SME marketing in practice Audrey Gilmore Reader in Marketing, Department of Marketing, University of Ulster at Jordanstown, Newtownabbey, Northern Ireland David Carson Professor of Marketing, Department of Marketing, University of Ulster at Jordanstown, Newtownabbey, Northern Ireland Ken Grant Senior Lecturer, Department of Marketing, Monash University, Melbourne, Australia Introduction This paper advocates that networking is an inherent tool of marketing which is wholly compatible with SME decision-making characteristics in relation to marketing activities. After a brief overview of relevant SME marketing and networking literature, the research study aimed at understanding how SME owner/managers use networking in their marketing activities. The paper concludes by advocating that networking is a marketing ``competence’’ and as such can be developed as a way of doing marketing for SMEs, that is, marketing by networking. SMEs’ limitations and marketing characteristics It is well documented that SMEs have unique characteristics that differentiate them from conventional marketing in large organisations (e.g. Carson, 1990). These characteristics may be determined by the inherent characteristics and behaviours of the entrepreneur or owner/manager; and they may be determined by the inherent size and stage of development of the enterprise. Such limitations can be summarised as: limited resources (such as finance, time, marketing knowledge); lack of specialist expertise (owner-managers tend to be generalists rather than specialists); and limited impact in the marketplace. In addition, SME marketing is haphazard and informal because of the way an ownermanager does business; they make most decisions on their own, respond to current opportunities and circumstances and so decision making occurs in a haphazard and apparently chaotic way, according to personal and business priorities at any given point in time (Scase and Goffee, 1980). Clearly such limitations will influence, indeed determine, the marketing characteristics of an SME. SMEs do not conform to the conventional marketing characteristics of marketing textbook theories; instead their marketing is characterised by the limitations outlined above. Thus, SME marketing is likely to be haphazard, informal, loose, unstructured, spontaneous, reactive, built upon and conforming to industry norms. Networking in SMES For SMEs networking can mean using a variety of networks. The inherent existence of the owner/manager ``networks’’ is built around their normal interactions and activities such as personal contact networks (Knoke and Kuklinski, 1982), social networks (Starr and MacMillan, 1990), business networks (Donckels and Lambrecht, 1997), industry (Andersson and Soderlund, 1988) and marketing networks (Piercy and Cravens, 1995). Clearly it is important to understand how owner-managers use these networks. Curran and Blackburn (1994) found that owner-managers tend to have relatively small and non-expensive networks with little resort to expected external contacts such as accountants and bank managers. While these networks were used deliberately to solve problems, the formation and development of the networks were The research register for this journal is available at http://www.m cbup.com /research_registers The current issue and full text archive of this journal is available at http://www.em erald-library.com /ft [ 6 ] Marketing Intelligence & Planning 19/1 [2001] 6±11 # MCB University Press [ISSN 0263-4503] Keywords Small-to-medium-sized enterprises, Marketing decision making, Networking, Marketing strategy, Qualitative techniques Abstract Acknowledges that SMEs (small to medium-sized enterprises) cannot do conventional marketing because of the limitations of resources which are inherent to all SMEs and also because SME owner/managers behave and think differently from conventional marketing decision-making practices in large companies. In this context the discussion focuses on SME characteristics and how these impact upon marketing characteristics within SMEs. In a search for ``alternative’’ marketing approaches, the inherent existence of the owner/ manager’s ``network’’ in its various guises such as personal contact networks, social networks, business networks and industry and marketing networks and how these networks are used is considered. Some evidence from an empirical study carried out simultaneously in Northern Ireland and Australia is presented which illustrates how and why networking is used by SME owner/managers as a tool or approach for carrying out meaningful marketing.
