small medium enterprise (SME) positioning

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ASCI Journal of Management 41 (2): 76106Copyright 2012 Administrative Staff College of India

SHALINI N. TRIPATHI*andMASOOD H. SIDDIQUI**

Marketing of SME Products: A Relationship Approach

Introduction

Small and medium-sized entrepreneurship is often considered a contemporary

phenomenon. The primary reason for the recent focus on the SME sector isthat this type of entrepreneurship influences society and contributes to theeconomic development of the region where it is located. This analysis tries tounearth and concretize some endogenous factors that contribute to the successof SMEs. These endogenous factors, accompanied by some exogenous ones,have the power to change current trends in regional development.

In its 2009 report, the Government of India defined the SME sector on thebasis of size of the workforce and level of business (http://www.dcmsme.gov.in/

ssiindia/MSME_OVERVIEW09.pdf). Enterprises qualify as micro, small andmedium-sized enterprises (SMEs) if they fulfill the following criteria:

Enterprise

CategoryHeadcount Turnover or Balance Sheet Total

Medium < 250 50 million 43 million

Small < 50 10 million 10 million

Micro < 10 2 million 2 million

In addition to the staff headcount criteria, an enterprise qualifies as an SME ifit meets either the turnover criteria or the balance sheet criteria, not necessarilyboth.

However, the above-mentioned definition of small and medium-sizedenterprises is only a quantitative measurement, an effort to classify a businessunit in the market using statistical methods and tests. Adopting a qualitative

* Faculty, Marketing, Jaipuria Institute of Management (JIM), Lucknow (e-mail: shalsnath @

gmail.com, [email protected]).** Faculty, Decision Sciences, JIM, Lucknow (e-mail: [email protected],[email protected]).


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Tripathi and Siddiqui Marketing of SME Products 77

approach to understanding these enterprises is more important forentrepreneurship development and an analysis of the SME sectors primary

influences. We have to examine entrepreneurship by focusing on the potentialof a business unit (what it could offer to society or the market; supply side) andthe resources available for activity development (financing, human resources)in the context of the dynamics and turbulence of the current businessenvironment. All these factors bring about important changes in strategicentrepreneur behaviour (Slvik and Romanova, 2005).

Various economic and political factors have led to the emergence of self-helpgroups (SHGs), small and medium enterprises (SMEs), and non-governmental

organizations (NGOs) as alternatives to formal bureaucratic governmentagencies. These organizations have begun to provide a large group of artisansa sustainable source of livelihood by helping them to produce and market theirproducts.

The SME sector produces a wide range of industrial products, such as foodproducts, beverages, tobacco and tobacco products, cotton textiles, wool, silkand synthetic products, jute, hemp and jute products, wood and wood products,furniture and fixtures, paper and paper products, appliances and electrical

machinery. The contribution of SME firms to our national economy in termsof creating a vibrant manufacturing sector, winning the global market throughincreased exports, and employment generation has been highlighted on manyoccasions.

Indias Socio-economic Structure

With the advent of a planned economy from 1951 and the industrial policyadopted by the Government of India for the next 40 years, both planners andthe government earmarked a special role for small and medium enterprises.Due protection was accorded to this sector up to 1991, till the nation adopted apolicy of liberalization and globalization. With the liberalization andglobalization of the economy and the removal of quantitative restrictions, SMEproducts started facing stiff competition; so far, they have been unable to createa noticeable position in the urban Indian market. Indias commitment to plannedeconomic development continued through the 1990s and into the newmillennium. It has again been reflected in the Eleventh Five-Year Plan. Specialprogrammes, aimed at target groups such as small and micro enterprises,

weavers, artisans and craftsmen, constitute an important part of the activitiesof the Eleventh Plan period (http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11v1_ch1.pdf).


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78 ASCI Journal of Management 41 (2) March 2012

A sizeable proportion of Indias population still lives in rural areas, whereilliteracy levels are high; and large industry is not in a position to absorb the

workforce from rural areas. In view of this, it is necessary to create moreemployment opportunities in villages by utilizing local resources and skills,and to provide rural people special opportunities to develop new skills so thatthey can get employment in the villages itself. In such a scenario, the SMEsector can play a crucial role in creating opportunities for the economic andsocial advancement of all sections of society.

