Education And Training

By MICHAEL MICHALOWICZ

In advertising, frequency is a term that refers to the number of times a consumer must see or hear an ad before they purchase the advertised product or services. Frequency applies to all industries—from the movie you choose on date night, to the brand of soda you purchase, to the stylist who cuts your hair—you are much more likely to buy something if it’s familiar to you.

The frequency technique works because it’s about fostering trust. As consumers, we are hard-wired to mistrust anything new, but expose us to that same something repeatedly and we will start to trust that it’s a product or service worthy of our hard-earned cash. You’re more likely to pick the movie for which you’ve seen 32 previews over the art-house flick you’ve never heard of, and you’re probably going to choose the name brand over a generic soda, even if it’s not your favorite brand, simply because you’re more familiar with it.

And the hair stylist? Chances are you didn’t choose your hair stylist because of a frequency ad campaign, but that doesn’t mean that frequency didn’t influence your decision. You probably heard about the stylist from more than one source, perhaps even noticed the stylist’s booth at a local event, or his or her name as a sponsor at a fundraiser; maybe you ran into the stylist at a party. And, after you heard the stylist’s name enough times, you decided to give that person a try.

Here’s where things get interesting for small businesses. While the film and soda industries have the big bucks to bombard consumers with advertising, spending money on “frequency” advertising is not realistic for most growing companies. However, small businesses can achieve frequency by working in tight, concentric circles – showing up many times in just a few places, as opposed to showing up in many places, just a few times.

When implementing the frequency technique, the first step is to evaluate your target customers or clients, those who purchase from you repeatedly. What is their demographic? Are they mostly college students with trust funds? New moms over forty? Aging triathletes?

Now that you know the basic common denominators of your target market you can discover where they hang out. Where and how do they spend their time and focus their attention? Which clubs, organizations and associations do they belong to? Where do they get their information (newspapers, online media, television, newsletters, the grapevine, etc.)? Which vendors do they use most? Which events do they attend?

Once you’ve identified the concentrated area where your ideal customers hang out, make sure you have a consistent presence in those areas. Join the clubs, attend the meetings, show up at the games. I’m not suggesting you start shopping at their grocery store and bump up against them in yoga class – that sounds more like stalking than hanging out. I’m encouraging you to become part of their business community, so that when it comes time to make a buying decision, they will choose you over the other guy. This strategy plays out online as well. Small businesses are served better by focusing on building a presence in one social media environment, rather than dabbling in three or four.

I applied this technique with my first business, a computer services company. We targeted the hedge fund industry, and as soon as I identified the circles in which my potential clients operated, I made sure we showed up there. Always. We joined their associations, attended industry events and even became friends with their vendors. Eventually, after they heard about my company from several sources, hedge funds started contacting us. They wanted to do business with us because they trusted us, and they trusted us because we were familiar to them.

Using this and related techniques, I was able to grow that company and sell it for a number with lots of zeros (after the first number and before the decimal point). Had I split my time and money moving in wider circles, concentrating on many clients and showing up just a few times in a lot of places, I’m certain we would not have achieved that level of success.

Infrequency will not generate qualified leads. Frequency inspires trust – trust in the brand, trust in the product or service, trust in you. So even if you don’t have a big marketing budget, start moving in tight concentric circles and you will reap the benefits of frequency.

By SARAH MORGAN

Often billed as the fund and brokerage industry’s quick fix for retirement planning, so-called target-date funds took an unexpected turn for the worse in 2011, according to new data.

The funds, which have become an integral part of many Americans’ 401(k) plans, are designed to protect investors by decreasing their exposure to stocks and increasing their bond holdings as people get closer to retirement, or their “target” year. But the average fund with about four years until its target date fell 0.4% in 2011, according to Morningstar Inc., a fund-research firm. That trails the Standard & Poor’s 500-stock index, which gained 2%, including dividends, and is well below the Barclays Capital Aggregate Bond Index, which rose nearly 8% for the year.

The results may revive a debate over whether the funds expose investors close to retirement to too much stock-market risk. “We had a real ‘stress test’ in the first nine months of 2011, and the industry failed,” says Ron Surz, a retirement-plan consultant and president of Target Date Solutions. He adds that the returns would have been much worse, but strong gains in the fourth quarter “bailed the industry out.”

The funds have become a popular option for company 401(k) plans, with $368 billion in assets in 2011, more than double the amount they held in 2008.

