Role of Marketing in SMEs

Improved marketing is central to a small firm’s industrial strategy. Unfortunately, many small
firms assume that the only requirement for success is to open and wait for customers. Perhaps, it
is due to severe limits on their resources. It is seldom recognized that marketing is a complex
process affected by internal external factors. Internal variable includes firm’s financial position,
management capability personnel resources, products offered. External variable includes general
economic conditions, characteristics of population, social and cultural factors, competition,
government regulations etc. Small firms success depends on the ability to plan organize staff and
control marketing activity in relation to internal and external environment. Marketing is the
performance of business activities that direct the flow of goods and services from the producer
to consumer.

Advantages enjoyed by small firm in the field of, marketing include realistic marketing planning,
shorter lines of communication, flexibility, and ability to act quickly.

Concept of Marketing

Marketing is the process of integrating and coordinating the following.

• Identifying and measuring the needs of customers for the type of products or services
that thefirm is equipped to provide.
• Translating the perceived needs into products or services development.
• Developing and activating a plan for availability of product or service available.
• Informing perspective customers about availability of the product/service and
stimulating their demand at a price that generates satisfactory profits for the firm.

Marketing Functions

The functions that must be performed in the marketing process are as follows:

1. Buying And Selling

Exchange process involves buying in anticipation of customer demand and searching for
materials that will satisfy those needs. Selling function includes determination of potential
customers and using a combination of sales techniques to stimulate demand for those
goods or services.

2. Transportation And Storage

It involves the movement and handling of goods. Not all goods are sold at the same time
they are manufactured. Storage is done so that goods are available at the time and place
they are needed.

3. Risk-Taking, Standardization And Grading

Stored goods are subject to several types of risks. They may undergo spoilage,
obsolescence, destruction. Consumer preferences may change leaving the business owner
with a large quantity of unsold goods. Some of the risks can be shifted through insurance
coverage. But the most effective means of dealing with risks is the adoption of good
management practices. Standardization and grading enable consumers to make a
 comparison of the products. Standardization establishes uniformity of specifications in
the matter of color, weight, composition etc. grading is done in the case of products that
cannot be produced uniformly e.g. fruit, egg.

Marketing Process – Steps

1. Identification of Potential Changes in Firm’s Market

Identification of potential changes taking place in firm’s market that could materially affect the
firm’s business.

2. Identification of Customer Needs

The first step in marketing should be to identify the needs of customers the firm intends to sere.
Many firms simply focus an introducing technical perfection in the product with out assessing
customer reactions. The small firm is advised to proceed only on the basis of definite
information collected with the help of a following exercise.

a. Sources of information about markets and customer

There are two broad sources of market intelligence viz,

i. Primary sources which the company develops for us own specific requirements

ii. Secondary sources i.e. the published reports of trade association, government agencies, and
other. These are not geared to the requirement of an individual firm.

Primary Sources

From a marketing perspective, the three primary sources of information are:-

• InternalRecordsoftheFirm:These consist of invoices, inventory audit, reports of

salesmen etc.
• Mail Surveys: Telephone interviews and personal interviews of actual or prospective
customers.
• Direct Observations: information derived from direct observation of customers and
competitors.

Secondary Sources

A number of publications provide overwhelming useful marketing information industry. Specific

data are published by trade and professional associations.

b. Pinpointing the real customers

The potential customers must not only be recognized but placed into proper categories as
follows:

i. Users. (who consume the product/service);

ii. Buyers. (who actually purchase);
iii. Deciders. (who decided what should be purchased);
iv. Influencer.(who has some influence on the purchase process);
v. Informer.(who controls the flow of information to the decision groups);

A typical customer may play several of these roles. Costlier the item to be purchased, more
actors playing different roles will get into the process. To illustrate, suppose the family decides to
buy a TV set. All the family members would be the users. But the actual buyer could be the
husband. Deciders could have been the husband and wife both. The children could be the
influencers on the decision-makers. Any member could act ad informer by providing or
withholding information from decision making group. Generally the role of buyer and decider
could have been performed by the same individual. But in case of organizational purchases. For
successful marketing, the entrepreneur will endeavor to identify the roles played by different
members in the decision process.

Market Segmentation

It is the grouping of customers into segments so that each segment has similar needs,
characteristics and requirements. It helps a firm to relate its products to those requirements of
the target group. A small firm may focus on a segment that may not be found attractive by a
large firm. Segmentation could be on demographics (i.e. age, sex, religion), geographic,
psychographic or social basis. Good segmentation must meet the following criteria:

a) Needs of customers must be both identifiable and measurable.

b) Firm must have the capacity to develop products that will satisfy the customer’s choice in the
particular segment.
c) The segment must be economically worthwhile.

Procedure for market segmentation is described below:

I). Ascertain firm’s Capabilities.

