The invitation to the May SOHO Summit, named for the small office/home office population that the acronym represents, promised an agenda that would "peek inside the life of a SOHO worker and understand him or her as you never have before...Find out how to get on the SOHO radar and...connect with this mass market of individuals...Identify strategies on how to position yourself today to be part of their tomorrow.
"It's larger than the population of New York and Texas combined," the invite screamed. "Its annual purchasing power tops $100 billion. It's the fastest-growing segment of today's business environment!"
Who could say no? With telecommuting finally taking hold and people starting home businesses at a rate of 2 million a year, with technology turning households into telecommunications centers and flexibility becoming the war cry among workers not only coast to coast but worldwide, home business is big business. And it's expected to get even bigger in the millennium.
To be sure, estimates of the number of people working at home-and definitions of a home office worker-vary greatly. CyberDialogue says telecommuters-employees who spend part of their time working from home-number at least 15.7 million in the United States, up from 4 million in 1990. A 1998 Wirthlin Worldwide study reported that slightly more than 31 percent of American households have a home office-about 31 million-but of that number, only 26 percent of the offices are used to support a home-based business. Another 24 percent are used for after-hours take-home work for outside employers. And only 9 percent are used by telecommuters.
The Bureau of Labor Statistics' tally of job-related home workers is the most conservative, based on its 1998 Current Population Survey. By the BLS's reckoning, the number of people who said they performed some of their work at home for their primary job in 1997-including everyone from teachers catching up on lesson plans, to wage-and-salary telecommuters on the company time clock, to those who were self-employed and operating home-based businesses-increased since 1991, the last time such data was collected, but modestly, up from 20 million to 21.4 million.
But it's the composition of those workers that shifted significantly during that period, the BLS notes, and should be of particular interest to marketers. Fewer people took home work to do on their own time, while the number of wage-and-salary employees who said they did some telecommuting from home and got paid for it exploded, up from 1.9 million in 1991 to 3.6 million in 1997, an 89 percent increase. In 1997 they represented 3.3 percent of all wage-and-salary workers in the country, and 17 percent of all those reporting home work time. The remaining home workers, about 30 percent of the BLS total, were self-employed, two-thirds of them in an incorporated home-based business.
But whether they're called telecommuters, business owners, virtual staffers, or moonlighters, each needs a place to stash stuff, log on, retrieve messages, call clients, type proposals, send faxes, crunch numbers, store pencils, and sit and ponder. The work space may run the gamut from gloomy to glorious, but the motivation is universal: a desire for the flexibility that working at home brings.
Trouble is, there are very few universals with this group. They're builders and salesmen, plumbers and writers, marketers and Mary Kay reps. It makes for a demographic debacle. Hence the SOHO Summit, the first of its kind. Execs from Cisco, Apple, Barnes & Noble, Visa, and other corporate giants lined up for the invitation-only tete-a-tete in Carlsbad. "Because technology allows us to be independent-all you need is a communication device-you can be working anywhere," says Terri Lonier, conference organizer. Lonier authored the book Working Solo in 1994, back when working at home was but a blip on the marketing radar. Her main message to invitees: "There is a shifting sense of values. Dollars are nice, but you can't replace time with dollars. So people are setting up at home to be masters of the time they have."
Lonier knows from experience. She directs a global consultancy from her New Paltz, New York, home office. Her assistant works there, too, coordinating a posse of consultants and contractors who work out of their homes. They meet up on Lonier's WorkingSolo.com Web site, the nexus of about 20,000 solopreneurs who check in regularly for tips and tools on plying their trades.
Lonier recently started surveying this Web-connected community in response to corporate clients' queries. "Selling upgrades is a limited revenue model. So [companies] need to find whole new markets," Lonier says. "The future of their revenue is going to come from people starting businesses. They know if you can get these buyers on their train early they'll stay on the track."
