How important is Marketing to SMEs?

THE WEAKEST LINK IN THE CHAIN?

An organization is like a chain having management (the entire scalar chain) and functional links (like production, marketing, finance). The strength of the chain will be determined by its weakest link. This weakest link is generally marketing (although in certain cases, it’s finance).

Small and Medium Enterprises (SMEs) are required to sell their product in a competitive market. The prominence of small businesses are allied with the balanced growth of Indian economy, playing an important role in generating millions of jobs. However, large scale units have an edge over SMEs in marketing because of the economies of scale, the financial strength to face setbacks and the competence to hire specialized professional managers.

SMEs depend upon retailers for marketing their products. Here, it is important to ascertain that SMEs get a fair price for their offerings from retailers. SMEs will generally find it difficult to export their products as they suffer from a lack of information and infrastructure relating to export procedures and their inability to undertake required market research. Expensive advertisements on TV and other media also present genuine constraints for SMEs.

INTERNAL CHANGES THAT CAN BE MADE

As a broad mitigation strategy against the above-mentioned constraints, it will be necessary to develop suitable mind-sets and owners will have to be trained like prudent investors and strategic problem solvers. They will also require training in planning, control, leadership, and management.

An SME Entrepreneur must understand that the building market is more important than building production facilities. It is always a good idea to purchase a product in bulk from the wholesalers and sell it to end-users (what is commonly known as trading) as it is or after repacking to learn the art and science of marketing. Once the entrepreneur gets trained and understands marketing function – S/he can always resort to backward integration and take up product creation/manufacturing.

If the SME entrepreneur can handle marketing effectively, S/he can avoid manufacturing altogether and resort to outsourcing product creation function to a third party who either has the capability or spare capacity to undertake to manufacture. However, in such a scenario, the SME entrepreneur will have to take care of both the process and product quality through suitable inspection mechanisms etc.

EXTERNAL AGENCIES THAT CAN HELP

Various Cooperative Societies and Government Agencies can be engaged to help with market surveys and market research studies since these are expensive for individual SMEs. The data helps in identifying and developing new products and newer opportunities. A suitable collaboration model for such a linkage with such agencies and the participating SME will ensure the fruition of this concept.

The Government, through State Level Development Financial Institutions (DFIs), should support SMEs to explore such possibilities and to open new rural markets. DFIs will have to create competent and dedicated marketing cells to help and support interested SMEs on such an initiative. Alternatively, DFIs can rope in local marketing professionals and/or small consulting firms to work on this idea on a retainer-ship or assignment basis.

Due to the high population density in India, there are many opportunities to be grabbed. SME entrepreneurs should select their products based on the existing needs and wants of the consumers rather than trying to create a fresh need. They can also go for collaborations with medium and large firms wherein they can take the role of producer-suppliers, leaving marketing to the large enterprises.

DON’T IGNORE MARKETING!

SMEs have become the sector showing the spirit of entrepreneurship of a country. Marketing can function effectively only when there is full commitment from the SME’s management and employees involved.

What are the steps that you have taken for your small business with respect to Marketing? Are there any good stories or lessons learnt as an SME entrepreneur? Let me know in the comments.

For Further Reading:

• Marketing Strategies for SMEs in India.