The use of advertising without hype has become a part of the CPA's world during the past decade. However, how to carry out their advertising missions is still a mystery to many CPA firms. The authors present guidelines for developing an effective and complete advertising program.

BACKGROUND

Prior to 1978, CPAs were prohibited from using any form of advertising. In 1977, Senator Lee Metcalf issued a lengthy report which was critical of the accounting profession's rulemaking and disciplinary machinery. This report led to a Federal Trade Commission (FTC) investigation into possible self-imposed restrictions on competition in the accounting profession, especially in the area of advertising. At the same time, a landmark Supreme Court case, Bates v. State Bar of Arizona, 433 U.S. 350 (1977), reached the decision that attorneys have the constitutional right to advertise under the First Amendment.

As a result of these and other events, the AICPA lifted its ban on advertising, which had been in place since 1922. However, the AICPA continued to restrict certain forms of advertising such as self- laudatory or comparative claims, testimonials or endorsements, and advertising not considered by the AICPA to be professionally dignified or in good taste. These restraints probably served to discourage many CPAs who might have considered advertising from doing so. A 1978 AICPA study reported that only 7% of accountants intended to advertise.

In 1985 the FTC began another investigation of the accounting profession. The investigation focused on certain rules and interpretations established by the AICPA. Advertising restrictions enforced by the AICPA since 1978 were a major concern of the FTC. As a result of this investigation, the AICPA entered into a consent agreement with the FTC that became final on August 3, 1990. This agreement permits CPAs to engage in unrestricted advertising as long as the advertising is not false or deceptive as defined by Sec. 5 of the FTC Act.

With the restriction lifted, a study published in September 1989 indicated that a growing percentage of CPAs are willing to advertise and that 44% of AICPA members who engage in public tax practice use some form of advertising. In light of the changing environment regarding advertising in accounting, the authors assume that an ever-growing group of CPAs will eventually advertise. What follows are necessary steps for CPAs to consider in developing advertising programs for their practices.

DEVELOPING AN ADVERTISING PROGRAM: WHAT'S NEW ABOUT THAT?

The steps involved in developing an effective advertising program are not new. For many years, marketing textbooks have discussed this developmental process. However, advertising is still largely unfamiliar to most of the members of the accounting profession and we are revisiting this process for the benefit of the uninitiated as well as those already involved but unsure. CPAs who are already engaged in advertising, but who are uncertain of their present approach to advertising, may also find the information provided in this article helpful.

THE CRITICAL STEPS

The importance of becoming familiar with the developmental process used in an advertising campaign cannot be over-emphasized. One of the main reasons accountants falter in realizing their potential is the failure to develop and implement a sound plan for marketing their practices as businesses.

We suggest nine steps for CPAs to consider when attempting to develop their advertising programs. The steps form the acronym ADVERTISE.

1. Analyze market; 2. Define advertising objectives; 3. Verbalize key issues; 4. Establish spending level; 5. Review media alternatives; 6. Target media vehicles; 7. Invent message; 8. Start advertising; and 9. Evaluate results.

Analyze the Market

The initial step in developing an advertising program is analyzing the market to answer the question: "What group of people am I trying to reach?" This target audience is made up of potential clients and existing clients. The target may represent only a segment of the firm's overall target market if the goal of the advertising campaign is a specific audience within the firm's total market. For example, a CPA firm may choose to advertise its tax services to clients and non-clients who file only individual tax returns even though the firm's total market obviously includes other reporting entities.

Advertising targets must be identified and analyzed so that the appropriate information is available for an advertising campaign. The analysis should include:

* Location and geographic dispersion of targets; * Criteria such as distribution by age, income, sex and education; and * Client attitudes regarding consuming and paying for services.

The kinds of information needed by various accounting firms will differ.

Define Advertising Objectives

Without clearly defined objectives, an advertising campaign is more likely to fail than succeed. Well-defined objectives act as the goal for any advertising campaign.