But how to find them? And who are they? Take Amy Hammingh: telecommuter, remote worker, IT specialist. A change management consultant for Andersen Consulting, Hammingh lives outside Seattle, not far from the airport. She works Monday through Thursday at a client's office in Cincinnati. The last thing she wants to do on Friday, she says, is commute two more hours to and from Seattle headquarters. She gladly set up shop in her two-bedroom home in return for the chance to work there. "It was worth it for the amount of time saved," she says.
When she's home, Hammingh, 26, and her husband, a student, work back-to-back at two desks in the spare bedroom. They share a laser printer, CD-ROM drive, and scanner, most bought at the Office Depot, ten minutes away. They buy software online through Egghead.com. She uses a work-supplied laptop.
Since she's not part of any formal company program, Hammingh's not likely to turn up in telecommuting profiles. Yet her situation is quite typical, says Ray Boggs, director of home office research at International Data Corp.
"We looked at formal versus informal telecommuting programs. Most of the telecommuters are informal, and that's what's going to grow tremendously," Boggs says. "It's like a deal you work out with the boss. The boss figures, 'Let them stay home and do the work, otherwise they'll take off to another company.' It's part of the arsenal of ways of being responsive to workers' needs."
Indeed, with unemployment hovering between 4 percent and 5 percent, companies are clamoring to keep top people from jumping ship. Merrill Lynch and AT&T were among the companies that decided early on that they should sanction formal telecommuting programs to remain ahead of the curve. Today, half of AT&T's 50,000 managers worldwide telecommute. Merrill Lynch's numbers increase with each two-week boot camp they conduct, designed to test employees' telecommuting mettle. Those who make it get a phone line, laptop with docking station, and modem from the mother ship. The staffer buys his own furniture. The swap pays off for the companies in more ways than feel-good human resources. Merrill Lynch reports saving from $5,000 to $6,000 per office, per year in overhead costs.
And Boggs estimates that the average office worker spends at least $2,000 a year to outfit, supply, or upgrade his or her office. You do the math.
In fact, telecommuters often bear the costs of setting up at home in return for the opportunity to work there. Workers told the Kensington Technology Group in a 1998 survey that they paid about $3,500 just to set up shop at home. Nearly three-quarters of them reported "feeling more productive" working at home than in the office, saying they accomplished "at least 30 percent more work in the same amount of time." While many work for companies willing to share the cost, some 44 percent said their employers didn't even pay for essentials like computers and phones.
Diane Phelps senses change. She directs telecommuting sales in the home office division of upscale furniture maker Herman Miller. Last summer, Herman Miller, known for its devotion to corporate clients, found its customers in a quandary. Clients wanted to help employees work at home, but they feared liability and workers compensation issues relating to shoddy furniture. They dreaded the logistics of moving. Yet they were eager to cash in on real estate savings and keep employees happy.
"We had a client that went into this on a large-scale effort," Phelps says. "We thought, 'Well, if this customer is interested in it, there must be others not far behind.' Now I cannot believe the number of companies interested. The potential, I think, is just enormous."
A few years back, Herman Miller had suspected telecommuting would change the face of corporate America, and did a survey to assess potential furniture fallout. They found that while many companies embraced the notion of telecommuting, few seemed to be responding in a big way, so they shelved their home-office initiative. But then came that big client. More research was in order. Herman Miller polled some 11,000 corporate facilities managers (the people responsible for everything from telephones to toilet paper) and learned telecommuting was quietly becoming a logistics nightmare. Time for another study. This one examined the environments of people who already had a home office.
The result was a turn-key program that lets clients' telecommuters choose ergonomically correct furniture and accessories for about $1,500 a package.
In fact, Phelps is describing the program from her very own Herman Miller- furnished home office, about 45 minutes from the company's Holland, Michigan, headquarters. She travels often and prefers to eliminate commuting time whenever she can, working at home about once a week as part of the company's "Homesite" program, in which company telecommuters get a phone line, laptop, $1,500 stipend, and their favorite chair. In return, they surrender their space in the main office. When Phelps needs to go to headquarters, she operates out of a "campsite" with other teleworkers-a place they can hook up their computers, use the phones, and meet colleagues.
