Updated: Apr 10, 2020
SMEs are generally started by hard working and highly motivated individuals, with vision and ambition, attributes which if integrated with a marketing orientation should increase the firms’ chance of success. Initially, the small and young firm faces marketing challenges, which can and will ultimately determine its future. SME success is dependent not only on the presence of products and markets, but also on the efficacious marketing of those products within those markets.
While the underlying principles of marketing are equally applicable to large and SMEs alike, a lack of sophisticated marketing is perceived to be problematic for SMEs. While the successful SME is seen as “a prime example of a marketing-oriented business”, insofar as the company will typically be close to its customers and flexible enough to respond quickly to changing customer needs, operationalisation of a marketing orientation will be determined by dimensions including management capability and key individuals’ backgrounds, with their utilisation of marketing techniques and tactics generally inhibited by constrained resources.
The internet is currently considered by some to be one of the few marketing tools that can be used to enable SMEs to effectively compete with larger organisations “on the same ground”, creating significant opportunity for affordable and effective dynamism and versatility.
Others view it as a mechanism through which SMEs trying to operate within specific niche markets will be able to access the “critical mass of customers necessary for success”.
Given the constrained resources of the SME, marketing tools suitable for utilisation by smaller firms must be welcomed if they can be effectively used to enhance marketing practice of these smaller organisations.
It must be recognised, however, that SMEs typically have different requirements with respect to marketing, with their inherent characteristics impacting upon the willingness/ability of the owner/manager to use conventional and/or contemporary marketing tools.
The marketing characteristics of SMEs also include:
· the fact that SMEs are faced with different market and competitive circumstances;
· are believed not to (in general) engage in marketing or innovative practices although their organic organisational structure should facilitate innovation more readily than the more bureaucratic structure of many larger firms;
· have inherent production and pricing flexibility, but generally lack strong brand names and market power;
· have less goal conflict, various sorts of flexibility, an imbalance between production and marketing, and are ineffectual in the use of marketing techniques.
SMEs typically are flexible and can respond more quickly than large organisations to changing market requirements, this flexibility forming a vital competitive strength.
Additionally, SMEs face marketing problems which are a function of the general characteristics of SMEs including:
· a limited customer base;
· limited marketing activity,
· expertise and impact;
· an over dependence on the marketing ability of the owner/manager;
· reactive rather than planned marketing, (with marketing plans only produced to secure loans);
· difficulties in exploiting marketing opportunities.
A further difficulty for the SME is that fixed costs usually absorb a higher level of sales revenue, leaving proportionally less for marketing expenditures. SME owner/managers rarely rely on formal training to negate a deficiency in marketing expertise. SMEs typically spend modestly on marketing expenditures, and utilise few of the available marketing techniques.
Many of the more structured procedures necessary for “formal” marketing techniques would in fact mitigate against the inherent and advantageous flexibility of the SME. Many owners/managers rely on previous experience and common sense, adopting a marketing orientation without the trappings through staying close enough to their customers to identify changing needs, and flexible enough to adapt to those changing needs.
Within the SME, the boundary between marketing and selling becomes very blurred, as most SMEs’ marketing takes place during the selling process and for many SME owner/ managers the perception is that selling is marketing.
Marketing practice is not easily standardised, with different facets of marketing of differing relevance to individual firms.
Some marketing activities pose particular problems for the SME.
Research indicates that SMEs find pricing difficult, relying on what are perceived to be industry norms for guidance, irrespective of their own firms’ individual circumstances. They also invest proportionately less on sales training than larger firms, indicating that the SMEs studied invested approximately one third as much time in sales management training as larger organisations.
A major deficiency within SMEs’ marketing to be the inability to forecast future demand for products, resulting in a passive (and often slow) reaction to changes in the marketing environment and a consequential less than optimum deployment of production resources. Ineffective or inadequate forecasting will mitigate against effective marketing planning as forecasting forms the basis of operative managerial planning.
The reality of SME’s marketing practice – informal, intuitive, and selling focused.
Implementation of marketing principles is problematic with evidence of specific weakness with respect to pricing, planning, training and forecasting. There can be little doubt that evidence of marketing practice, as prescribed in text books, is rarely found in the SME. Owner/ managers need to be generalists rather than specialists, and this means that: “Formal marketing may be interesting to the entrepreneur but it is unlikely to relate closely enough to his/her situation specific requirements or to solve company problems”.
Marketing activity within the SME will be related to the owner/manager’s attitude to, experience of, and expertise in marketing.