largely unstructured and coincidental in nature. Networking for business activities is about ``companies joining together with a common objective, working together, and cooperating’’ through the exchange and sharing of ideas, knowledge and technology (Dean et al., 1997). Such networking can occur through trade events, personal contacts, in liaison with marketing intermediaries and as part of the SME owner managers’ social endeavours. The characteristics of SME networking are therefore striking in their similarity to SME marketing characteristics. SME networking tends to be informal, loose, unstructured, spontaneous, reactive, structured around and conforming to industry norms. Marketing by networking In bringing together the deliberations on SME marketing and definitions of networks and networking this debate focuses on the notion of ``marketing by networking’’. Networking is a naturally inherent aspect of SME owner-manager decision making, particularly those decisions relating to marketing. This is because owner/managers must go outside the businesses’ physical confines in order to do business and this business is marketing-led activity. Thus, SME owner/managers are doing marketing through their natural and inherent networking activity, through all their normal communication activities, such as interacting and participating in social, business and trade activities. Some of the characteristics of ``marketing by networking’’ are that it is based around people-orientated activities, it is informal, often discreet, interactive, interchangeable, integrated, habitual, and can either be passive or proactive. Marketing by networking is done through personal contact networks (PCNs), carried out with people with whom the ownermanager has had a relationship ± either in the past or currently. The way in which marketing by networking is carried out is often pre-determined by industry behaviours and norms through regular or irregular meeting occasions and industry activities or in just doing business. The frequency and focus may vary depending on the nature of the markets in which the company operates; for example, international networks may be more focused than domestic networks because of the need to plan ahead, whereas contact with domestic markets may be more frequent than with international markets because of convenience. For SME owner-managers, the costs of networking are implicitly hidden because any explicit costs or expenses are low in the immediate term. For example, the cost of networking will include minor expenses such as a club or trade membership, the cost of dinner at trade functions, or the cost of entrance fees to exhibitions. Therefore owner-managers do not consciously need to consider the cost of this ``intangible’’, difficult to access and measure aspect of their marketing activity as opposed to the more tangible, easier to measure aspects of conventional marketing activity. This inherently fits comfortably with SME ownermanagers’ way of doing business. Networking occurs as a natural and inherent entrepreneurial activity. An SME owner-manager’s personal contact network will be represented by people who can help the entrepreneur in arriving at decisions for the wellbeing of the enterprise. The SME owner-manager/entrepreneur will be the focal point of this network ± although it may not always seem so in practice. The network will change according to current circumstances, one of the most documented examples being that of a ``start-up’’ network compared with a network belonging to an established entrepreneur of some years. Also, networks will change according to need; for example, new people may be enlisted into a network when some new area of real or potential interest becomes paramount. Some individuals may serve the entrepreneur’s network as regular advisers, for example, close friends, family, the company accountant or bank manager, others may simply form part of an ongoing and inadvertent information-gathering process. The entrepreneur may not necessarily appear to be the focal person but rather someone who is part of a broader social gathering of peripheral activity. In addition to being a natural activity, networking can be an acquired skill or competency for the SME owner/manager. That is, owner/managers can develop networking skills or competencies over time; they can learn from experience who or where to network and how to do it effectively. Sometimes entrepreneurs will consciously seek out information from certain individuals believed to have a contribution to make; on other occasions information will be gleaned subconsciously. Some illustrations of marketing by networking will be provided from a collaborative study of Australian and Irish SMEs which focuses on how SMEs use [ 7 ] Audrey Gilmore, David Carson and Ken Grant SME marketing in practice Marketing Intelligence & Planning 19/1 [2001] 6±11
networking in doing business with competitors and customers. Methodology This research study sought an understanding of how SME owner-managers do marketing. Large firm models applied to small firm settings have been criticized, and small firm researchers are thus urged to conduct studies that are sensitive to the unique characteristics of small firms. Given that the study of small firms is a relatively new branch of social science research (Churchill et al., 1986; Brockhaus, 1987; Bygrave, 1989) and the relative lack of understanding of small firms, it is argued that emphasis should be placed on empirical research of a phenomenological nature. This points to a qualitative approach where the aim is to explain rather than predict phenomena (Leavy, 1994) and to understand things rather than measure them (Gordon and Langmaid, 1988). Furthermore qualitative methods are considered to be particularly suitable for gaining an understanding of decision making in small and medium-sized firms (Carson et al., 1998). Qualitative research offers a variety of methods. Based on the specific aims of this research, in-depth interviewing was deemed to be the most appropriate means for collecting the relevant data. In-depth interviews are thought to be one of the best methods to investigate