Literature Review: Marketing Practices in the SME Sector

The subject of small and medium entrepreneurship has been widely researchedand analyzed globally. In the current scenario, this field is considered rathercontemporary. The area of management theory which deals with smallentrepreneurial firms was reviewed through the work of many authors, includingLongenecker, Moore and Petty (2003); Dewhurst and Burns (1993); Storey(1997); Ballantine, Cleveland and Koeller (1993); Barrow (1993); Julien (1993);Shutt (1998); Wickham (1998); Ram and Holliday (1993); Beckhard and Dyer(1987); Sahlman and Stevenson (1992); Fuller (1994); and Burns and Dewhurst(1989). This review gave rise to the need for some innovative multiple

perspectives on small firms to compensate for the aspects where orthodoxmanagement theory cannot explain specific elements of a firm or anenvironment. These perspectives also compensate for the intense focus of mostexisting literature on large firms.

Business growth and performance has been associated with innovation inmarketing orientation both for SMEs and larger organizations (Brooksbank etal., 1999; Brooksbank, Kirby and Taylor, 2004). Brooksbank, Kirby and Taylor(2004) suggest that medium-sized firms that survive are amongst the most

innovative and market-oriented. Accordingly, the absence of current marketingpractices and activities in a majority of small and medium enterprises has ledto concerns about the potential consequences of this apparent lack ofengagement with innovation in marketing for the business success of SMEs.Marketing is embedded in business development; it starts with the mission andphilosophy of the company and extends through the design of the product rangeto the brand, pricing and distribution strategies. Researchers are thereforeinterested in understanding the nature of marketing in SMEs (Day, 2000;Simpson and Taylor, 2002). Lewis, Pick and Vickerstaff (2001) have suggested

that successful SMEs are marketers in denial, i.e., these firms practiceinnovative marketing without fully acknowledging it or comprehending its


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multi-faceted impact. Others have characterized marketing in SMEs as havinga sales orientation (Hill, 2001). That is, to most SME managers, marketing

primarily connotes selling (push strategy) their products without adopting anyformal planning process.

An important aspect of marketing by SMEs is the central role of relationshipmarketing. Some authors have attempted to explore this innovative concept.For instance, Gilmore, Carson and Grant (2001) and Hill (2001) discuss thecentrality of the owner managers network in its various guisessuch aspersonal contacts networks, social networks, business networks, and industryand marketing networksto marketing in SMEs. Zontanos and Anderson (2004)

go further and suggest that it is difficult to disentangle or even to distinguishthe practice of relationship marketing from entrepreneurial action and that,possibly, relationship marketing might be considered to be a facet ofentrepreneurship. In a similar vein, some other researchers have also beenintrigued by the marketing/entrepreneurship interface (Day, 2000; Wilson andStokes, 2004).

The relevance of transactional and relational marketing variables in relationalexchanges is now well established in marketing literature. However, knowledge

about their relative effectiveness and their optimal mix over time remains verysparse. An analytical model has been proposed by Fruchter and Sigue (2005)to help determine the optimal decision rules for transactional and relationalmarketing efforts. Alexander and Colgate (2000) have considered theintroduction of financial services, within the context of retailers relationshipswith their customers and retailers ability to build closer relationships withexisting and potential customers. Financial services provision is, therefore,considered in the context of the relationship marketing paradigm, presentingan opportunity for retailers to move from a transactional to a relationship

approach to marketing. Relationship marketing has won as many opponents asadvocates, owing to its conceptual ambiguities. Li and Nicholls (2000) haveconceived of relationship marketing as a strategic choice, rather than a marketingparadigm, delineating the boundary conditions associated with such a marketingapproach. This shows that the appropriateness of relationship marketing dependson the nature of particular exchange relationships and the governing mechanismof the exchange involved.

Objectives of the Study

The premise of this paper is that in the current competitive marketing scenario,SMEs (especially those marketing rural/artisanal products) need to incorporate


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certain innovations in their marketing strategy, and the focus needs to shiftfrom traditional marketing to relationship marketing. This shift is essential

for greater acceptance (among consumers) of the products being marketed bythese SMEs. Thus, the present study attempts to find new forms of partnershipsin marketing and support systems for the development of small and mediumenterprises. It proposes an innovative approach towards marketing by thesefirms, so as to take the market forward and fuel future growth. However, as aprecursor to adapting their strategy, these firms need to gauge and develop aninsight into the perceptions of their consumers (who exhibit a preference for/buy artisanal products). The purpose is to cull out those attributes in whichthese products lag behind. Thereafter, some strategic initiatives have been

suggested, incorporating the (identified) desired attributes in the marketingefforts of SMEs. This would consequentially lead to enhanced acceptance ofartisanal products amongst consumers.

