One of the reason why SMEs remain small is because of a marketing trap they find themselves in.
SMEs do not have enough money to spend on marketing (or decide not to). Either way, the smaller marketing spend limits the awareness of the SMEs solutions in the marketplace. This results in lesser business, which in turn results in keeping the SME small. This is the marketing trap. Most SMEs are stuck in this and find it difficult to get out of this.
A big business can be reached by an SME (the knowledge is available of the big buyers) while a big business also has the resources and network to locate SMEs relevant for its business, though this is much harder. On the other hand, it is quite hard for SMEs to sell to other SMEs. The two have no way of connecting with each other. Technology has done very little to change the way SMEs trade with each other, especially in a local marketplace.
Of course, the easy solution to this problem is for SMEs to spend money on marketing and get out of this marketing trap. The problem is that their scale is small to justify effective media campaigns where they have to rise above the din of the big businesses. One-off ads are not very effective, and in fact, have a counter effect because the response is not that great, leading to disillusionment. Other techniques include classifieds, yellow pages, telemarketing, direct marketing and building up a channel. Again, for SMEs, these techniques all have their limitations in generating new business.
Garnering new business is very important for SMEs because that is the passport for growth. Most SMEs typically have very tight cost controls because the owner-managers are in charge and its their own money. The key for growth lies in leveraging existing capacity to service new customers. Since the base costs are probably already being met by the existing business, the profitability on new business is likely to be higher, giving the SME the necessary additional capital for one or more of the following: business expansion, marketing or technology investments. That is a possible path out of the marketing trap.
It is therefore important therefore to first bridge the information gap knowledge of who the possible SME buyers of the SMEs products and services are. If these buyers can be connected with the SME, it is possible that both will be better off. The problem is that there is no easy way for them to find each other. This is the intervention that is required an SME Trade Information Marketplace (STIM).
STIM caters to their basic need of SMEs wanting to be better off than where they are. What the STIM does is connect SMEs to other SMEs in a local region. SMEs are both the producers and consumers of information. The information they produce is who they are, and what their needs are (buy) and what they produce (sell). The buy-sell requests need to be mapped and the SMEs need to be connected. So far, there is little new about this a traditional marketplace solution does that. So, in theory, the classified ads or the yellow pages ads (print or online) are supposed to do this. There are even plenty of Internet bulletin boards and website which provide this facility.
What is different about STIM is the use of innovative technology to make the linkages more effective. SMEs publish the information about themselves, and also subscribe to the information they want. What is different is the way this process is done. By itself, each is perhaps a small advance on current ideas, but taken together, they create a powerful positive feedback cycle.
Next Week: As India Develops (continued)
TECH TALK As India Develops+T