Entrepreneurship Marketing

Principles and Practice of SME Marketing

Sonny Nwankwo, Ayantunji Gbadamosi, Sonny Nwankwo, Ayantunji Gbadamosi

• Publisher: Routledge
• Year: 2020
• ISBN:
  9780429999970
• Edition: 2
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Small and medium-sized enterprises (SMEs) dominate the market in terms of sheer number of organisations; yet, scholarly resource materials to assist in honing skills and competencies have not kept pace. This well renowned textbook guides students through the complexities of entrepreneurship from the unique perspective of marketing in SME contexts, providing a clear grounding in the principles, practices, strategies, challenges, and opportunities faced by businesses today.

SMEs now need to step up to the terrain of mobile marketing and consumer-generated marketing and utilise social media marketing tools. Similarly, the activities of various stakeholders in SME businesses like start-up accelerators, business incubators, and crowdfunding have now gained more prominence in SME activities. This second edition advances grounds covered in the earlier edition and has been fully updated to reflect this new, dynamic business landscape. Updates include:

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• A consideration of social media imperatives on SME marketing;

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• Discussion of forms of capital formation and deployment for marketing effectiveness, including crowdfunding;

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• Updated international case studies drawn from diverse backgrounds;

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• Hands-on practical explorations based on real-life tasks to encourage deeper understanding.

This book is perfect for students studying SMEs, Marketing and Enterprise at both advanced undergraduate and postgraduate levels, as well as professionals looking to obtain the required knowledge to operate their businesses in this increasingly complex and turbulent marketing environment.

Chapter 1

Marketing in small and medium-sized enterprises

An introduction

Mike Simpson, Nick Taylor, and Jo Padmore

LEARNING OBJECTIVES

After reading this chapter, you will be able to:

Define what we mean by small and medium-sized enterprises (SMEs) and why there is a need for theoretical developments in the area of SME marketing;

Critically review the extant literature on marketing in SMEs;

Consider the relationship between marketing, strategic thinking, and small firm survival;

Discuss the reasons why big business marketing does not appear to be transferable to small and medium-sized enterprises;

Discuss how small and medium sized businesses have adapted marketing to their particular context.

INTRODUCTION

The application of marketing principles is widely accepted as the way in which larger companies generate profits and grow. The supporting marketing literature has been developed over many years and has generally focussed on established large organisations. In contrast, the literature surrounding small and medium-sized enterprises (SMEs) and their marketing efforts is still in the development stage. This chapter explores how the established principles of marketing apply to small and medium sized enterprises. The relationship between marketing and strategic thinking is explored and in particular the extent to which some SMEs feel that marketing is not relevant to their business needs. There is evidence to suggest that the formal approaches to marketing that have been established for larger organisations do not appear to be easily transferrable to SMEs. However, if these companies are not utilising these principles to generate success then what are they using, and how does this inform our strategic view of marketing practice in SMEs? Marketing exists to facilitate exchanges. Exchanges of value as perceived from both the supplier and the receiver. Core to the understanding of value exchange is the notion that the supplier offers something of less value than they receive in return. Of course the opposite is also true for the receiver, in that the value of goods and services received is of greater value than the cost of obtaining them. The resultant satisfaction is shared among both parties.

The following chapter now examines the nature of SME organisations and how they differ from larger organisations. In addition the relationship to marketing is explored to reveal how SMEs organisations manage to create value that promotes profitable exchanges leading to customer satisfaction.

DEFINING SMALL AND MEDIUM-SIZED ENTERPRISES IN CONTEXT

Definitions of small and medium-sized enterprises (SMEs) vary widely from country to country. Most research defines SMEs by the number of employees. In the UK, SMEs are defined as businesses with fewer than 250 employees, and in the European Union they are defined as independent businesses with less than 25% owned or controlled by another enterprise(s) and with fewer than 250 employees (EU, 2005). The European Union also places stipulations on the turnover and balance sheet figures such that micro businesses (one to nine employees) should not exceed 2m Euro turnover, small businesses (ten to 49 employees) should not exceed 10m Euro turnover and medium sized businesses (50–249 employees) should not exceed 50m Euro turnover (EU, 2005). In some countries the definition of an SME varies by industry sector as well as number of employees and turnover figures.

