Marketing Strategies and Channels that are vital to SMEs
In today’s competitive landscape where trends inevitably come and go, the success of a business heavily depends on its ability to market its products and services. Based on Bank Negara Malaysia’s SME Finance Survey 2018, the biggest constraint to SME growth is the increasing competition among SMEs (69%), followed by fluctuating consumer demand (51%). Due to resource constraints, distinct organisation structures and management styles, conventional marketing theories for large enterprises may not apply to the context of SMEs. One major difference is the overt presence of business owners; this influences marketing through their vision, personality, knowledge, business style and personal networks.
The 4Ps of Marketing for SMEs
In a position to cultivate intimate customer intelligence and connect with them in innovative ways, SMEs are able to derive market value from building customer loyalty and network relationships. Here are the four elements that frame a self-branding model for SMEs:
SME owners often adopt a personal and self-reflective perspective of the business. By implementing their personal attributes, they can develop an effective marketing strategy that cannot be easily replicated. Owners can also become brand champions for their own businesses, which will further differentiate them from others. This could also lead to the owners being viewed as effective, knowledgeable and well-connected individuals. However, the perception of SME owners as the brand might pose problems as the business grows and delegation becomes more complicated.
It is essential for an SME to maintain long-term relationships with its customers and suppliers. The perseverance of networking over a long period of time is necessary to ensure a consistent flow of new customers and recurring sales from satisfied customers to the business. One of the major reasons that causes SMEs to fail is the constant hard work required from the owners to obtain new relationships while maintaining existing ones.
The focus of SME marketing is placed on executing day-to-day tasks, which mostly involves engaging with customers to solve their problems, rather than planning marketing activities. Due to this, marketing plans for SMEs often emerge from interactions between SME owners and their customers, but also leads to implementing marketing strategies that are basic, unplanned and uncontrolled.
Through the “personal” approach that SMEs use with their customers, they are able to produce goods and services based on customer specifications. SMEs could also co-produce with its suppliers or other SMEs to achieve a goal desired by customers. These collaborations could lead to higher brand awareness through leveraging each other’s customer base.
Niche Marketing Strategy
Niche markets comprised consumers with similar demographic, purchase behaviour and lifestyle; or a section of the market whose needs are not fulfilled. A niche market strategy focuses on achieving product differentiation and building consumer relationships. The strategy fits SMEs well as it helps them identify a place within the hyper-competitive and over-advertised marketplace, support long-term relationships with customers, and save marketing costs by focusing on a narrow market.
A smaller customer base also allows SMEs to know their customers very well, enabling them to satisfy the customers and build loyalty for sustainable profits. In addition, a reputation built on trust and commitment is able to help the business attract new customers. It may be more profitable to manage reputation within small market niches as compared to expanding beyond existing capabilities. Strategic Planning Institute stated that the average return on investment from smaller markets is 27%, while that from larger markets is only 21%.
Online Marketing Channels
“Word of Mouth”, the marketing traditionally used by SMEs, has been replaced by “Word of Mouse” and social media. Many have turned to advertising online due to its cheaper advertising cost and ability to target specific audience groups.
Businesses should create a website to increase the accessibility of offerings and information to their consumers. For many, a business website makes the first impression for its potential customers. To drive traffic into websites, businesses must work on Search Engine Optimisation, which means using keywords favoured by Google’s algorithm to rank higher up on searches. For businesses with a physical location, Google My Business is a free tool that makes businesses appear on top of the list when searched by consumers in the same area.
Businesses should also integrate social media with their websites, considering a positive social media presence can drive more traffic to the website and improve its search engine rank. As managing social media requires consistent effort, businesses should pick the ones with users that could be converted into customers. Here are some top social medias and their demographics:
The number one platform for adults has a predominant demographic of users aged between 25 to 34; and is comprised of 44% female and 56% male. Facebook is considered as one of the best platforms for advertising as its older demographic also means higher purchase power. Apart from being relatively cheap to run ads, its system allows businesses to target their audience by age, interests, behaviour and location, which can be incredibly powerful if businesses understand their consumer base very well.
The online photo-sharing app has proved its staying power by surpassing the 1 billion global user mark in 2020. The largest user base of Instagram is aged between 25 to 34; and is comprised of 57% female and 43% male. Instagram stated that 87% of its users’ purchase behaviour are driven by influencers, and 70% of users turn to the application for product discovery. The most effective types of content are claimed to be standard image posts and Instagram Stories.
The top messaging app in Malaysia (97% of the population uses it daily) helps small businesses to connect with their customers, and is an effective platform for promotions as text messages have an average open rate of 98%. Businesses can automate message responses, or save messages to quickly reply commonly asked questions. Customers can also be organised through custom labels, and businesses can broadcast messages to specific groups for efficient communication.
The fastest growing social media platform of all time has a main demographic of users aged between 18 to 24; and is comprised of 59% female and 41% male. TikTok is a crucial platform in social media marketing for businesses that are targeting Generation Z and younger millennials. For others, it will be wise to not overlook this platform and adopt it ahead of other brands. After all, many top social medias started with a young user base.
Marketing has evolved over time, shifting its focus from transactions to relationships, and utilises customer loyalty to build a series of sales out of a single transaction. As SME marketing practices and SME owners are irrevocably linked, SME owners can utilise their entrepreneurial personality to create a unique and innovative marketing strategy. It is also beneficial for SMEs to adopt a niche market strategy, as it builds consumer relationships and a solid reputation with competitive advantage. Despite the costs demanded from SMEs to invest in marketing, it brings benefits that outweigh the immediate costs by reducing customer acquisition costs in the long run. When businesses reach what seems to be a dead end, do remember that marketing strategies are almost endless and only limited by resources and creativity. Like the paradox of the chicken and egg situation, in marketing you can find customers for your product, or find products for your customers.
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