The importance of Marketing in Small Businesses

small business

Small and Medium Sized Enterprises (SMEs) are important engines of growth in modern economies. They are responsible for many positive factors increasing not only the competitiveness of nations globally but also acting as incubators of innovation, main players in unemployment reduction, provide nations with important goods and services, and creating a better standard of living for populations. Yet, despite the importance to any economy, these companies have high failure rates.

Small businesses are important engines of growth in modern economies. Nonetheless they have high failure rates

This phenomenon might happen for several reasons such as: negative attitude towards marketing activities; the perception of marketing as a cost; marketing perceived as sales; marketing doesn’t have the same importance as other areas such as accounting, finance and operations; and due to growth SMEs becoming less entrepreneurial (innovative, risky and proactive) to be more administrative and operational.

Interpretation and definition of marketing
There are many definitions to the concept of marketing and authors do not seem to agree in a unique interpretation of it. For this reason, and to better understand the meaning of marketing, a few concepts developed by experts will be shown:

Marketing definitions

Earlier definitions of marketing are limited to sales and advertising, where the main purpose of the company was selling its production. Nowadays, the marketing function is more complex since it is more strategic and diffused within the whole organization. This evolution of the marketing definition happened because in the early days, companies faced local competition. Today, many (if not all) enterprises are threatened by foreign companies and foreign products that are constantly increasing their market share in one another’s markets due to globalization that decreased barriers to commercialization of products and services between nations.

A definition proposed by me is that marketing is the process by which a company studies the market and all its actors in order to make available to its target segment customers, products and services that satisfy needs, tastes, requirements and preferences, seeking to create and maintain long-lasting relationships with the purpose of building customer loyalty and encouraging repetitive purchases throughout of time. In conclusion, the concept of marketing assumes that the key to achieving the goals is to be more efficient than competitors in creating, delivering and communicating higher value to its target markets.

Marketing in SMEs
Small firms face marketing issues critical for their survival and growth and although there is no consensus as regards to a definition for marketing, the concept which has been well documented and developed applies better to larger enterprises where marketing is formal, planned and well-structured,rather than SMEs where there is given little attention to plans, strategies and analysis, and where marketing is pushed aside as being secondary in importance or completely neglected.

The most successful SMEs are those that have a marketing orientation and, although the managers / owners of SMEs do not follow the theoretical concept of marketing, they tend to have a basic notion of the underlying principles and their application. This basic notion about marketing leads managers / owners to use it in a general way and only as a tool to increase sales. On the other hand, poorly performing SMEs tend to apply weak marketing strategies or simply do not use it.

The limitations associated with SMEs – limited time, limited financial and human resources,

little impact on the market, behaviours and education of the owner / manager – have direct influence in which these companies apply marketing, essentially in three ways: first, companies are not inhibited in their growth and expansion by their limitations in marketing but rather by cash flow, financial capital and available human capital; second, small businesses tend to focus their attention on marketing problems with a vision of the future that is mainly short-term – SMEs plan marketing activities, but not formally, and in this type of companies the planning of marketing is inherent and informal and consequently balanced in the context of company behaviours and resources; third, small businesses must adapt the marketing to meet their own needs.

In this way, the small business’s first task should be to study its potential customers and analyse the market where it will operate. It is known that one of the first marketing tools that SMEs use to establish a position in the market is by networking, but it is necessary to bear in mind that marketing strategies differ considerably between mass markets or final consumer (B2C – Business to Consumer) and business markets (B2B – Business to Business) due to some differences in the market structure, purchasing behaviour of consumers, and marketing practices (such as market fragmentation, concentrated demand, purchasing power of buyers, market complexity, market size, purchasing cycles, product complexity).  Distribution channels are shorter and more direct in B2B markets, with greater emphasis on personal / relational negotiation and selling.

There are short-term and long-term benefits to be obtained from marketing. From a short-term perspective, the benefits get evident in the form of sales (SMEs strongly depend on sales or next contract to pay bills and invest to grow) and higher customer satisfaction. In the long-term apart from increased sales, better image and better positioning, SMEs can get bigger returns on marketing investments (ROMI). Marketing is the difference on whether a company wants to be discovered or whether it wants to remain hidden behind its competitors’ shadow.

The power of marketing can change the fate of SME’s and can help them grow faster. Specially now a days with the Internet and the power of social media channels that can boost brand’s recognition and positioning, and ease communication. Marketing helps your small business stay ahead of your competitors and helps you achieve your targets. To get closer to your customers, you must use the best marketing tools and techniques available.

Don’t have the resources to have a marketing team for your company? Outsource the job to an experienced team and boost your company!

 

PT
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