Traditional Marketing Theory and Concepts Have only Limited Application for Small Business Marketing Practice

Traditional Marketing Theory and Concepts

Have only Limited Application for Small Business Marketing Practice

 

Introduction

Marketing is an important aspect of any business. Without the application of an effective marketing approach, the products and services of the company will not reach consumer knowledge nor stimulate their interest to purchase them. Through marketing tools and techniques, businesses are able to position their products or goods to the market. Most importantly, this helps them overcome companies manufacturing or offering similar products. In traditional context, marketing has been used by industries in decisively enhancing the capabilities and performance of the business. Marketing can be noted as one of the essential element underpinning successful enterprises (1994). 

The significance of marketing theories and concepts incorporates oft-repeated factors which include customer orientation, integrated marketing efforts as well as resultant profitability (1994). Some marketing theories and concepts highlights the long-term retention and satisfaction of the target market through the provision of products or services which directly suit their needs and demands. While these marketing theories and concepts have been used for different purposes within the customer life cycle, obtaining and maintaining consumer remain its prime objectives.  However, even if marketing theories and concepts have much to offer to every industry, there exists some issues regarding the limited application of these traditional marketing theories and concepts with the small business marketing practices. Primarily, the main goal of this paper is to discuss and investigate the view that traditional marketing theory and concepts have only limited application in guiding small business practices. Herein, the nature of small business organisation will also be discussed.

 

Small business

The scale of Small business operations means they have a relatively low impact on their surroundings and have a limited power to influence environmental forces in their favour this will include both their suppliers and customers. However, their weakness in these areas can be countered by their ability to react quickly to environmental change. Fundamental shifts in social values, consumer tastes, technological developments, managerial techniques, financial markets and so on, have brought about more complex and dynamic commercial environments. For the small business, their less bureaucratic structural arrangements, together with concentration in the power of the owner, allows growth-orientated small ventures to capitalize on opportunities that emerge from such environmental changes.

In Europe, authorities have made one clear definition of a Small and medium Sized Enterprises (SMEs), so as not to be confused with the features of the larger enterprises.  In the definition of SMEs a business can be classified as small enterprises when the number of working employees are not more that 50 people and whose turnover or balance sheet total must be less than or equal to € 10 million.  On the other hand, a firm is classified as a medium-sized enterprise if the employees do not exceed to 250 individuals and the turnover must be less than or equal to € 50 million and the balance sheet total must only have less than or equal to € 43 million (See Appendix 1).

            Small organizations usually thrive in a changing environment, although it must not be unduly complex in terms of the number of variables involved or the speed of their change (1979). It is further suggested by  (1982) that the SME nimbleness in response to change is due in part to the fact that senior managers or owners formulate strategies that are closely connected with the work of the organization and with other workers and managers. Control and tactical decision making is not separated and distanced from ownership or senior management. In other words, such firms tend to be task continuous; there is a close link between management, planning and the work activity. Larger firms on the other hand are task discontinuous; there tends to be a separate and discrete planning and management structure (1999).

 

Limited Application of Marketing Theory and Concept

            There are many marketing theories and concepts which have been around the business environment over the years. The theory of marketing provides a framework on how this business concept should be implemented and practiced. Marketing is defined as the process of developing long-term relationships with the consumers through effective planning and implementing proper pricing, distribution and promotional means (1990). The aim of marketing should not only to meet the goals of the business; operators should adapt marketing strategies and practices that satisfy the needs of the consumers. This definition of marketing suggests that this principle involves the establishment of a give-and-take relation between the business and the consumers. One of the marketing theory and concept is the context of the marketing mix. The idea of the marketing mix has been around for many years - well before an 'e-' came in front of 'marketing' or anything else. In this regard, marketers devise strategies and tactics aimed at providing satisfaction and adding value for customers. The marketing mix can be defined as the blend of tools and techniques that marketers use to provide value for customers. In its traditional form, marketing mix is widely known as '4Ps':  Place, Product, Price and Promotion. Place refers to the routes organizations take to get the benefits of the product or service to the intended customers. Product means both tangible product and also 'service' and all the ways in which an organization adds value. Price means not just the price charged, but also all aspects of pricing policy.

