He's even gained the (guarded) approval of the state offices he's competing with for cases. "We understand our relationship with Child Support Services. The growing pains are over," proclaims Ron Harris, district manager of the Child Support Enforcement (CSE) office in Virginia Beach, Va., from which Jones has drawn many of his clients. "Personally, I see it as the mother's choice," adds Harris. "There's certainly enough business here for all of us."
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The Market
Every entrepreneur's dream: a market niche that's virtually unlimited and untapped. Jones views anyone who will tie or has tied the knot as a potential client, and in Virginia alone, 27,307 couples divorced in 1990. There's one restriction on the potential market: Child Support Services can't handle welfare cases, as any money collected for past or current recipients of Aid to Families with Dependent Children (AFDC) must reimburse the state. Even so, at stake is some $220 million in non-AFDC debts Virginia has failed to collect.
Soon after Jones got into the business, he uncovered a promising submarket: selling his consulting services to the start-ups springing up every day in this blossoming industry. He charges about $1,250 for a day and a half of "insider" information on how to deal with the government, customers, and marketing. He figures the consulting market will peak in 1994. But so far along the way, he has picked up a few contract collecting accounts, doing back-end collection work for start-ups that want to concentrate their efforts on simply screening and signing up clients.
One thing is clear: Jones is not limited to his home state. Since many cases involve out-of-state fathers anyway, the company is equipped to handle customers calling from Anywhere, USA. He has already expanded his reach into the Middle Atlantic states through an affiliate office in North Carolina. And the future looks wide open. "Someone estimated that New York City could support 15 of these agencies," gushes Jones, whose closest competitor is in Washington, D.C.
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The Marketing Strategy
The results of Jones's initial marketing campaign attest to the national need for a service like his. His first, and so far only, TV commercial premiered on five Virginia stations on Thanksgiving Day 1991. The timing was a coincidence; the response was not. Jones's small office was inundated with calls, almost 9,000 in three months. Although the 30-second spot aired locally, grandmothers watching the ad in Virginia called their daughters in New Jersey, Ohio, and North Carolina.
Marketing was not Jones's strong suit, so he'd hired a public-relations firm, which in turn hired an advertising agency. The TV commercial it produced is a classy affair. No images of abandoned, dirt-smudged children. The ad's words appear in white on a black screen, accompanied by a soothing female voice-over. The tag line: "Child Support Services. They make sure the check's in the mail." The commercial could pass for a public-service announcement.
Happy with the ad's quality, Jones continues to use it for what he calls "maintenance advertising." For a company with limited start-up funds, though, the cost of the campaign was steep, and the success questionable. "Of the 9,000 calls, only 3,000 calls were qualified to use our ser-vice. The other two-thirds were AFDC cases," he laments. "I had to pay for 9,000 calls on the toll-free number, plus the ad agency took its 15% of the $25,000 ad [it ran 250 times] and charged me another $3,000 or so to produce the commercial." He figures the company got 3,000 qualified leads at a cost of $2.30 a pop. "That's high for the collection industry." And the $2.30 doesn't count the toll-free charges, which totaled about $8,500. From that, he's signed up about 550 clients, or less than a fifth of the qualified callers, a hit rate he's not satisfied with.
Nevertheless, the campaign appeared to achieve its basic goals: to establish Child Support Services' name and to discourage competition. As word spread, the company became a media favorite. Reporters cast Jones and his company in the mold of knight-rescuing-damsel-in-distress. One local newspaper story picked up by the Associated Press led to TV coverage in Ohio and some 100 calls from moms in the Rustbelt. The company had definitely arrived when Tom Brokaw interviewed Jones last July 31 for an "America Close Up" segment on the new industry. The coverage continued to snowball, convincing Jones that the best marketing is free or nearly so. He dropped the ad agency and the original PR firm. Instead, he hired Lisa Belkov, owner and sole employee of PR firm Write Productions, in Norfolk. Belkov, 29, has become an expert on child-support issues and legislation, and frequently gives talks on the topic in her second role as spokesperson for the American Child Support Collection Association. She fields interviews from the press and pens her own stories as well. In addition, she's passed out thousands of fliers at supermarkets and holds free public clinics.
Jones worked out an incentive-based compensation plan that makes sense for a young cash-strapped company. He pays Belkov $1,500 a month, a small retainer in PR. Her real reward is a piece of the consulting business. Several start-ups that have come through Jones's offices have retained her. In the future, she'll share in the bonus pool from his company's profits, Jones says.
Jones's goal is to continue to reduce the cost of marketing. He knows he can't count on free press forever. If Child Support Services is to consistently bring in 100 new cases a month, as forecasted, he has to do more advertising. But that mustn't distract him from the real money-making process of locating deadbeat dads. The challenge: more targeted, less costly marketing.