an individual’s behavior or attitudes (Tull and Hawkins, 1990); and semi-structured or unstructured interviews have been found to be particularly effective for collecting data from ownermanagers of small enterprises (Curran and Blackburn, 1994). Findings: how SME owners/managers use networks for marketing The study focused on SME owners and managers who operate in business markets in Northern Ireland and in the Melbourne area, Australia. The participating companies operated in a wide array of industries including engineering, textiles and food. These SMEs employed between ten and 250 employees (thus in keeping with the European Commission definition of SMEs). A second criterion for firm selection was that the firm had been in operation for more than five years. This criterion was included so as to eliminate those firms which were experiencing growth volatility that is normally associated with the start-up phase, especially in the first four years of trading (Storey and Johnston, 1986; Storey, 1989). Within these criteria, a total of 45 SME owner-managers were selected. The data were collected by means of in-depth interviews. These were tape-recorded with the informants’ prior consent. The owner/ managers were told that the purpose of the research was to gain an understanding of how SME owner/managers ``do business’’ rather than focusing on their definitions and descriptions of networking. This was a crucial factor in the study as it avoided a scenario whereby the informants would provide answers that they felt the interviewer expected. The interviews were semi-structured insofar as the interviewers had a checklist of areas to cover, rather than a list of pre-determined questions. As such, the interviewers gave the informant the fullest opportunity to relay stories and events which they deemed relevant. The findings in relation to interfaces of networking activities, networking with competitors and networking with customers, are described and illustrated below. Networking with competitors The empirical study highlighted that there is considerably more communication between the SME owner/manager and his/her competitors than is widely reported in the literature. Owner/managers may communicate with competing firms and often are quite supportive of each other. Indeed, many owner/managers claimed to know their competitors personally, and would have no hesitation in contacting them for help or advice. For example, some owner/managers describe relationships with their main competitors as follows: . . . there’s a lot of openness between people like ourselves and (the biggest competitor) . . . One of them came to me and said, ``Look, I’m going to England to see (big retailer), should I know anything about them. . .? Can I buy you lunch and come and talk to you . . .’’? We share jobs . . . we work together. To a certain degree we are still competitive but if he has too much work on, he’ll send me some of the work to do for him; and if we have too much on, or we’re given a job that we don’t specialise in and he does. We’d give it to him, and things like that. A high level of co-operation seemed to exist between some competitors. The reason for such collaboration in many cases was to prevent the client taking the work to a company outside the domestic market, ``It would have to go outside of (local region), that’s the difficulty’’. In other cases one company might engage in a joint arrangement with a competitor if a particular project is too large for either to complete on their own, or if one company [ 8 ] Audrey Gilmore, David Carson and Ken Grant SME marketing in practice Marketing Intelligence & Planning 19/1 [2001] 6±11
requires new resources or skills. For example: . . . at times we would realise we are not going to get this (business) on our own, so we would ask one of our competitors, ``Would you fancy having a go at this with us’’? Especially if it was an area in which we felt we were underresourced. So it’s not difficult to work with our competitors. . . Many SME owner-managers recognise the advantage of maintaining good relations with competitors for the overall good: . . . we do try to improve professionally. I suppose, when you think about it, it’s bound to be for the good of everyone. I suppose that’s inherently what it’s about. Trade associations or institutes often provide the ideal forum for managers to meet: . . . that is the reason we started the clothing institute . . . so that it would be an independent place for you as an employee of a big company . . . as a manager who wanted . . . something for the future you could go along there and speak your mind . . . It worked fantastically for many years. In speaking of the benefits of such bodies, most would claim that they inform of general developments within the industry, which includes what other firms are doing and how buoyant their business is relative to their own. For example: . . . to find out what exactly is going on . . . on a daily basis you know. . . . when I talk to other (practitioners) locally and I’d say, ``how are things going. . .’’? Or perhaps you’re very busy, then you find out what the trends are from talking to these people. . .. . . . there is one annual general meeting held in (city) . . . where all the members come together and we would talk . . .. . . and after the after-dinner speaker, we retire to the bar and then people talk among themselves. Trade associations act as a means for the manager to become known to his peers within the industry. While occasions such as exhibitions or committee meetings ensure a certain degree of formality, they create the opportunity for more social encounters: It’s not a confrontational group. We all meet professionally and are reasonably supportive of one another. Whilst we compete on service and on price, we don’t disagree with each other, we don’t bad-mouth one another. That’s how I get to know the partners in the other firms, I would know them socially and professionally. Similarly, with professional associations, one entrepreneur stated: So I got myself back on branch council . . . That put me back in the (profession) spotlight. I was in the newsletters. I was