Why small businesses struggle to advertise

Most SMEs rely on word of mouth or referral. [iStockphoto]

Advertising is key for any business.

This is because it not only offers a new lifeline to the company but also as a means of beating competition or cementing the firm's position in the market

While large corporates have no problem advertising since they have the money to hire the best talent in marketing who can craft messages with the ability to make people buy air in order to breathe, small businesses do not have that luxury.

Some micro, small and medium enterprises (MSMEs) after coming up with a service or manufacturing a product remain with nothing to market it and as such, even while they may have a superior product or well-packaged service, they fail to maximise the potential of the market to make profits.

Low prices

A short study titled Kenya SME Go-to Online 2022 by Viffa Consult, a Kenyan consultancy firm whose primary focus is supporting MSMEs, details why it is at times a challenge for these businesses to advertise.

The study notes that the majority of SMEs ride on the unsustainable advantage of low prices.

"This is risky due to the fact that it leads to thin profits margins hence breaking even is impossible as well as exposure to stiff competition from well-capitalised competitors leading to the closing of business, especially for wholesale retail SMEs," says the study.

The study asked businesses to name reasons why customers come to their business. Excellent service came first followed by low costs, high product quality and legal requirements.

"SMEs in manufacturing ranked low product cost as its highest value proposition while product quality as its lowest pointing to a need for systematic support to improve quality and market linkage. The value proposition of legal requirement featured in SMEs in regulated sectors such as insurance and aviation," reads the study.

The study borrows findings from a 2016 report by the Kenya National Bureau of Statistics (KNBS) on MSMEs which documents that a large proportion of these businesses never advertise or market their goods or services but instead depend on the quality of products and clientele satisfaction as their marketing tool.

Handout mentality?

According to the report, most SMEs say that to solve the problem of marketing government must assist in market promotion and provide an enabling environment for fair competition.

It adds that the challenge of marketing is further compounded by little to no value addition.

This leads to a lack of competitive advantage hence little to no solid value proposition by Kenyan SMEs locking them out from both national and export markets.

The study notes that the economic slowdown due to Covid-19 had a negative effect on SME operations which further underscores the dire need for marketing innovation by SMEs as part of building resilience and subsequent recovery.

"Despite a low e-commerce market penetration of 0.5 per cent, according to the Communication Authority of Kenya (CA), e-commerce has the potential to provide SMEs with an alternative channel for existing customers as well as access to new customers both locally and internationally," the study further adds.

Viffa Consult says it consulted the study among 107 businesses to establish the sales and marketing strategies used by SMEs.

Word of mouth

When it comes to customer acquisition, most SMEs relied on word of mouth or referral. Other ways of getting a customer listed include social media and walk-in clients.

"Although social media is sighted as a top customer acquisition channel, SME respondents indicated the need for capacity building to fully harness the potential of social media combined with the need for seamless logistic support for last-mile delivery to customers," reads the study.

The study adds that SME respondents indicated the need for a new international market, especially in the continent through African Continental Free Trade Area (Afcta) and global supply chain through sub-contracting by multinationals.

Six out of the 10 MSME customers are individuals. The rest are distributed among private companies (12 per cent), national government (12 per cent), counties (12 per cent), civil societies and non-governmental organisations (five per cent).

"There is need by SMEs to develop of B2B market which holds a higher value potential as opposed to individuals (B2C)," says the report.