One recent stop in Phelps' travels was a furniture show in Los Angeles. Home office designers packed the floors alongside commercial buyers. Built-in home offices are now a must-have in new construction-including features like separate entrances, sound proofing and beefed up electrical capacity. And people working in one want furniture that goes with the rest of the house.
"There comes a time when a person working at home says 'I'm tired of working on this door on concrete blocks as a desk.' They want something good, and they want it fast," says Phelps, whose division advertises in House & Garden and Metropolitan Home. Apparently, SOHO consumers are willing to pay for aesthetics. The top-selling desk chair on Miller's Web site is the $999 Aeron, a technological wonder that seems to bend every way a person can.
And because people who work at home really value their time, Herman Miller makes it easy to shop. "The delivery people will call them up and make an appointment," Phelps says. "If they want to know the status of their order, they e-mail us online or call customer service. There is a live person who will speak to them at any time they want." There's also a designer on call who responds to unique home office quandaries via e-mail for a fee, and designer templates for work-at-homers to manipulate while they're eating their egg salad in front of the monitor.
Still, for marketers like Phelps, tracking down telecommuters-even those who have informal arrangements with their employers-is easier than finding their solopreneur brethren. At least telecommuters are tethered in some way to the mother ship. Solopreneurs are floating throughout the galaxy. Still, some brand new data provides a window into the solopreneur profile.
In a study from Ohio State University, researchers counted some 5.5 million home-based businesses in the U.S. Based on a national survey of family enterprises (the owners had to be in business for at least a year and work at least 312 hours a year), the study, just released last month and written by consumer sciences professor Kathryn Stafford, offers a state-by-state analysis of where the home businesses are, and who's running them: 32 percent of the business owners are women, the average age is45, and 92 percent are married. The Midwest claims the largest share, 31 percent; followed by the South, 29 percent; the West, 24 percent; and the East, 15 percent.
Clearly, notes the Summit's Lonier, "This is a mass market of individuals. It's huge and lucrative, but they're all individuals. They're very busy and it's hard to reach them."
Try tracking down Lisa Clair of Fairfield, Connecticut. She and her Boston-based partner run the public relations business Clair/Stone from home. Clair doesn't want for business, so she doesn't advertise. She doesn't belong to any associations. She has neither the time nor the need to network. Just last month she shelled out more than $1,000 to spruce up her office, which began as little more than a phone, computer, and card table some 10 years ago.
Now, the rug matches the curtains, which match the bedding on the day bed, which matches the oriental lamps, which, by the way, were a lot more expensive than the lamps in the living room.
Clair is the kind of solopreneur Pitney Bowes wants to reach. She's an ideal candidate for the company's personal shipping products. But she's off the radar. The only indications she has a home office are a second phone line in the house, frequent purchases from the Staples catalog, and her own UPS account. How could a company find her?
"They couldn't," she says. "I don't market myself because I'm not looking for business. I go online, I get e-mail, I get off. I do the upgrades when my clients upgrade. I don't have time to shop. You couldn't find me unless you knew me," she says.
It makes for marketing mayhem.
"There are not a lot of lists available." Patrick Brand, vice president of marketing for Pitney Bowes Office Direct, is talking. Lamenting, really. Pitney Bowes grew up in the mailrooms of big companies. They do a tremendous business in meters. A couple of years ago, the company looked at its customers-in the neighborhood of 1.5 million-and compared that to the number of small businesses out there that could use mailing services-"somewhere around 10 million, a large percentage of which don't use any mailing equipment," says Brand. They added to that the home-based entrepreneurs, telecommuters, and moonlighters, and started salivating over their stamps.