Advertising objectives should be worded in understandable, precise, and measurable terms. Precision and measurability are the critical characteristics that permit advertisers to evaluate the effectiveness of an advertising program subsequent to its implementation. An operational advertising objective for a given CPA firm might be stated in the following manner:

"Our primary advertising objective

is to increase our existing tax client

base (200 clients) by 50% (or 100

clients) for a total tax client base of

300 clients within 12 months." This sample objective includes:

* A current benchmark--200 tax clients; * The direction and distance to move from the current benchmark--increase by 50% to a new level of 300 tax clients; and * The time frame for accomplishing the objective--12 months.

Although stated in different ways, advertising objectives should always include a current benchmark, the direction and distance to move from that benchmark, and the length of time allotted for the objective's achievement.

Verbalize Key Issues

Similar to a political platform, an advertising platform consists of the key issues or selling points that a CPA firm might wish to include in its advertising campaign. Partners, managers, and even staff members of the firm should share a commonality of purpose regarding the major issues on which the firm will position its advertising program.

Although some CPAs feel that it is difficult to advertise the competence and quality of accounting professionals, most CPA firms want to try to establish competence and quality in their advertising. The recent agreement between the AICPA and FTC, which now allows CPAs to advertise using testimonials or endorsements, may provide CPAs with the means to support the issues of competence and quality of work. Efficiency and availability of accounting personnel represent other key items to be considered when using testimonials or endorsements.

The key issues in a CPA firm's ad campaign should reflect what is important to the target market. However, not all of the key issues may be relevant or appropriate for a single advertisement in an advertising campaign. The critical element throughout an effective advertising program is the client-consumer. Information included in advertisements must be considered valuable by the CPA services user--not necessarily by the CPA advertiser--before success can be achieved.

Although research provides the most effective means of learning about those issues deemed important by the users of accounting services, the expense of conducting research is often prohibitively high. As a result a CPA firm may be forced to depend on its own opinions and that of an advertising agency.

CPA firms can seek out information available in accounting literature. A number of research efforts have been undertaken regarding CPA advertising and some of these studies (see References at end of article) contain useful information. Also, client contact personnel should be trained to ask questions that could result in information regarding client needs and concerns.

Establish Spending Level

You should decide how much money to allocate to advertising for a specified time period. This task is difficult because it is virtually impossible to spell out the likely effects of advertising on company revenues. CPA advertisers should also consider the geographic size of the target market and the distribution of client-consumers within the market when allocating advertising dollars.

There are a number of techniques to aid in determining advertising budgets including:

1. The objective and task approach; 2. The percent of revenues approach; 3. The competition-matching approach; and 4. The arbitrary approach.

The objective and task approach calls for the advertiser to determine the tasks and related budget required to accomplish the advertising objectives.

The percent of revenues approach is popular, due to its simplicity. The CPA advertiser multiplies past revenues, forecasted revenues, or some combination of the two by a percentage derived from what the firm has traditionally used, or an industry average.

Under the competition-matching approach, CPA advertisers try to mimic what the competition is doing with regard to advertising dollars. This method can result in an erroneous conclusion because the competition may have different advertising objectives, leading to an illogical match.

Finally, the arbitrary approach represents "seat-of-the-pants" decision-making. CPAs with some advertising expertise and intuition are capable of allocating funds to advertising using this approach. Most CPAs will not find this method suitable.

Review Media Alternatives

Your advertising program can utilize any of the following media:

* Television; * Radio; * Newspapers; * Magazines/Periodicals; * Direct Mail; * Business Papers; * Outdoor Displays; and * Other (e.g., mass transit displays).

While the strengths/weaknesses of each medium are beyond the scope of this article, the literature referenced at the end contains a great deal of relevant information.

Target Media Vehicles

The CPA advertiser must develop a media plan to set forth the particular media alternative to be utilized in the advertising campaign. The primary goal is to reach the largest number of persons in the advertising target per dollar spent. Significant factors to consider when selecting a medium include:

* Size and nature of audience reached by the medium; * Cost of the medium; * Content of the advertisement; and * Location and demographic characteristics of individuals in the advertising target.

