Podunk Is Beckoning

Most Americans haven't heard of Machias, Me. (pop. 2,569); Belton, Tex. (pop. 12,476); or Baxter, Minn. (pop. 3,695). Most American marketing companies probably haven't either, for that matter: Battling it out in and around major urban and suburban areas is still their paramount strategy.

But these three burgs are now being wooed by some mighty big suitors. McDonald's Corp. has opened a tiny 53-seat cafe in Machias. Sharp Electronics Corp. helped sponsor Belton's rodeo. And Target Stores, a unit of Dayton Hudson Corp., has opened a Baxter outlet. Of course, Wal-Mart Stores Inc. for years shunned the bright lights of the big city for more rustic locales. But the king of rural retailing is getting a lot of company (table).

MOBBED. These marketers are fleeing the big city for the same reason some residents do: It's getting too crowded there. Most larger markets already have all the fast-food joints and mall outlets they need, and competition is fierce. McDonald's alone has 8,600 U. S. locations.

Small wonder that small towns look attractive. "The competition is nowhere near as intense as in traditional large markets," says Thomas Conroy, an economics consultant based in Allen Park, Mich.

The trick is finding the right spot. Red Lobster, for example, has been expanding into new markets where total area population is 90,000 or fewer. But it rejects four out of five new locales it considers.

And opportunities aren't always obvious. Townsend, Tenn., for example, is small even by small-town standards: Its population is 329. But looks are deceiving. Situated on a well-traveled and picturesque route between Knoxville and the Smoky Mountains, the village "serves both the business and leisure traveler," says David Sullivan, development manager for Hampton Inns Inc. In August, the 290-motel chain opened one in Townsend, and Hampton Inns plans to open 100 more in tiny towns by 1996. Similarly, Target has set up shop in Baxter because it's near Brainerd, Minn., the county seat and center for an area of 80,000 shoppers. And summertime visitors to Minnesota's lake district boost the population to 150,000.

Some companies are also aiming advertising and promotional efforts at a more rural audience. Sharp, for example, learned that affluent professionals and white-collar workers in the Western states loved rodeos. So this year, the Japanese electronics maker sponsored 20 rodeos and tied them to promotions at nearby retailers. Sharp will double its rodeo sponsorships next year.

'MORE THINGS.' Lower costs are an asset in this sort of micromarketing. But volume is usually smaller, too, so businesses must often ratchet down. The Townsend Hampton Inn, for example, has 54 rooms instead of the usual 135. McDonald's has for years built standard-sized restaurants in smaller towns. But recently it opened 12 smaller formats, including three "Cafes." All are designed for towns it would otherwise pass over. The Machias McDonald's Cafe has about 60% of the square footage of a regular McDonald's, and to get needed volume it serves a broader menu, including roast chicken, hot dogs and beans, and even a fish platter. "In the smaller towns, you have to be more things to that community," says owner Doug Quagliaroli.

Of course, the community has to want the marketer. The presence of the National Baseball Hall of Fame & Museum in Cooperstown, N. Y. (pop. 2,180) lured a Pizza Hut franchisee into applying for a permit. No soap: The local council has steadily resisted.

And when a marketer finds a small town, the market may not be as underserved as he would like. In Baxter, Target is facing off against a Wal-Mart right across the street. And Kmart Corp., which has been expanding into small towns for years, has an outlet just a mile away. So far, business has been plentiful. "People come from 35 miles around to shop," says Don O'Brien, Baxter's mayor. But if the competition heats up, who knows? These retailers, like other urban refugees, could find that the small towns they've recently discovered aren't immune to all big-city woes.

      Company              Strategy
      HAMPTON INNS  Building scaled-down motels in towns smaller than 75,000
      McDONALD'S  Has 3 McDonald's Cafes designed for small towns
      RED LOBSTER  Launching 270-seat restaurants in smaller urban areas
      Sponsoring rodeos, branching out to state fairs
      TARGET STORES  Has just opened three stores in towns of 3,700 to 15,000
      DATA: BW
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