As part of the Pension Protection Act of 2006, target-date funds were made one of a few permissible “default options” for retirement plans with an automatic enrollment feature, meaning some employees are automatically enrolled in the funds. But far from protecting investors, many target funds performed worse than other funds during the market crash of 2008.

Since that downturn, the funds have generally done well — until last year.

Experts say target funds’ broad array of holdings actually hurt last year, as many investors fled to blue chip stocks and long-term government bonds. “They’re intended to be diversified, and that should be an advantage over the long term,” says Josh Charlson, a fund analyst with Morningstar. “But it’s not always going to work so well, particularly when there’s a flight to quality in the market.”

Despite widespread criticism from regulators and lawmakers after 2008, the average fund nearing retirement today has 40% of its assets in stocks, down only three percentage points from 2008, according to Lipper.

And while retirement experts say target-date funds are still well-suited for investors without the knowledge or desire to select their own investments, many financial advisers recommend that more independent-minded investors build their own retirement portfolios.

By SHARON TERLEP

Auto-loan delinquencies are on the rise as cash-strapped Americans increasingly struggle to repay car and truck loans, according to a study out Monday, the latest sign that the nation’s economic woes are bleeding into the automotive-finance business.

Nearly $25 billion in auto loans are past due, according to a report by Experian Automotive being released at the Automotive Finance Summit in Las Vegas.

Auto lenders saw a 9% increase in loans 30 days past due in the second quarter of 2008 from a year earlier, and an 11% increase in loans 60 days past due.

In a sign that more trouble lies ahead, the creditworthiness of people holding outstanding loans is worsening. About 57% of borrowers with open loans have what is considered a prime credit rating, down from 61% two years ago.

The breadth of auto-loan delinquencies isn’t nearly as severe as the rippling problems caused by the nation’s mortgage meltdown, created by years of extending home loans to high-risk borrowers. The overall delinquency rate on auto loans remains manageable, with less than 4% of 30-day or 60-day loans past due.

But the effect is felt nonetheless by lenders who must wait longer to get loans repaid and go to greater lengths to recoup their money.

“There is a pretty big dollar burden that is out there in terms of delinquencies,” said Melinda Zabritski, Experian director of automotive credit. “We expect to see this pattern hold strong.”

In all, about 64 million auto loans worth $795 billion were outstanding in this year’s second quarter, according to Experian. The overall number of loans originated in the second quarter this year was 4.4 million, compared with 5.1 million a year earlier.

The share of loans extended by captive auto-finance companies, those affiliated with an auto maker, has dropped nearly five percentage points in two years to 31% of all loans opened. These companies still account for the largest share of auto loans, followed by banks, credit unions and financing companies.

Write to Sharon Terlep at sharon.terlep@dowjones.com

By ANIT MUKHERJEE

Indian Prime Minister Manmohan Singh boosted transparency in 2005 when he passed the Right to Information Act, or RTI, designed to give citizens better access to government records. But for the past couple of months, Mr. Singh has been talking about revisiting the act—for the worse.

Mr. Singh’s says he wants to protect the “deliberative processes” of officials who now claim to be bogged down by RTI petitions seeking documents. More likely, those officials are scared of writing memos that reflect what they really think, lest that memo should suddenly become a liability when released under the act. The government wants to dilute the RTI by creating lots of exceptions for what information a citizen can access. Instead the act needs to be strengthened.

The passage of the act has improved accountability to some extent and enhanced ordinary citizens’ understanding of government and politics. Hence, for instance, government bureaucracies that deliver services, like passports or driving licenses, are increasingly responsive to citizens who can drop the threat of an RTI to get work done faster. This is introducing an element of transparency in decision making.

But this hasn’t been enough. The big problem is that the government’s implementation of RTI is weak. Caveats for justifiable national-security cases are built into the law. Yet even for matters that don’t need opaqueness, bureaucrats have stonewalled information gatherers or ignored diktats from the Chief Information Commission (CIC), the judicial office that oversees RTI.

Consider my own experience. Researchers of defense policy like me need access to government data, but the Indian military does not adhere to declassification procedures. Frustrated by the lack of primary material related to the defense ministry’s organizational structure from the 1940s to 1980s, I filed an RTI request in 2009 against the Ministry of Defence and the three armed services, seeking six documents. A torturous year shuttling between different offices later I finally appealed to the CIC in August last year. But I heard from the CIC only eight months later. This exposed the first loophole in the implementation of the RTI—the CIC can take as long as it wants to call for the first hearing.

