Micro and Small Enterprises in Ethiopia II: Marketing challenges and solutions

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Does Marketing really matter?

The task of any business is to deliver customer value at a profit. It does this by fine-tuning the value delivery process and choosing, providing, and communicating superior value.

This requires good marketing and sales techniques to succeed.

In Ethiopia, marketing-related challenges make it difficult for many Micro and Small Enterprises (MSEs) to stay in business.

MSEs, unlike large corporations, do not have a marketing department with a budget to perform marketing functions. Most MSE owners or managers in Ethiopia do everything themselves because they:

  • lack the budget to hire or consult marketing professionals, and
  • are unaware or underestimate the importance of marketing activities on business growth.

To stay competitive, however, MSEs should design an effective marketing strategy targeted toward a specific audience, focused on key benefits based on the audience’s point of view and interests, and delivered in a timely way.

Marketing Challenges and Solutions

Market Research

Before starting the business, MSEs owners/managers should understand from market research amongst other things:

  • the needs and wants of their potential customers,
  • business locations,
  • competitors,
  • changes in demand, and
  • suppliers.

Market research allows MSEs to discover the target market and get opinions and other consumer feedback about their interest in the product or service.

A great deal of research has been done with respect to pre-establishment market research with MSEs. Most of the research shows that the majority of small business owners established their businesses without market research, and thereby faced difficulties to satisfy the needs and wants of customers. Many MSEs because of this fail in their first few years.

As the project leader of a community-based training program (CBTP) survey, we learned that the majority of MSEs in the Ethiopian towns of Goba, Robe, and Bonga start their businesses by simply observing “successful” enterprises in their area. MSEs did not research additional information, such as marketing skills.

To improve the working environment of MSE’s, I therefore prepared and delivered various business trainings, one of which was marketing training focused on, amongst other things:

  • market research,
  • product/service improvement,
  • pricing,
  • placement, and
  • promotion.

Then, in phase two as a follow-up, we visited the MSEs who took the training and observed that their way of doing business had improved.

The Marketing Environment

Inadequate knowledge of the dynamic nature of the marketing environment adversely affects the survival, growth and success of business enterprises.

The marketing environment is divided into two parts:

  • the task environment, and
  • the broad environment.

The task environment includes the actors involved in the production, distribution, and promotion of the offering. These are the company, suppliers, distributors, dealers, and target customers.

The broad environment is made up of six components:

  • demographic environment,
  • economic environment,
  • social-cultural environment,
  • natural environment,
  • technological environment, and
  • the political-legal environment.

According to my survey of 314 MSEs from five selected towns (Hawassa, Sodo, Dilla, Wolkite, and Bonga) of the south and south-western regional states of Ethiopia, the majority of MSE owners/managers do not periodically scan the marketing environment and thereby fail to understand its impact on their business success. Therefore, in order to stay competitive, the MSEs must pay close attention to the trends and developments in the marketing environment and adjust their marketing strategies as needed. 

Consumers Buying Behaviour

Consumer buying behaviour refers to the actions taken by consumers prior to purchasing a product or service.

Understanding this process is beneficial for businesses because it allows them to better tailor their marketing initiatives to successfully influence consumers to buy.

Consumer buying behaviour is highly influenced by cultural, social and personal factors and it changes as a result of fashion, technology, trends, living style, disposable income, and other similar factors.

During our CBTP survey, one of the most frequently observed problems within MSEs in three selected towns (Bale Robe, Goba and Bonga) was the inability to understand factors influencing the consumers buying behaviour. To fill these gaps, I incorporated training on factors influencing consumer buying behaviour and its impact on business success. After a number of workshops, the majority of them improved their offerings by taking the aforementioned factors into account. Therefore, In order to remain competitive, MSE owners/managers must understand the factors influencing consumer buying behaviours and make efforts to adapt their products/services accordingly.

Measuring Consumer Satisfaction

It is difficult to know the level of customer satisfaction without conducting surveys.

Various studies and research have confirmed that consumers will purchase products with the highest perceived value. The cost of emotional level decisions such as brand image, corporate brand, sales personnel image, and functional image are used to calculate this value.

This value is converted to total customer cost by including the cost of the product, the time spent evaluating it, and the intuitive cost. Consumers will make decisions based on the total cost of the purchase, both perceived and actual. Customers will be satisfied if the perceived value of the product/service exceeds their expectations. A completely satisfied customer is likely to repurchase the product and even promote it through word of mouth.

According to my questionnaire-based survey on MSEs from five selected towns of the southern regional state of Ethiopia (Hawassa, Sodo, Dilla, Wolkite, and Bonga) I learned that the majority of MSEs do not even solicit customer feedback after selling their products or services. Therefore, MSE owners/managers should gather consumer feedback using different tools and techniques. They should also keep their eyes and ears open for dissatisfied customers, especially in this digital age, because they may smear the image of their enterprises using various social media platforms and/or in person with negative reviews. 