Research Methodology

Conclusive cross-sectional descriptive research design has been deployed togauge and develop an insight into the perceptions of consumers who exhibit apreference for/buy artisanal products. The survey instrument was a questionnaire

(See Annexure 1) divided into three sections. The first section of thequestionnaire attempted to gauge, firstly, the general opinion of respondentstowards artisanal products and then acquire deeper insights into the respondentsperception towards these products. The next section focused on the lacunae inthe existing marketing strategies for these products. The last section of thequestionnaire dealt with different socio-economic and demographic criterialike income, age, profession and educational qualifications of the respondents.

The exploratory process deployed for formulating the questionnaire included

discussions with SME personnel (marketing artisanal products) and consumers(who buy these products), and content analysis of the pilot survey. The twosteps followed in the pilot study were:

A small-scale survey of customers (of artisanal products) to understandtheir perception of various SME products.

Focus group discussions held with customers and representatives ofdifferent SMEs.

Content analysis of focus group discussions and in-depth interviews wereconducted. In content analysis, the responses (oral as well as written) werecategorized, classified and coded for tabulation purpose. The predominant


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categories were: level of awareness about SME products; preference for SMEproducts; various issues related to SME products (e.g., inadequate infrastructure,

lack of marketing efforts, problem of finances, support desired, issues ofquality); poor acceptance of these products; various categories of demographicprofiles; degree of emphasis (in the discussions) on various issues so as toidentify more predominant issues; related frequencies, etc. These categories ofresponses were augmented with those culled from current literature in order todraw a wider and more in-depth inventory of factors. Finally, 17 variablesencompassing the various dimensions of perception towards artisanal productswere identified through this process. Table 1 provides the source (s) of thevariables included in the perception studies. There were many variables that

were common across different sources. However, seven variablesincludingprice, after-sales services, government supportwere deleted, as they weresuggested by a single source and not supported by others.

Table 1: Identification of Perception Variables

Variables Identified Source from Where Variables Were Suggested

Focus Group In-depth Literature

Discussion Interviews

Adapt according to innovative demands X XGood quality & refined products X X

Symbolize self-reliance X X X

Symbols of patriotism X X X

Superior to other comparative products X X

Variety in these products X X

Advertising & promotions of these products X X X

In sync with current fashion trends X X

More suitable for older generation of X Xcustomers

Successfully satisfied needs X X

Recommendation will benefit the artisan X X X

Store dcor & product display X X X

Standardization in sizes & designs X X

Sales staff efficiency & product knowledge X X

Customized as per personal preferences X X

Sales staff responsiveness X X XStore visibility X X


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Pre-testing (of the initial questionnaire) was performed on a sample of 60respondents selected by the quota sampling method. In order to ensure

authenticity of the data, the pilot survey was carried out on a wide (demographic)variety of customers.

The purpose was to ensure inclusion of all the essential dimensions related togauging customer perception for these products. Simultaneously, a cautiousapproach was adopted to avoid fundamental flaws (misunderstanding of items,unreadable options, etc.) in the final questionnaire. During content analysis ofthe pilot survey, the responses (oral as well as written) were categorized,classified and coded for tabulation purpose. The method deployed was

qualitative content analysis (inductive category development and deductivecategory application) (Marying, 2000).

After content analysis and detailed discussion and deliberations, thequestionnaire was modified, eliminating some questions and including thosethat had been missed out initially.

Quota (multi-stage) and shopping mall intercept sampling schemes wereemployed, with the questionnaires being sent to approximately 1,400respondents (customers). Of these, 1,183 questionnaires were found to be

complete in all respects. The response rate was 84.5 per cent. An attempt wasmade to keep the sample fairly representative across all the demographicvariables by constructing quotas according to various demographiccharacteristics.

Data Collection

The questionnaires, accompanied by a covering note, were personally distributedto customers. The areas of sampling were cities like Lucknow, Delhi, Mumbai,

Bangalore and Kolkata. The time frame of the study was December 2009June 2010. Primary stage sampling units were the customers (of artisanalproducts), while the secondary stage sampling units were various markets,shopping malls, institutions and localities of the above-mentioned cities. Inorder to make the sample representative, sampling was carried out in variousmarket places, shopping malls, office complexes and some residential localitiesconsidering the desired quotas. A group of respondents was also chosen fromthe respective cities telephone directory using the systematic sampling scheme.After selecting the respondents at a definite interval, using systematic sampling,they were contacted by phone. Those who agreed to participate in the surveywere administered the formal questionnaire at the places specified by them.