The course of my hearings threw up more surprises. Admitting it had one of the documents in question, the army claimed that it was still sensitive to national security and could not be declassified. Anticipating this I had made a caveat in my petition: that if there was any matter in these documents still sensitive then this could be redacted with a security deletion and the rest of the report could be shared. This information was anyway dated and secondary literature on it was already in the public domain. Something similar was done with a committee report that investigated the failures leading to the 1999 Kargil war in Kashmir.

But the army bureaucracy refused, instead offering to share the report with the CIC and leaving it to that office’s judgment. The CIC in turn refused to make the report public arguing that he could not “substitute my own judgement for that of the Army top brass.”

Mine isn’t the only example. Journalists Kuldip Nayar and Sandeep Unnithan,have both filed RTIs to get access to records relating to India’s 1962 war and 1971 war, respectively. In these cases, the CIC accepted the logic of declassification and instructed the relevant ministries to follow a logical and mature declassification policy. But these instructions went nowhere.

In other democracies, declassification is done by an expert body of scholars, historians and bureaucrats who deliberate and decide what to restrict and what to declassify. In India this process is missing. Bureaucrats who created the documents control their declassification. And they often are gripped by a fear of what will be revealed.

The RTI law in theory should signal to bureaucrats to start being accountable. Yet in practice, there is no political will from New Delhi to instruct bureaucracies to help ordinary citizens with information, or give them the manpower to do so. In this environment, bureaucrats can easily avoid this law.

These episodes suggest that the RTI act needs to be bolstered. First, the staff strength of the CIC needs to be augmented. Second the powers of that body must be strengthened. CIC officials should be allowed to initiate contempt proceedings against bureaucrats that do not implement its orders. In my case, at least the CIC advocated declassification at first. Third, all RTI requests and information gleaned through them must be shared on the Internet. Finally, the CIC must hear from experts during its deliberations. It cannot argue, as it did in my case, that one cannot substitute for the judgment of the military. Without such modifications, the obvious loss is for democratic accountability.

This legal issue can have profound implications for India’s democracy. Without access to government documents, academics—especially historians—can only compose hagiographies of leaders or one-sided views of political events. The government denies citizens greater understanding about big events such as India’s 1962 war against China, and may unfortunately skew their views. It’s time to lift the veil of secrecy.

Mr. Mukherjee is a research fellow at the Institute for Defence Studies and Analysis (IDSA), New Delhi.

By SIMONA COVEL

When it comes to cutting costs during tough economic times, many small businesses start out with a disadvantage: They don’t have all that many costs to cut. Even during good times, small businesses tend to keep expenses pretty tight.

The result is that small companies often have to get creative in their efforts to find waste in places where little exists.

Here’s a look at four companies that have cut their overhead expenses without sacrificing inventory, daily necessities or their employees:

Tracking the Trucks

Kenneth Bravmann, an operations consultant at Marjam Supply Co., knew the building-supply company was wasting money on gas and losing efficiency when drivers got lost. And he found out just how much after the company installed Global Positioning System equipment in most of its 165 flatbed trucks, which haul supplies to construction sites.

The Brooklyn, N.Y., company began installing the equipment about 18 months ago, and executives quickly realized wrong turns weren’t the only money wasters. “Now we know where our trucks are,” Mr. Bravmann says, “and we make sure [drivers] aren’t going out of route or stopping at home [or] at their girlfriend’s place.” In the early days, about 15% of the truck drivers had to be reprimanded for driving off route.

Drivers now are more efficient — and even more cautious since the system also transmits the trucks’ speed. A dispatcher monitors the trucks’ locations and time spent at each stop. And the GPS boxes transmit whether a truck is sitting idle, which wastes fuel and is illegal in some localities.

Some drivers griped. “They took it as Big Brother” watching, Mr. Bravmann says, but all the drivers appreciate having the system when they get lost.

Each GPS device costs $450 to $600, plus $100 for installation. The subscription fee is $26 per month per box.

Mr. Bravmann says it’s difficult to place a dollar value on the savings; drivers’ time is a big part of it. Altogether, he estimates, the company is saving about 10% of the cost of running the trucks.

