Small Firms and the Internet: Force or Farce?
International Trade Forum - Issue 1/1999 | Source
Should small firms in developing countries take the plunge and invest in setting up an Internet site now? What lessons can they learn from Internet pioneers?
There are lessons in a recent Internet study of small and medium-sized exporters in the United States. The conclusion of participating firms: they plan to keep using theInternet for marketing and customer support, although they did not sell as much as they had expected.
Will a web site increase my exports? Is it worth my time and financial resources to design and maintain a web site? What is the essence of a well-designed, high-traffic web site? Are small businesses selling products and services on theInternet or it is the domain of large businesses? What is the average ratio of “hits” to sales?
Thousands of small and medium-sized enterprises (SMEs) still ask these questions, as the Internet evolves into a marketing medium that someday may be as common as advertising in the newspaper, at a trade show, or in a trade journal. The Internet is an ever-changing, increasingly popular, untested marketing medium that confuses, frustrates, and yet gives hope to millions of SMEs attempting to penetrate foreign markets using the Internet as their launching pad.
Scores of articles have been written regarding the exploding use of the Internet, but actual research is sparse regarding how consumers use the Internet to purchase products and services, successful e-marketing techniques, analysis of “hits to sales” levels, and overall constraints of e-commerce. SMEs in developing countries should benefit from the research that exists when developing their own successful e-commerce strategies to compete with firms across the globe.
In 1996, 15 Michigan-based small businesses were selected to study their experiences as they marketed their products and services on theInternet. The study aimed to identify common pitfalls and successes of Internet marketing, share results with SMEs as they begin to market on the Internet, and help SMEs decide if Internet is a wise investment.
As part of the project study, help was provided to design company web sites; set up e-mail accounts; conduct training sessions; and track the number of visits, sales leads, and salesfor the duration of the study.
Great expectations
SMEs in this study did not want to simply design a web site to attract customers. Many expected to market products and services by providing on-line quotes, advertise in more markets at less expense, use e-mail as amarketing tool, and decrease the costs of printing marketing materials. They also expected to sell products and services over the Internet , enhance credibility by projecting a professional image, answer questions about products or services in several languages, and conduct foreign market research. Finally, the companies wanted to improve customer service, by providing same-day service, getting feedback from customers, offering paperless documentation, improving response time to customer queries, and using e-mail as a customer communication tool.
Frustrations
During the course of the study, the SMEs sold next to nothing on the Internet, despite the best attempts by e-commerce experts, in-depth training, constant analysis of constraints, and changing of web site content and othermarketing techniques.
The study revealed that the low sales figures resulted from a combination of constraints related to competency, time, finance, marketing and technology. Most firms had limited knowledge about how various computer technologies could contribute to an overall e-commerce strategy. Firms were frustrated that they were unable to update the web sites—they were too reliant on expensive web designers andInternet Service Providers who were not responsive to their specific problems or questions. Due to staffing constraints, many firms were frustrated that there was no time to respond to the increase in inquiries, to useInternet as a research tool, or to develop and keep the web site current.
They also found it difficult to design a site with truly useful information for clients. Firms were frustrated that search engines did not list their site prominently—due to too much competition on the Internet—which meant it was difficult to get existing and potential customers to visit the site. Also, firms found it difficult to register key words with search engines that would be obvious to customers searchingfor a product or service on the Internet.
The firms were disappointed by the low level of visits to the web site, relative to the company’s investment in marketing and sales via the Internet. They found that in addition to the US$ 30 per month web site maintenance fee and an initial US$ 1500 to design a basic web site, there were significant research, development, staffing, promotion, maintenance, and other costs. This illustrates why it is importantfor an SME to set up a business plan that tracks investment and return over time. (See box, above, for an example of measuring a site’s impact.)
A marketing presence
Firms in the study nevertheless remained optimistic about how Internet will help enhance credibility, market research, marketing and sales capacity.
The study found that firms with an active marketing strategy generate more visits to the web site. To attract new visitors, promoting the web site is essential. In addition, updating the site with useful information tended to foster repeat usage.
Consider, for example, the promotion for the Michigan Small Business Development Center site. Initially designed in May 1996, the number of visits increased very slowlyfor about a year until the Center launched a promotion campaign. The campaign consisted of sending waves of 1,500 humorous postcards to over 8,000 firms and organizations. It was an inexpensive yet successful way to generate greater interest in the site.For every 1,500 postcards sent per month, roughly 300 new viewers visited the web site. The conclusion? A constant marketing awareness campaign results in a greater number of visits.
Lessons learned for developing countries
The firms reached potential clients in new international markets through reactive or passive marketing using search engines, and through a proactive promotion by the firm to encourage existing and potential customers to visit the site.
Many firms felt that Internet marketing provides substantially more advertising value because it reaches a wider and more targeted market than traditional marketing mediums (in other words, firms can reach many more specific potential clients).
Because of the initial success reaching targeted customers in a relatively inexpensive venue, many firms expressed willingness to investmarketing dollars in updating and expanding their web site rather than spending funds of traditional marketing venues such as trade shows or newspaper advertisements.
Firms that did sell adopted a proactive, multi-faceted approach to advertising their web site which was updated on a monthly basis. They did not abandon theInternet as an e-commerce strategy due to lack of sales. They viewed the Internet as a way to enhance services to customers as an investment in the future. This approach was integrated into an overall e-commerce strategy embraced by a cross-section of the firm’s employees.
The bottom line is that it is important to design an e-commence strategy that is responsive to customer needs because the only guarantee e-commerce provides is that theInternet will help you find foreign clients, information, and, perhaps, sell products.