Small and medium-sized enterprises are an important part of all economies, accounting for 99% of businesses in the UK. Worldwide SMEs account for in excess of 99% of all businesses and are by far the largest contributor to employment and the gross domestic product of nations. Therefore, SMEs are a source of job creation and contribute both innovation and competition to the market. Some, but not all, SMEs grow to be big businesses. Government policies are often aimed at growing SMEs to create employment or to ride out periods of economic crisis and yet many SMEs either cannot grow or choose not to expand beyond what can be managed and controlled by the owner-manager. Some owner-managers choose a life-style rather than to grow their business and this view affects the way SMEs behave. Owner-managers also define success in different ways (e.g., being happy rather than wealthy; having a manageable business rather than creating a large business they could not control themselves; simply having enough money and enough freedom to do as they wish). These issues only serve to complicate any theoretical developments in the area of marketing in SMEs.

Research has found that SMEs faced the following problems:

Sales and Marketing (in 40.2% of SMEs)

Human Resource Management (15.3%)

General Management (14.3%)

Production/Operations Management (8.6%).

(Huang and Brown, 1999)

Sales and marketing is often the most dominant problem encountered by SME operators and yet has been acknowledged to be the most important of all business activities and essential for the survival and growth of small businesses (McKenna, 1991; O’Brien, 1998). The areas of marketing with the most frequent problems in SMEs were promotion and market research (Huang and Brown, 1999). The reasons for this were that SMEs lacked the financial resources to employ specialists, that the resource constraints limited the ability of the company to search for information and that a lack of a management information system limited the use of data already held within the organisation.

Thus, the typical SME has limited resources, limited cash flows, few customers, is often engaged in management ‘fire-fighting’, concentrates on current performance rather than taking a strategic focus, often has a flat organisational structure, has problems with sales and marketing, and possibly has high staff turnover (Hudson et al., 2001). The dynamic forces (both internally and externally) affecting SMEs create a very different environment in which marketing activities take place by comparision with larger and often long established stable businesses that are capable of manipulating the business environment to a degree.

PREVIOUS RESEARCH ON MARKETING IN SMALL AND MEDIUM-SIZED ENTERPRISES

It is generally accepted that the basic principles of marketing are universally applicable to large and small businesses (Siu and Kirby, 1998; Reynolds, 2002). The study of marketing in SMEs has been recognised as a problematic area for researchers for over 20 years (Chaston and Mangles, 2002; Siu and Kirby, 1998). SME marketing in practice is thought to be largely done though networking (Gilmore et al., 2001) or a combination of transaction, relationship, interaction, and network marketing (Brodie et al., 1997). More recently, the use of internet marketing (Chaffey et al., 2000; Sparkes and Thomas, 2001) or e-commerce (Rayport and Jaworski, 2001) has become popular in all types of businesses including SMEs. However, academic research appears unable to resolve a number of questions about small businesses and their relationship with and the use of marketing. Siu and Kirby (1998) point out that empirical evidence has been generated in an ad hoc manner because of a general absence of a systematic approach to the subject. Insufficient knowledge about marketing in small business remains and a small business marketing theory specifically related to the understanding and knowledge of strategic marketing is needed (Siu and Kirby, 1998).

MARKETING MODELS FOR SMEs

Research on small businesses and their marketing activities has been largely limited to explanations of certain types of behaviour observed in small businesses (e.g., Hannon and Atherton, 1998; Smith and Whittaker, 1998; Huang and Brown, 1999), or on the search for factors that are missing or present barriers in smaller businesses, accounting for their apparent inability to apply or use marketing ideas and concepts that were often developed for larger businesses (e.g., Barber et al., 1989; O’Brien, 1998; Freel, 2000). Theory development in SMEs research seems to be somewhat limited in general. The work that has been done is more applied in nature, taking the form of prescriptive or descriptive frameworks and ‘models’, on how to apply certain business and management theories to the smaller business (e.g., Carson, 1990; Brooksbank, 1996; Valos and Baker, 1996; Brooksbank, 1999). Some authors are investigating th...