The company is considering upgrading to a more sophisticated system that tracks how long a driver spends at certain types of stops, in order to track which drivers are the most efficient and who is lagging behind.

Filling the Store With Fakes

George Falzon, the owner of jewelry store G. Falzon & Co. in Holliston, Mass., has been hit by high metal prices and a tough economy — dual pressures that are weighing down small jewelers nationwide.

That left him with lots of pricey display bridal jewelry sitting around. So about four months ago, Mr. Falzon began stocking his store with different types of displays: faux pieces.

The new display engagement and wedding rings come from one of his usual vendors, a line called Authentix by wholesaler Overnight Mountings Inc. But the jewelry isn’t real gold or platinum. It’s crafted of plated silver, with cubic zirconium centers. He readily tells customers that the display pieces are replicas. Since most bridal jewelry is special-ordered anyway, customers generally don’t mind, he says. The real pieces take about a week to arrive.

Having lower-cost replicas serve as display pieces is saving Mr. Falzon about $75,000 in inventory at any given time. That means he can spend less than he did before and offer four times as many styles of engagement rings and wedding bands.

“This program puts me in the same league as a chain store with deep pockets” in terms of selection, he says.

Mr. Falzon does keep a few real gold and platinum settings in the store, he adds, “if the guy wants to get on his knee that night.”

Find the Little Things

Like banks across the country, Connecticut Community Bank N.A. has seen the value of real estate decline and nonperforming assets increase over the past few months. So the Westport, Conn., bank, which has nine branches across the state, went on the hunt for expenses that could be trimmed — and didn’t come in the form of salaries or benefits.

Working with Expense Reduction Analysts Inc., a consulting company in Carlsbad, Calif., that helps businesses cut expenses, the bank’s staff pored over the company’s office-supply and printing expenditures — a common culprit for wasteful spending, according to Expense Reduction Chief Executive Ken Hagerstrom.

Expense Reduction found that simply by ordering larger quantities of printed materials like forms and letterhead less frequently, the bank could take advantage of the printer’s bulk discount. Similarly, by using one vendor for office supplies rather than three, the company could place larger orders and pay less.

Altogether, says Bill Laudano, Connecticut Community Bank’s chief financial officer, the bank expects to trim 10% from its office-supply and printing budgets annually. ERA’s Mr. Hagerstrom estimates that will add up to about $40,000 a year.

Next up, the company plans to take a look at telecom expenses, evaluating its phone, fax and Internet services.

Losing the Office

Alliance Home Mortgage Inc. closes 15 to 20 transactions a month these days, down from as many as 60 a few years ago. And its staff is down to five people, from 15.

Paul Vitale, president of the Boca Raton, Fla., mortgage provider, has seen many of his competitors in the same predicament eventually close their doors forever. And he wanted to avoid that fate.

He considered putting personal money into the business. It was something he had seen a few of his contemporaries do — but some ended up going out of business anyway. So he decided it was time to make drastic cuts to the company’s overhead expenses.

And Mr. Vitale knew the big culprit was his $10,500 monthly rent.

At first, he looked into a lower-cost alternative, executive suites, which are small offices that house one or two desks and cost about $800 each per month. But he would have needed two or three to fit all of the company’s staff, an arrangement that wasn’t ideal.

Instead, Mr. Vitale decided to forgo office space altogether. He signed up with CES Virtual Offices, a company that offers clients a receptionist to answer calls, a corporate mailing address, and email and fax services — all while the staff works from home.

CES forwards calls and faxes. Voicemails are delivered to Mr. Vitale’s home phone and are also sent to his email inbox as sound files. Faxes are sent via email as PDFs. If Alliance Home Mortgage’s staffers want to meet clients in person, they can go online and book local conference-room space provided by CES.

Mr. Vitale spends about $500 per month altogether for the virtual-office setup. He doesn’t cover employees’ home-office expenses, but he does offer an extra 5% commission to his salespeople as compensation — which generally comes to between $1,000 and $2,000 per month. Because that expense is correlated with sales, it’s easier to manage than extra rent, he adds.

Mr. Vitale’s most potent fears — that email or fax forwarding wouldn’t work — have been unfounded, he says. He does miss the camaraderie of an office. “But when I think about the money I’m saving,” he says, “I don’t miss it quite as much.”

Write to Simona Covel at simona.covel@wsj.com

Printed in The Wall Street Journal, page B5