Should small firms in developing countries take the plunge and invest in setting up an Internet site now? What lessons can they learn from Internet pioneers?
There are lessons in a recent Internet study of small and medium-sized exporters in the United States. The conclusion of participating firms: they plan to keep using theInternet for marketing and customer support, although they did not sell as much as they had expected.
Will a web site increase my exports? Is it worth my time and financial resources to design and maintain a web site? What is the essence of a well-designed, high-traffic web site? Are small businesses selling products and services on theInternet or it is the domain of large businesses? What is the average ratio of “hits” to sales?
Thousands of small and medium-sized enterprises (SMEs) still ask these questions, as the Internet evolves into a marketing medium that someday may be as common as advertising in the newspaper, at a trade show, or in a trade journal. The Internet is an ever-changing, increasingly popular, untested marketing medium that confuses, frustrates, and yet gives hope to millions of SMEs attempting to penetrate foreign markets using the Internet as their launching pad.
Scores of articles have been written regarding the exploding use of the Internet, but actual research is sparse regarding how consumers use the Internet to purchase products and services, successful e-marketing techniques, analysis of “hits to sales” levels, and overall constraints of e-commerce. SMEs in developing countries should benefit from the research that exists when developing their own successful e-commerce strategies to compete with firms across the globe.
In 1996, 15 Michigan-based small businesses were selected to study their experiences as they marketed their products and services on theInternet. The study aimed to identify common pitfalls and successes of Internet marketing, share results with SMEs as they begin to market on the Internet, and help SMEs decide if Internet is a wise investment.
As part of the project study, help was provided to design company web sites; set up e-mail accounts; conduct training sessions; and track the number of visits, sales leads, and salesfor the duration of the study.
Great expectations
SMEs in this study did not want to simply design a web site to attract customers. Many expected to market products and services by providing on-line quotes, advertise in more markets at less expense, use e-mail as amarketing tool, and decrease the costs of printing marketing materials. They also expected to sell products and services over the Internet , enhance credibility by projecting a professional image, answer questions about products or services in several languages, and conduct foreign market research. Finally, the companies wanted to improve customer service, by providing same-day service, getting feedback from customers, offering paperless documentation, improving response time to customer queries, and using e-mail as a customer communication tool.
Frustrations
During the course of the study, the SMEs sold next to nothing on the Internet, despite the best attempts by e-commerce experts, in-depth training, constant analysis of constraints, and changing of web site content and othermarketing techniques.
The study revealed that the low sales figures resulted from a combination of constraints related to competency, time, finance, marketing and technology. Most firms had limited knowledge about how various computer technologies could contribute to an overall e-commerce strategy. Firms were frustrated that they were unable to update the web sites—they were too reliant on expensive web designers andInternet Service Providers who were not responsive to their specific problems or questions. Due to staffing constraints, many firms were frustrated that there was no time to respond to the increase in inquiries, to useInternet as a research tool, or to develop and keep the web site current.
They also found it difficult to design a site with truly useful information for clients. Firms were frustrated that search engines did not list their site prominently—due to too much competition on the Internet—which meant it was difficult to get existing and potential customers to visit the site. Also, firms found it difficult to register key words with search engines that would be obvious to customers searchingfor a product or service on the Internet.
The firms were disappointed by the low level of visits to the web site, relative to the company’s investment in marketing and sales via the Internet. They found that in addition to the US$ 30 per month web site maintenance fee and an initial US$ 1500 to design a basic web site, there were significant research, development, staffing, promotion, maintenance, and other costs. This illustrates why it is importantfor an SME to set up a business plan that tracks investment and return over time. (See box, above, for an example of measuring a site’s impact.)
A marketing presence
Firms in the study nevertheless remained optimistic about how Internet will help enhance credibility, market research, marketing and sales capacity.
The study found that firms with an active marketing strategy generate more visits to the web site. To attract new visitors, promoting the web site is essential. In addition, updating the site with useful information tended to foster repeat usage.
Consider, for example, the promotion for the Michigan Small Business Development Center site. Initially designed in May 1996, the number of visits increased very slowlyfor about a year until the Center launched a promotion campaign. The campaign consisted of sending waves of 1,500 humorous postcards to over 8,000 firms and organizations. It was an inexpensive yet successful way to generate greater interest in the site.For every 1,500 postcards sent per month, roughly 300 new viewers visited the web site. The conclusion? A constant marketing awareness campaign results in a greater number of visits.
Lessons learned for developing countries
The firms reached potential clients in new international markets through reactive or passive marketing using search engines, and through a proactive promotion by the firm to encourage existing and potential customers to visit the site.
Many firms felt that Internet marketing provides substantially more advertising value because it reaches a wider and more targeted market than traditional marketing mediums (in other words, firms can reach many more specific potential clients).
Because of the initial success reaching targeted customers in a relatively inexpensive venue, many firms expressed willingness to investmarketing dollars in updating and expanding their web site rather than spending funds of traditional marketing venues such as trade shows or newspaper advertisements.
Firms that did sell adopted a proactive, multi-faceted approach to advertising their web site which was updated on a monthly basis. They did not abandon theInternet as an e-commerce strategy due to lack of sales. They viewed the Internet as a way to enhance services to customers as an investment in the future. This approach was integrated into an overall e-commerce strategy embraced by a cross-section of the firm’s employees.
The bottom line is that it is important to design an e-commence strategy that is responsive to customer needs because the only guarantee e-commerce provides is that theInternet will help you find foreign clients, information, and, perhaps, sell products.
Sarah McCue is ITC’s Adviser on Practical Guides. Boxes in this article are adapted from the book, “Internet: Force or Farce?”
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