Improving Products/Services

To achieve market leadership, MSEs must offer products and services of superior quality that provide unsurpassed customer value better than their competitors. Because most of the time customers evaluate the market offering by three basic elements:

  • product features and quality,
  • services mix and quality, and
  • price.

However, according to our CBTP survey, most MSEs in the south and southwestern part of Ethiopia do not continuously improve their offerings because of a lack of:

  • budget,
  • modern machinery,
  • work premises and,
  • lack of technical know-how-related factors.

This is one of the reasons for the failures of most MSEs in the south and south-west Ethiopia. Therefore, the concerned government bodies should facilitate credit access, work premises and technical training for MSEs facing similar problems in the country.

Pricing Policy and Strategy

Price is more than just a number on a label; it is the result of a complex set of calculations, research and comprehension, and risk-taking ability. Since pricing affects enterprise profit margins, sales volume, business positioning, market share, and competition, MSE owners/managers must consider many factors when making pricing decisions, including the company, customers, competition, and marketing environment. Understanding how pricing affects the overall business model of the enterprise will therefore assist MSE owners/managers in setting better price levels.

However, during our CBTP survey, we learned that most MSE owners do not implement appropriate pricing strategies depending on the situation. MSEs should first decide where they want to position their market offerings, since having a clear objective (survival, maximum current profit, maximum market share, product quality leadership or market skimming,) makes the pricing decision easy. However, it is highly advisable for MSEs to consult professionals and/or seek assistance from the relevant government bodies on the matter.

Managing Marketing Channels

A marketing channel consists of the people, organizations, and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. A successful value creation necessitates successful value delivery. Holistic marketers are increasingly viewing their businesses as value networks. Instead of focusing on their immediate suppliers, distributors, and customers, they investigate the entire supply chain that connects raw materials, components, and manufactured goods and shows how they move toward the final consumers.

In our community-based training program survey, we have learned that MSEs from three selected towns (Bale Robe, Goba and Bonga) do not fully comprehend the importance of channel members in reducing cost, promoting their offerings, building customer relationships and ultimately increasing brand loyalty and awareness. Therefore, it is highly recommended that MSEs should continuously evaluate the performance of their channel members and take appropriate measures to bring things on track.

Promotional strategies

The aim of promotion is to increase brand awareness, create interest, generate sales or create brand loyalty. It is an essential element of a promotional plan, which includes advertising, sales promotion, direct marketing, publicity, trade shows, events, etc.

Some methods of this procedure include special offers, coupon discounts, free sample distribution, trial offers, buying two items for the price of one, contests, and festival discounts.

However, according to our CBTP program survey we’ve learned that the majority of MSEs in Bale Robe, Goba and Bonga towns do not apply appropriate promotional strategies. As a result, as a project leader, I prepared and delivered training on how to design an effective promotional strategy. During phase two of the project, we visited MSEs and observed that the training met its objectives. MSE owners/ managers began to promote their offerings using billboards, volunteering at local events and fairs, special offers (through direct marketing), catalogues/brochures, samples (they started to display their sample products in their outlets) and so on. Additionally, some of them started promoting their offerings using social media platforms, which resulted in increased sales and market share. For these achievements, we received recognition from both the university and the local government.

In conclusion

Finally, I would say that, yes marketing really matters and the concerned government bodies of Ethiopia should provide the necessary marketing training, work premises and machinery (on rental or lease) to business owners and managers to make them competitive in local, national and international markets.

By the same author:

Micro and Small Enterprises in Ethiopia: Access to Credit – Challenges and Solutions

Image: istockphoto

 

Muluken Haile Muluken Haile

My added value comes from the theoretical AND practical experience I have of project management in different international contexts.

This includes:
- Setting up the entire administration section of a university in Ethiopia from scratch, including Finance, HR, Procurement, Facilities Management and Student Services.
- Designing and implementing a community-based training program to identify and address community issues related to health, education, infrastructure, shelter and drinking water projects. I also coordinated fundraising efforts to fund the projects.
- Identifying and addressing MSE (Micro and Small Entreprise) growth challenges by providing training to Owners/Managers on basic business management, entrepreneurship, marketing, inventory management and basic bookkeeping.
- Working with relevant local government bodies to improve the implementation of the country’s MSE focused policies and support programmes.
- Providing project management, project analysis and technical support, and team coordination and support as a project coordinator for an international NGO in Switzerland.

With a Ph.D. in commerce and management studies, my articles with GBN focus on the importance of MSEs to Ethiopia’s economy, the challenges they face and how they can overcome them.

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