Once the advertising medium is selected, specific vehicles within that medium must be chosen. Picking a single media vehicle can be a difficult chore--consider the selection of one accounting periodical from all available accounting periodicals that sell advertising space. Cost comparison indicators can ease the burden somewhat. For example, the "milline rate," a cost comparison indicator for newspapers, shows the cost of exposing a million persons to a given amount of newspaper advertisement space. Again, the references cited at the end of the article can be useful to CPAs involved in soliciting the most effective media vehicles.

Invent Message

In determining the best content and form of an advertising message, the advertiser should consider the following factors:

* Nature of the services offered (i.e., tax, audit, MAS); * Demographic characteristics of the people in the advertising target; * Advertising objectives and advertising platform; and * Choice of media.

Assume you wish to demonstrate your knowledge of alternative minimum taxes or the passive loss rules in your advertising effort. This message would be wasted if it was geared strictly to wage earners, and should be designed to interest high income and high net worth individuals.

An accounting firm concerned with its reputation regarding the quality of its tax-planning services might want to use an advertising message that emphasizes the care taken conducting tax research.

Most advertising messages depend on the use of "copy" and "artwork." Copy refers to the verbal part of an advertisement and artwork refers to the illustration and layout of an advertisement.

Start Advertising

An advertising campaign requires a great deal of planning and coordination on the part of the CPA advertiser. Even if the CPA turns to an agency, the execution of the advertising campaign involves cooperation from research organizations, production companies, media firms, printers, photo engravers, and commercial artists to name a few.

Detailed time schedules must be followed to ensure compliance with deadlines. The advertiser must also monitor the quality of each stage of the production of the advertisement and take corrective action, while retaining a degree of flexibility to make changes as called for during the campaign.

Evaluate Advertising

Although it is difficult to evaluate the effectiveness of an advertising campaign, the CPA should attempt to weigh the result. Actually, evaluations can be performed before, during, and after the campaign:

* Before--pretests of selected clients; * During--inquiring of individuals in the advertising target; and * After--tests of a sample of the advertising recipients.

If administered by the CPA firm, the cost of consumer surveys may be prohibitively expensive. However, the cost of engaging an outside research organization to evaluate print advertisements may be manageable because the costs would be shared by numerous advertisers.

The ethical environment for advertising accounting services has changed radically since 1977. Prior to 1978, CPAs were not permitted by the AICPA to advertise in any form. Since that time, primarily as a result of government mandate, the AICPA has changed its position 180 degrees to allow a great deal of freedom in advertising by its members.

The CPA firm should carefully evaluate the benefits of delivering its message to potential clients in the form of advertising. Advertising is not unprofessional; it is good business.

REFERENCES

Bialkin, Kenneth J., "Government Antitrust Enforcement and the rules of Conduct," Journal of Accountancy, May 1987, pp. 105-109.

Chesser, Delton L., Lucian G. Conway, Jr., and Carlos W. Moore, "Advertising by the CPA Tax Professional: What are the Results?" Accounting Horizons, September 1989, pp. 71-81.

Folland, Sharon, Eileen Peacock, and Sandra Pelfrey, "Advertising by Accountants: An Update," The CPA Journal, December 1988, pp. 86- 90.

Heightchew, Robert E., Jr., "Strategies for Marketing Your Accounting Practice," The CPA Journal, September, 1987, pp. 64-74.

Hyatt, Melissa A., "Strategic Growth: How to Develop an MAS Department," The Practical Accountant, February 1990, pp. 55-65.

Pride, William M., and O. C. Ferrell, Marketing, 5th ed., Boston: Houghton Mifflin Co., 1987.

Traynor, Kenneth, "Accountant Advertising: Perceptions, Attitudes, and Behaviors," Journal of Advertising Research, December 1983/January 1984, pp. 35-40.

Paul W. Allen, MBA, CPA, is Instructor of Accounting at Mississippi State University-Meridian Campus. He previously worked in public accounting with Exxon Co. Mr. Allen has had articles published in accounting and marketing journals. Danny R. Arnold is Professor of Marketing and Associate Dean of Internal Affairs at Mississippi State University, Mississippi State. He has conducted extensive research and consulting in marketing and advertising. Mr. Arnold has published several textbooks on related topics, and authored many articles published in professional journals.