Micro, small, and medium sector enterprises (MSME) have a vital role in the economic growth of a developing nation like India. Nearly 63.4 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities as well as 33.4% of India’s manufacturing output. Despite its importance, the MSMEs sector has long extreme faceted obstacles in accessing finance and markets.
A survey conducted by the All India Management Association has also identified a ‘lack of finance’ as one of the most crucial hurdles in the growth of MSMEs. The survey revealed that 60 percent of the units fail due to lack of demand for products, 36 percent due to marketing failure, and 46 percent due to lack of adequate finance. In the survey of ICSI, more than 60 percent of the SSI units are sick and pushed to closure due to the non-availability of timely and adequate finance. Whereas some Associations even feel that as many as 80 percent of MSMEs are afflicted with financial problems.
We will focus our discussion on why marketing failure is the leading failure of MSME and how the digital products and services can come to the rescue of MSME in a significant turnaround. Many MSME tries the conventional channels to market and sells their products/services without exploring the digital. In contrast, many MSMEs stay away from digital media marketing, considering the high cost with an unpredictable outcome.
Some of the marketing problems commonly faced by the small scale entrepreneurs in India are:
- Competition from large scale sector: Because of the scarcity of resources, small entrepreneurs usually use inferior technology. As a result, their products are not standardized. The obsolete technology used by them gets translated into the inferior quality of products.
- Lack of marketing knowledge: Most of the small scale entrepreneurs are not highly educated or professionally qualified to know marketing concept and strategy. Their lack of expertise further inhibits their understanding of the prevailing trends in the market.
- Lack of sales promotion: Small units lack the resources and knowledge for valid sales promotion. Large scale units mostly have well-known branded names. They also have a considerable amount of resources to spend on advertisements and other sales promotion tools. Small scale units, on the other hand, have to pay a hefty commission to dealers for their selling efforts, which reduce profits margins.
- Weak bargaining power: At the time of purchase of inputs, large scale entrepreneurs manage to get huge discounts and credit. Such facilities are not available to small units.
- Product quality: It is costly and trying for a small unit to have quality testing and evaluating equipment.
- Credit sales: The small scale enterprise is invariably called upon to sell on credit. However, when it comes to purchasing inputs, they are denied liberal credit facilities. As a result, they have to borrow excessive working capital than needed. This method of finance increases the general cost of production and prices, making it noncompetitive.
To address all issues faced by MSME, we will start describing various tasks on how MSME should operate in a perfect digital marketing strategy. The digital transformation of MSME from the current style of a manual, semi-automated, semi-manual solution to complete digitization of marketing strategy will open up more opportunities for business growth. The price indicated is a tentative minimum cost of various heads and will differ from case to case.
|Activities||Sub-Activities||One Time Cost (INR)||Cost per Annum (INR)|
|Site Design and Contents||10000||2000|
|Image/ Inforgraphics – 20 Nos||6000|
|Wordle – 3 Nos||3000|
|Video – 5 Nos||6000|
|Forum (Employee / Partner / Customer)||4000|
|Blogs – 4 Nos per month||15000|
|Prospect (Lead) collection||Social Network Personal meeting. Local networking group – 5 Nos||120000|
|Lead collection through various means like Google Ads, Linkedin Ads, Facebook Ads, Instagram, Twitter, Profession Contact provider – 20000 contacts||10000||300000|
|Social Media – Facebook||5000||400000|
|Connect and Nurture Lead||Marketing Automation||5000||10000|
|Social Media Posting||5000||10000|
|Meetings (Discovery of requirement)||Discussion / meetings over net/phone or personal meeting – 40 per month||30000|
|Demo / Discussion about products and Services||Demonstration of specific products, services, capabilities – 20 per month||25000||15000|
|Quotation / Order Closure||Order finalization which Sales Order preparation and other activities – 5 per month||5000||10000|
From the above, the total cost of marketing comes to a minimum Rupees 1.042 Million and a one-time charge of Rs 0.1 Million, which altogether comes to 1.142 Million. The marketing cost makes it unviable for many start-up entrepreneurs where they lack fund, and secondly, their profit margin does make the option viable.
Considering the above expenses as minimum fund requirement, we will work out backward on how to cut down these expenses based on available fund and profit margin to make it viable from day one for MSME start-ups
We will continue our discussion on how each area contributes to your cost of running MSME and addressing each area to minimize the operation cost of IT to Zero.
If interested to know further on Zero cost or want to contribute, please click below to join the group.