Marketing SMEs

Small and Medium Enterprises (SMEs) have played a tremendous role in the growth of developed countries and are still playing a vital role in their further development and economic growth. SMEs are also the biggest employment provider in any country and contribute heavily in creating gross domestic product (GDP), which ultimately establishing a better standard of living in the society.

Although SMEs are an integral component of economic growth. Consequently, countries around the globe devise policies to ensure the successful SMEs. However, failure rate is still very high. Research indicates that almost 50 percent of SMEs fail within first five years of their inception, while remaining keep on shutting down with seven percent yearly rate. In capital markets, failures of SMEs cannot be absolutely prevented, but can be minimized if reasons for failure are properly identified. Some of the factors that lead towards the failure of SMEs are as under:

1. Excessive taxes,
2. Low sales,
3. High interest rates,
4. Non-supportive government regulations,
5. Lack of skilled labor, and
6. Competition from multinational corporations 

The success of SMEs not only depends on the availability of the market(s) for their products, but also on the effective marketing of the products within the available market(s). However, there is a vague difference in marketing and sales practices of SMEs. Most of the SMEs misconceive their sales strategies [that shoot up their sales] as their marketing while completely ignoring the formal marketing tactics. So far SMEs have failed to understand the advantages of formal marketing strategies that are helpful to identify and tackle competition, gain resources, and  achieve long term objectives. Major focus of SMEs is to increase the sales that may give them profit in the short run.

Some of the reasons due to which formal marketing is not adopted by SMEs are as under:

1. There is a difference between the organizational goals of multinational corporations (MNCs) and SMEs. Multinational corporations have huge financial backup and are more focused on growth strategy. Whereas, SMEs being small and having limited finances are more focused on survival strategy – their focus is more on the financial planning, rather than on marketing planning.
2. An experienced marketing manager is needed to develop customer loyalty and to measure return on marketing efforts. SMEs may not be able to hire a marketing expert due to shortage of finances.
3. Due to focus on survival strategy, the SMEs majorly focus on increasing the sales to keep them in business rather than building the trust with the customers, which requires heavy investment in branding.
4. SMEs do not invest in marketing research to study the market needs. They usually take marketing as a cost rather than investment, and do not include marketing in their business strategy.

These issues may lead to the loss of business against their competitors, keeping SMEs at a disadvantage in the market. One of the reasons that SMEs refrain from formal marketing is that most of the marketing theory is focused on MNCs or big corporations. Generally, marketing theory does not provide solutions to the specific issues that SMEs face.

SMEs need to learn that there is always an innovative approach to applying the marketing mix (product, price, place, promotion) in their respective scenarios. For example, an existing product may be launched in a refined manner or an ingenious use of running product may be offered. Rather than calculating the price on the basis of cost plus profit, a price may be charged that increases customer value or is very much affordable to customers. Moreover, SMEs can look for alternate and promethean distribution channels, rather than using traditional ones. Similarly, SMEs can avoid established communication channels to cut the cost. They can look for other cheaper channels of communication such as, social media, buzz marketing, viral marketing etc. 

On agreeing that SMEs cannot adopt traditional marketing practices not only due to the limitation of resources as well as non-supportive theoretical foundations, but also due to the fact that SME(s) owners surmise and comport differently from that of their counterparts in MNCs. Usually, in SMEs it is the owner who takes the final decision – and most of the decisions support the objective of increasing sales and revenue on day to day basis. However, they must develop the understanding of customer needs and wants, as well as the market requirements. SMEs must understand that marketing activities increase customer value and can help to create customer loyalty, bringing higher revenue and increased sales in the long run. 

To conclude, in the end, it falls on the government to protect SMEs’ activities because they are the biggest employment generator in the economy. Government must establish institutes that not only provide infrastructural support to SMEs but should also develop effective marketing and business plans for each SMEs separately – helping them to launch their products in distant local markets as well as in international markets.