            Finally, promotion is not just the more specialised sales promotion, but also every way in which a product is promoted to customers – from print advertising to websites. The 4Ps are used as an approach to marketing planning. The prominence of the 4Ps derives largely from  (2001) focus on these as central to marketing strategy. This traditional concept can be considered to have a limited application to guide the small business operations since these contexts are conventionally made for business enterprises which large operations. As has been mentioned, small business operations have different needs and requirements as compared with larger operations.

Given the limits imposed by small scale operations, evidence suggests that the marketing theory and concept has only limited application for this kind of business because of different factors.  One of the factors that tend to hinder the application of traditional marketing theory and concept with small business marketing practice is the resources, especially the financial resources.

With its restricted resources, small business tend to avoid permanent or binding linkages with suppliers and other network contacts which are an important aspect highlighted in most traditional marketing theories and concepts. Apart from that, flexibility factor can also be considered as barrier to enable small business marketing practice to be used fully to guide all small organisation’s operations. Accordingly, small business’ flexibility relies upon the transient nature of their relationships with other organisations using short-term, entrepreneurial contracts an ability to utilise resources carried by others ( 1991) which is very unlikely with traditional marketing contexts which aim on using long-term relationship with suppliers, customers and other networks in the marketing mix.

            Small business marketing firms also suffer a power imbalance when dealing with larger suppliers and customers, with both sides regarding the relationship as somewhat temporary. This arrangement certainly offers greater degrees of flexibility, but is also highly speculative and makes operations planning very problematical.

            Another fundamental element in realising the requisite levels of flexibility which limit the application of traditional marketing theory and concept lies in the reduction of uncertainty. Traditional methods of operation rely heavily upon sales forecasting systems which drive all activity. This leads to large amounts of uncertainty and consequent holdings of buffer stocks in order to combat unknown demand. Fast and flexible response, however, reduces forecast reliance and removes uncertainty by applying different operational practices to individual product groups, distribution channels, retailers, etc. Hence, true demand patterns become evident and easier to satisfy.

The small business marketing practice resides in a changeable environment, has a small output, and is a flexible and responsive generalist organisation. These firms are ideally suited to providing a variety of customised product and service combinations in response to constantly changing customer needs. Small firms have less sophisticated, flexible, and organic structures. They tend to adopt what   (1984) describe as ‘flexible specialisation’.

            In general, the volume of the products or services produced tended to dictate the size of operational scale of small business. Small-scale operations tended to be less specialised, had fewer levels of management authority and a small span of control for marketing supervisors and managers. In terms of financing resources, it seems that small firms are on the disadvantage. (2004) reported that smaller firms finance a lower proportion of their investment externally, particularly because they make use of bank finance to lesser extent. Compared to large firms, small firms use significantly more informal finance. Furthermore, small firms do not use disproportionately more leasing or trade finance compared to larger firms. Small firms also finance their investment significantly less from government sources or development banks despite the fact that such programs are often politically justified as increasing financing for small firms.

             (2003) stated that among the weaknesses of Small business marketing practice is their difficulty in financing and using of external knowledge resources and these affects the application of traditional marketing theory and concept which are largely depends on high investment. That particular task is stronger in large firms.

Marketing Research is also one of the common traditional marketing concepts in the business environment. Marketing research as defined by  (2001) is the “systematic design, collection, analysis and reporting of data relevant to a specific marketing situation” () of the organisation. Clearly, marketing research is engaged in various activities from market potential to market share studies as well as customer satisfaction and product improvement. The information which results from the marketing research is pivotal to the formation of effective strategic marketing plans of the company because acquiring the right information can lead to successfully addressing the needs of organisation. Typically, the implementation of any marketing strategy should be supported by market research so as to ensure effectiveness. This research is usually done through market and competitor analysis. After which, a marketing plan is developed based on the acquired research information (2004). However, because of the financial and employee constraints, the use of research as part of marketing approach is also limited in the small business marketing practice.