Pitney Bowes formed a small office division with intentions of bringing the mailroom technology home. At first, the company thought it could pitch people like Clair the same way it pitched the corporate world-through direct mail and sales calls. But how do you find a business owner in her dining room? Plus, they didn't have any understanding of her buying habits and priorities.
So they set out to find out. Pitney Bowes spent more than a year researching SOHOs, talking with consultants, pulling in focus groups, conducting online surveys and trials through Staples, floating customer response cards. Listen to Brand. He talks from experience.
"As businesses get smaller and smaller, the person becomes the business. They do more and more of the functions themselves. They don't have a receptionist to do the copying, the layout, the mailing. They tend to do everything on their PC," he says of his new-found clientele. "Their time is money. If they have to go out to the post office and find a place to park and wait in line and come back, that can take 45 minutes. They don't like to wait, so they look for productivity tools to help them save time, automation tools on their PCs, appliances, so to speak, that can make their life simpler."
Enter Pitney Bowes' ClickStamp, which lets you print postage directly on envelopes. Prepaid postage is stored in a device that plugs into the PC and can be refilled 24 hours a day via modem. It also manages address books and mailing lists. Pitney Bowes created this product just for the SOHOs. Now in beta testing, ClickStamp is expected to get U.S. Postal Service approval by the end of the year. Another SOHO product, TargetProspects, lets users select and download mailing lists for more than 95 million consumers and 11 million businesses. That debuted in April.
"What we quickly found out was that reaching these types of customers was much more difficult. Once we reached them, we knew we had to provide products the way the customers were interested in buying them," he says.
Instead of selling directly, Pitney Bowes set up different distribution channels: in superstores, on the phone, and on the Web. The company changed its advertising strategy, too. In addition to direct mail, Pitney Bowes found success on television with A&E, the History Channel, CNBC, and local cable. They ran ads in Success, PC Computing, and Working Woman. The company also runs banner ads on the Web and sends e-mail to subscribers of technology publications who agree to accept e-mail solicitations.
Says Brand, work-at-home customers are more demanding than their corporate brethren. So Pitney Bowes established a help line staffed with real people from 8 a.m. to 8 p.m., and a whole different customer service team, just to respond to the SOHO's needs.
The investment is worth it. People who work at home are as loyal as they are demanding, SOHO experts report. They crave value in a relationship and when they find a compatible suitor, they stay put. They pay a premium for good products, service, tools, and information that help them in their business, says Robert Largen, partner at Dallas-based marketing management firm Bustin & Co. Largen helped Office Depot (when it was still Bizmart) develop its plan to reach telecommuters, and worked on CompUSA's marketing plan for the home office market.
"The true SOHO offices, as opposed to the telecommuters, became the most important in terms of selling software and hardware, and the reason was they were making self-contained buying decisions," says Largen. "They felt the most in charge of their destiny, but also the most at sea. They would compensate for this concern by spending top dollar for quality products. It's almost like a security blanket for them.
"They save on their wardrobe. They save on their overhead. They save on their cleaning bills. They save on their commuting. What they pay for is technology and service."
Indeed, people who are self-employed and work at home are 41 percent more likely than the average to shop at computer and office supply stores, and 25 percent more likely to use desktop computers, according to Simmons Market Research. They are also 70 percent more likely to use the Internet.
Largen believes the most effective way to reach SOHOs is via service, whether that's face-to-face, on the phone, or online. SOHOs like to research products and rely on tech publications for reviews and advice, Largen says, but when it comes to making a buying decision, they respond to how they're handled. "That's a place some of the e-commerce has lagged," he believes. "Whether it's in-store or online, the sales needs to be oriented toward what the individual specifically needs to be able to do. It's almost a consultative sell with SOHO customers.
That strategy worked for Pitney Bowes. A year and a half ago, "practically nobody" ordered from Pitney Bowes online, Brand says. "Now we take thousands of orders per month on the Internet." User reports seem to indicate the company has succeeded in reaching the elusive home office target. "We have the statistics on when people refill," he reports, "and it's after 10 o'clock at night."