The subject of marketing is a highly debated topic, the majority of which concerns the actual definition of marketing. According to Kotler (2005) “Marketing is a social and managerial process by which individuals and groups obtain what they want through creating and exchanging products and value with others”. Small businesses typically see marketing as simply attracting new business.
Kingston University’s small business research centre Stokes et al (1997) indicated that small business owners equated marketing with selling and promoting only, However many studies have highlighted the importance of marketing especially for small firms and that there is a positive correlation between levels of marketing amongst small firms and the survival of small companies during the first few years.
According to Stokes et al (1997) “Marketing is particularly important to smaller organisations because it represents, a) a vital interface between small firm and an uncertain, fast changing external environment, and b) a key internal management skill that differentiates between surviving and failing firms”. This highlights the importance that small firms must continually adapt their marketing strategies to match an ever changing market.
Unfortunately this can be extremely difficult for small firms in terms of finance and resources, although small firms do have the ability to be more flexible more quickly than relatively large firms which does enable them to adapt to small changes in their particular market, However sudden changes or changes that occur in the economy can often catch small firms off guard who would be powerless and without the sufficient finances and resources to adapt responsively to the change.
This essay attempts to present a critical review of the methods of marketing used by small firms, with the aim of identifying which methods would be more beneficial for small firms to put into practice and how marketing methods and theory varies between large firms and small to medium sized enterprises. Carson (1985) concluded that “marketing constraints on small firms took the form of restricted resources, lack of specialist expertise and limited impact”.
This mainly concerns the personalised management style of the owner/manager who is in charge of the small firm. The competency of that owner/manager forms an extremely large basis on whether the small firm will perform well in the early stages of its development and will ultimately decide on whether or not the small firm will survive. The decisions chosen by the owner/manager often occur in response due to opportunities and circumstances that arise and therefore they seem to occur in a ‘haphazard’ way (Scase and Goffee, 1980).
The pre-dominant problem concerning marketing in small firms is that they do not hold marketing in as high a regard as accounting and finance, This can escalate into a much larger problem when small firms come into periods of trouble as they do no associate marketing as an essential method enough to sustain the company. SME’s do not conform to conventional marketing theory mainly because of the marketing constraints discussed above by Carson. These three main points of marketing constraint are why small and medium sized enterprises (SME’s) cannot implicate their marketing methods as easily as larger firms or as marketing theory states.
Limited resources not only means limited finance but Carson (1985) states that limited resources also contains limited marketing knowledge and limited time available to conduct marketing tasks. Marketing theory suggests that large firms can hire personnel with expertise in marketing and they can conduct primary and secondary research into the specific market segment, the target market and also the correct marketing mix required for the segment/market respectively.
The second marketing constraint of small firms corresponds with the previous point of expertise. Owner/managers of SME’s will contract business experience over a long period of time therefore it is known as one of the last business disciplines to obtain. In order for SME’s to succeed under Owner/Managers they must become general specialists in a wide variety of business disciplines and the wider their range of skills the better the small firm will be able to adapt and survive in an ever changing environment.
The final marketing constraint on small firms occurs due to the physical size of SME’s, they are generally smaller than large firms therefore they will have fewer consumers, fewer employees and fewer orders to deal with, which limits their impact both within an industry and geographical area both in terms of the firms selling ability as well as their impact on the media in terms of publicity and advertising.
The differences between large firms and small to medium sized ones are apparent, however the underlying principles of marketing are equally applicable to large and small firms alike, a lack of sophisticated marketing is perceived to be problematic for smaller firms Cromie (1991). The main difference between large firms and SME’s is the market available for the firm to target i. e. for a large firm it may be possible to target a mass market which could span across an entire country, continent or maybe even globally.
Until the introduction of the internet this was unimaginable to SME’s. Hsieh and Lin (1998) have researched this topic specifically and state that “The internet is currently considered by some to be one of the few marketing tools that can be used to enable small firms to effectively compete with larger organisations “on the same ground”. Many companies that are locally based use the internet to access a large mass of customers, which are extremely necessary for a small firm to survive within a specific niche market.
This access to a large amount of customers allows SME’s to compete with dynamism and versatility against larger firms who boast a wider range or knowledge and resources at their disposal, Poon and Jevons (1997). A relevant example of the internet as a marketing tool for small firms would be eBay shops. eBay itself is an extremely large company which allows people to buy and sell products from each other, however eBay shops is a section of the website whereby shops can advertise their entire product line and use the internet to access the mass of customers that are relevant within that companies specific niche market.
Large companies do not use eBay shops as they perceive it to be less professional than their own means of trade, however this extremely beneficial for small firms, for example, a manufacturer of rare collector’s items within the United Kingdom can access customers on the opposite side of the world. A number of medium/larger sized companies are unable to sell products globally as they do not have the required customer base that small companies who use the internet effectively have.