Treasurer, that was important to get my face back into the limelight, to get to the Executive Director, to know the national people. I can be seen to be a ``doer’’ in these organisations. Likewise they could see that I could get things done in the organisation. While SME owner-managers claim to communicate quite openly, the managers will guard against speaking too freely about certain things, most notably any plans they might have for substantial changes to the firm. For example, one manager who was very active in ``professional circles’’ described how the decision to introduce a new discipline into his company was kept from other industry players by employing an agency to recruit the new staff members with appropriate skills: . . .so we didn’t place the advertisement, because we were aware it may be sensitive and we didn’t want people to know how we were expanding our business just yet. So the advertisement was placed, if you like, anonymously. . . Also SME owner-managers will be reluctant to expend their personal resources in the pursuit of something which will eventually benefit the entire industry. For example, a manager speaking of the possibility of introducing new technology to his company: . . .it’s particularly difficult because the research and development is in the whole industry . . . we’re trying to develop a system within our own business that hasn’t been really fully developed outside the industry . . . we’re actually providing the rest of the industry with information. So while competitor collaboration does take place, it is balanced with caution when it is felt that the benefits enjoyed by each party are proportionate to their respective inputs. Managers will guard against speaking too freely about certain things, especially any plans they might have for substantial changes to the firm or its direction. However, in doing all of this, SME owner/managers rely heavily on using their networks and their networking skills for all aspects of marketing in the context of competitor activity. Networking with customers SME owner-managers often make a concerted effort to include customers and potential customers in their networking. In this study, the customers in most cases were firms, as opposed to consumers. The concept of building relations with another company is more complex than building relations with individuals. In discussing this with the managers in the study, it became apparent that, when they claim to have a relationship [ 9 ] Audrey Gilmore, David Carson and Ken Grant SME marketing in practice Marketing Intelligence & Planning 19/1 [2001] 6±11
with a client company, they are actually referring to their relationship with a few key figures in that company. More importantly, should that person or persons with whom the manager has contact leave the company, very often the relationship with the company dissolves, as the following comments illustrate: We would lose a client for a while because the ``link’’ personality left. A new one comes in and he of course goes to the people he’s used to dealing with, then he moves on. Needless to say we did suffer as the main people in management lost their jobs and they were the people who had all the contacts with customers. These companies had now realised the importance of developing relationships with a wider range of personnel throughout the company and recognised the importance of individuals who may have managerial roles in the future. Indeed the ability to form a relationship in the first instance and maintain it over time will depend on the characteristics of the individuals: . . . it always has to be taken into consideration that personalities are very important, you know, and provided that the selling personality and the purchasing personality are compatible . . . that means quite a lot to a business. Some further illustrations of building and maintaining relationships with customers in the industry are given below: . . . There was a two-way network. I never missed a social event, I never missed any dinners or anything, I went. None of the other consultants went but I went. We had a drink, I met the heavies in the industry whom I didn’t know at the time and then you get talking to them and they get to know your philosophies and when they move around the industry they know how you think. I suppose that’s good. . . . Initially it was from my having a range of contacts and having the courage to approach them and probably having the hunger and the drive to help clarify in their minds how they could use me. SME owner-managers recognise that building relationships are vital to the company’s success and they invest considerable time and effort in maintaining good relations with regular clients. For example: . . . If you have it (a relationship) with the individual, you’ll have it with the company. I mean you’ve got to start somewhere, and who better than to start it with than the person across the desk from you or on the other end of the ’phone. We would try to get to know them now. . .. We wouldn’t be very obvious, you know we are not the type of people who say ``let’s go out and get drunk over lunch’’, but we would meet them and go to the same trade functions, etc., and try to be friendly but on a professional level. I think that’s what people want. . . . as Managing Director with a strong personality I am not loved or liked by everyone. Not everyone would invite me into their home, I can tell you. I am not the most relaxed, ``have a beer with me’’ type of person but I’m in business with these people, I’m friendly in a professional way ± not to go dancing with them. SME owner-managers recognise that they are perceived to be the point of contact by their clients/customers. They make themselves available to speak to these people if requested, even when a member of staff could quite adequately handle the enquiry. This is especially true of long-term customers/ clients. For example: The private clients won’t talk to anyone else. It’s the most important thing they’ve done in years and they have to talk to a ``partner’’ in the company. In some cases, customers become accustomed to speaking to the manager: It’s not a preference