It must know what wet of needs it can satisfy. For instance, the small firm may be willing to sell
its products to foreign buyers. But it must ascertain whether it has the necessary financial,
promotional or distributive capabilities.

II). Ascertain the Competition.

Identify the characteristics and extent of competition in the various segments. All other
conditions being equal, it should focus on the segment which has the least competition or the
segment which are too small for large firms.

III). Focus on the Segment Chosen.

For a small firm, the segment chosen on the criteria of customer characteristics such as
geographical region, demography has been found to be more suitable.
 Marketing Decision Variables

Marketing Controllable Variables

a) Target Market Segment

a. Location
b. Target customers
c. Timing

b) Products offered
a. Typesof products
b. Rangeofproduct
c. Design features
d. Quality

c) Price
a. Price level
b. Pricing Strategies
c. Price variables (discount)
d. Maintenance

d) Advertisement & Promotion

a. Advertising level
b. Advertising media
c. Sales promotion

e) Distribution.

a. Channels
b. Number of sales outlets
c. Warehousing facility

f) Servicing

Marketing Uncontrollable Variable

a) Resource Availability.
a. Availability of required materials
b. Cost and quality of required material
c. Material

b) Competition – Direct & Indirect.

c) Economic Conditions – total market size, economic trends, income situation.

d) Socio-CulturalConditions–societal values, lifestyle,fashion consciousness.

e) Political & Legal Conditions.
a. Political risk situation
b. Legal regulation

f)TechnologicalSituation–state of technology,rate of technological change.

Decision about Product

Product decisions have quite important because the length of time for which a Product remains
profitable has considerably shortened. Frequent technological innovation and entry of new
products have contributed to the shortening of life of a product. Such factors pose a problem
beyond the financial capabilities of a Firm. The product features amenable to manipulation by a
small firm are :

a) Performance and functional features i.e.firm’s ability to perform,durability,reliability and

precision.
b) Use characteristics i.e. ease in handling and serviceability.
c) Aesthetic qualities e.g. style, design, color etc.
d) Extrinsicfeaturese.g.uniquenessofproduct,statusvalueetc.

Product Life Cycle

Product Life Cycle is equally helpful in deciding about appropriate marketing strategy to be
adopted.
a. Product Development
b. Introduction
c. Late Growth
d. Maturity
e. Decline

Marketing Mix

It is the integration of the four elements noted below to service the needs of target market.
a) Product Mix: Correct combination of product andservice.It will cover product depth
(i.e.model, size, style, and color) and product breadth (i.e. number of product lines carried).
b) Promotional Strategy:Promotional Strategy to inform customer about firm’s
products/service etc. through personal selling, sales promotion etc.
c) Physical Distribution:Physical Distribution i.e. the chair of distribution to be adopted for
selecting retailers and wholesalers

Product Mix

It refers to number of products offered by a company. It is not uncommon to find small firms
selling ultiple products. Product mix is done to optimize profits.

Advantages of product mix

1. It enables the firm to serve different segments of the market.

2. It gives steady sales & profits to the firm.
3. The firm can keep all its bases covered.
Demerits of Product Mix

1. It makes greater demand on firm’s resources in the form of increased investment in

production facilities and inventory.

2. Marketing Problems.

The firm should weigh the pros and cons of a wider versus narrow product mix. The ultimate
decision would rest on such considerations as the available resources, existing and future market
opportunities and strategies of competitors. Phillips kotler has suggested the following indicators
of firm’s sub optional product mix;

1. Disproportionately high percentage of total profits from a few products;

2. Insufficient product breadth to exploit sales force;
3. Excessive productive capacity on a chronic or seasonal basis;
4. Steadily declining sales or profits.

Development of New Product

Small firms should consider the frequent introduction of new or improved product as part of
their market strategy. The procedure for generating new product ideas and implementing them is
described below:

1. Making creative search for new product ideas

2. Scrutinyof ideas for their worthwhileness
3. Evaluating whether the idea is compatible with firm’s objectives
4. Establishing technical and market feasibility
5. Reviewing internal resources and capabilities
6. Product development and product testing
7. Test Marketing
8. Commercial sales

State Assistance in Marketing

• Export Promotion Bureau.

• Export Promotion Zone Authority.
• 3⁄4Small & Medium Enterprise Development Authority.

Export Promotion Bureau : Exhibitions

Export Promotion Zone Authority

Small & Medium Enterprise Development Authority (Marketing Services Division)

o Internal Support
o External Support
o Marketing Support to SME
o Packaging Support
o Advertisement & Media Support
SMEDA (Marketing Services Division)

o Internal support
o External support
o Marketing support to SME
o Packaging support
o Advertisement and media support

Marketing Facts (A World Bank Survey)

o Most small enterprise work for domestic center.

o Only 8% work in export sector
o 4% work for govt.sector
o Tough bargaining on price 36%
o Credit customer 34%
o 28% are optimistic to grow in the next 2 years while the real number is 30%