In the marketing environment, it is also said that small business face increased competition from international-scale enterprises both at home and abroad who have unrestricted application of the traditional marketing theory and concept. Some authors have suggested that in order to survive, Small business must undertake new initiatives in a conscientious manner and adopt marketing techniques that enhance their use of resources and strengthen their business capabilities.

Another marketing context is the relationship marketing. Relationship marketing (RM) is the concept used to describe the contact between the company and the consumers. Berry and Thompson (1982) had defined this as the strategy for business organizations to attract and maintain customers through relationship enhancement. Studies indicated that relationship marketing has been used by businesses either through salesperson management or business-to-business relations. Previous researches had also noted that certain factors such as situational influences, customer or salesperson character and pairing dynamics affect the use of relationship marketing. According to Waring and associates (1980), the effective application of RM actually revolves within 5 C’s. These include communication, caring, commitment, comforts and conflict resolution. Though these RM features, businesses are able to employ various marketing or advertising activities, which in turn facilitates relationship-building with the customers. Such marketing theory is also said to have limited application in guiding small business marketing practice, because of the complexity of the concept for some small businesses and still because of the lack of the of financial and human resources of small businesses.

Furthermore, part of the relationship marketing concept is the recognition of the behaviour of the customers or target market. Accordingly, studying the characteristics of the consumers is an important aspect of marketing especially for small businesses, because of the lack of resources that would pursue marketing research in understanding consumers. Consumer behavior enumerates the customers’ product knowledge, usage, attitudes and responses to a particular commercial item or service. In this regard, the familiarity with, function, and purpose of commercial goods or services are distinguished depending on the consumers’ needs and use. However, such context is again having limitations in guiding small business marketing practice which do not have strong corporate brand or corporate image to attract the customers.

Traditional Marketing theory and concept also emphasise the importance of promotional tools. These theories guide companies to develop promotional strategies through the use of mass media advertising. In almost all aspects of marketing communication, companies, especially larger ones depend on expertise of advertising agencies. Although, most marketers have already introduced and used other marketing communication and promotional tools, package design firms, direct marketing agencies and sales promotion were generally considered as supplementary services and were only used on specific projects. Because advertising is costly and larger firms are the ones who have the resources to avail the services of these advertising agencies, such context can also be considered to have limitations in applying for small business as part of their marketing practice.

In addition, it is said that agencies on public relations were employed to handle the affairs, publicity and image of a company to the targeted public. However, these services were not regarded as vital processes in guiding small businesses to have an effective marketing communication. Traditionally, marketing practices were founded within strong barriers wherein various functions on marketing and promotion are planned and managed separately, with specific market views, budgets, goals and objectives (1996) and having small number of employees, the small businesses could not afford to practice or apply such marketing concept.

 

Conclusion

 In general it can be said that the increasing number of the small and business enterprises has not been able to be properly guided by the traditional marketing theory and practice because most of these marketing contexts only highlights and give opportunities to larger organisation playing in the market environment. It can also be noted that traditional marketing theory and concept have only limited application to guide small business marketing practice because of some factors internal to Small business such as lack of financial resources and the small number of employees. These weaknesses also hinders the application of various marketing theories effectively, including marketing mix, consumer behaviour, relationship marketing, marketing communication and other conventional way to promote or market products and services. In this regard, it can be concluded that marketing theories and concepts should be modified to meet the needs of small business organisations and for them to have an effective guide to be successful in the market environment and to gain competitive advantage in spite of being small in the business.

           

Appendix 1

Adapted Definition of SMEs in Europe

 

Enterprise category	Headcount	Turnover	or		Balance sheet total
Medium-sized	< 250	≤ € 50 million		≤ € 43 million
Small	< 50	≤ € 10 million		≤ € 10 million