to speak to me, it’s a tradition, you know, because I have been here all the time, they just out of habit ask for me, whereas if I tried to ``retrain’’ them gradually . . . other people in the place could deal with them, could deal quite well with them. There is a realisation among SME ownermanagers that often customers prefer communicating with their ``peers’’: Younger people would rather talk to younger people, they many see us as a bit stuffy or something . . . I mean the senior men and these people would know me but the next generation don’t know me, they know our younger associates and they communicate with them. Another widely held belief is that contact with new clients is best done in person. For example: . . . I think, once you get there and you know what the person looks like, sometimes you can form a better relationship on a one-to-one basis . . . These findings illustrate the variety of elements that will impact on how the SME does marketing by networking with customers. It is important to recognise the influence that personality, age and experience of the two communicating parties will have on the networking relationship. The nature of manager-customer networking and how it is done will either contribute to or spoil the integrative way SMEs do [ 10 ] Audrey Gilmore, David Carson and Ken Grant SME marketing in practice Marketing Intelligence & Planning 19/1 [2001] 6±11
marketing. That is, the creation and existence of effective networking will be concerned with maximising marketing opportunities and ensuring the enterprise’s survival and development through successful interactions with customers and competitors. Managerial implications and conclusion Marketing by networking will be enhanced and improved with the advent of experience. This is often manifested by owner/managers using their networking abilities. Owner/ managers will use their strengths to overcome their inherent weaknesses, learn from mistakes and assess what went wrong in order to avoid such mistakes in the future, learn from successes and assess all of the circumstances that contribute to success. As the composition of the SME owner/ manager’s network moves between personal and business relationships, the nature of decision making also changes. Where a manager depends mainly on social networks, decisions are likely to be based on incomplete information and will rely more on intuition. As the owner/manager gathers more business contacts and networking becomes more strategic, his decision making will become more rigorous. Much of this networking development can be attributed to increased experiential knowledge in that, having made certain decisions before in the past, the manager will have learned from previous mistakes and will approach the task in a more structured way. Such a realisation allows for a speculation that networking can be harnessed into a proactive marketing infrastructure. This discussion does not advocate that this infrastructure be formalised in any way, instead, it is argued that networking is a ``competence’’ which can be developed in much the same way that any competence has been learned, refined and developed through time spent doing it. At whatever stage of refinement or development, it is argued that SMEs do marketing by networking and this MBN can be developed proactively as an approach for marketing which is wholly compatible with the characteristics of SMEs. References Andersson, P. and Soderlund, M. (1988), ``The network approach to marketing’’, Irish Marketing Review, Vol. 1, pp. 63-8. Brockhaus, R.H. Sr (1987), ``Entrepreneurial research: are we playing the correct game?’’, American Journal of Small Business, Vol. 11 No. 3, pp. 43-9. Bygrave, W.D. (1989), ``The entrepreneurship paradigm (I): a philosophical look at its research methodologies’’, Entrepreneurship Theory and Practice, Vol. 14 No. 1, pp. 7-26. Carson, D. (1990), ``Some exploratory models for assessing small firms’ marketing performance’’, European Journal of Marketing, Vol. 24, p. 11. Carson, D., Gilmore, A., Cummins, D., O’Donnell, A. and Grant, K. (1998), ``Price setting in SMEs: some empirical findings’’, Journal of Product & Brand Management, Vol. 7 No. 1, pp. 74-86. Churchill, N.C. and Lewis, V.L. (1986), ``Entrepreneurship research: directions and methods’’, in Sexton, D.L. and Smilor, R.W. (Eds), The Art and Science of Entrepreneurship, Ballinger, Cambridge, MA. Curran, J. and Blackburn, R. (1994), Small Firms and Local Economic Networks, PCP, London. Dean, J., Holmes, S. and Smith, S. (1997), ``Understanding business networks: evidence from the manufacturing and service sectors in Australia’’, Journal of Small Business Management, Vol. 35 No. 1, pp. 78-84. Donckels, R. and Lambrecht, J. (1997), ``The network position of small businesses: an exploratory model’’, Journal of Small Business Management, Vol. 35 No. 2, pp. 13-25. Gordon, W. and Langmaid, R. (1988), Qualitative Market Research: A Practitioner’s and Buyer’s Guide, Gower, Aldershot. Knoke, D. and Kuklinksi, H.H. (1982), Network Analysis, Sage, Beverly Hills, CA. Leavy, B. (1994), ``The craft of case-based qualitative research’’, Irish Business and Administrative Research, Vol. 15, pp. 105-18. Piercy, N.F. and Cravens, D.W. (1995), ``The network paradigm and the marketing organisation. Developing a new management agenda’’, European Journal of Marketing, Vol. 29 No. 3, pp. 7-34. Scase, R. and Goffee, R. (1980), The Real World of the Business Owner, Croom Helm, London. Starr, J.A. and MacMillan, I.C. (1990), ``Resource cooptation via social contracting: resource acquisition strategies for new ventures’’, Strategic Management Journal, Vol. 11, Summer, pp. 79-92. Storey, D.J. (1989), ``Firm performance and size: explanations from the small firm sector’’, Small Business Economics, Vol. 1 No. 3, pp. 175-80. Storey, D.J. and Johnson, S. (1986), Are Small Firms the Answer to Unemployment?, The Employment Institute, London. Tull, D.S. and Hawkins, D.I. (1990), Marketing Research, Measurement, and Method, Macmillan, New York, NY. [ 11 ] Audrey Gilmore, David Carson and Ken Grant SME marketing in practice Marketing Intelligence & Planning 19/1 [2001] 6±11