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The questionnaires were administered personally to ensure authenticity of theinformation provided by the respondents.

The respondents had to fulfil the following criteria for being selected for thestudy: they should have either purchased SME products or visited SME stores,village industry shops, or rural craft exhibitions at least once in the previoussix months. The demographic profile of the respondents is summarized in Table2.

Table 2: Demographic Characteristics of Respondents

S. No. Respondents Characteristics Percentage of Respondents

1. Gender

Male 57.8Female 42.2

2. Age Group

60 13.2

3. EducationUpto HSC 12.6Graduate 38.2Post-graduate 31.4Professional and others 17.8

4. Occupation

Salaried 37.6Professional 20.5Business 15.1Student 13.0Retired 5.3Housewife 8.5

5. Income

50000 19.8


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Data Analysis

Validity Analysis

Content validity: For the present study, to ensure the content validity of theinstrument, variables reflective of the customers perception of artisanal productswere identified from the literature and exploratory investigations, and werethoroughly reviewed by professionals and academicians.

Reliability Analysis: The reliability of the data was examined, by runningreliability tests, to check whether or not random errors, causing inconsistencyand in turn lower reliability, were at manageable levels. For various sets of

important associated factors used in the questionnaire, values of coefficientalpha (Cronbachs Alpha) were obtained. Amongst the reliability tests that wererun, the minimum value of coefficient alpha obtained was 0.688 (substantiallyhigher than 0.6), which shows that the data has satisfactory internal consistencyreliability (see Table 3).

Table 3: Reliability Analysis

Dimensions No. of Items Cronbachs Alpha

Marketing set-up 6 .842

Quality 4 .781

Fashionable & trendy 4 .706

Emotional bonding 3 .688

Exploratory Factor Analysis

In order to explore the consolidated perceptual dimensions related to artisanal

products (as expressed by the expectation scores on 17 statements), exploratoryfactor analysis was performed. Here, we have considered the hypothesis thatthere are some underlying dimensions inherent in the responses to 17 variables,and so the data set can be reduced.

The factor analysis results are shown in Tables 4.1 and 4.2. The value of theKMO statistic is very high (0.871). Bartletts Test of Sphericity (with the nullhypothesis that the correlation matrix of the variables is an identity matrix)shows significant results (sig = 0.000). These two results indicated the

appropriateness of the data for factor analysis. The total variance shown,accounted for by all the four components, explains the nearly 82.1 per cent of


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the variability in the original 17 variables (see Table 4.2). Hence, the originaldata set can be reduced by using these four components (Eigen values greater

than 1 as shown in Table 4.2) with only 17.9 per cent loss of information.Table 4.1: KMO and Bartletts Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .871

Bartletts Test of Sphericity Approx. Chi-Square 9971.886

Df 136.000

Sig. .000

Table 4.2: Total Variance Explained

Compo- Initial Eigen Values Extraction Sums of Rotation Sums of

nent Squared Loadings Squared Loadings

% of Cumula- % of Cumula- % of Cumula-

Total Variance tive % Total Variance tive % Total Variance tive %

1. 7.467 43.924 43.924 7.467 43.924 43.924 5.156 30.329 30.329

2. 3.217 18.924 62.847 3.217 18.924 62.847 3.658 21.518 51.847

3. 2.227 13.1 75.947 2.227 13.1 75.947 3.027 17.806 69.653

4. 1.046 6.1529 82.1 1.046 6.1529 82.1 2.116 12.447 82.1

5. 0.823 4.8412 86.941

6. 0.646 3.8 90.741

7. 0.572 3.3647 94.106

8. 0.219 1.2882 95.394

9. 0.194 1.1412 96.535

10. 0.161 0.9471 97.482

11. 0.121 0.7118 98.194

12. 0.099 0.5824 98.776

13. 0.063 0.3706 99.147

14. 0.052 0.3059 99.453

15. 0.045 0.2647 99.718

16. 0.032 0.1882 99.906

17. 0.016 0.0941 100

The rotated component matrix reveals four factors (reflecting the consolidatedperceptual dimensions related to artisanal products) derived from the 17variables. In order to confirm the four consolidated perceptual dimensions,confirmatory factor analysis (CFA) was deployed.


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Confirmatory Factor Analysis

Factor analysis is primarily an exploratory technique because of the researchers

limited control over which variable are indicators of which latent construct.Structural equation modelling, however, can play a confirmatory role becausethe researcher has complete control over the specification of indicators foreach construct. Thus, confirmatory factor analysis (CFA) provides enhancedcontrol for assessing un-idimensionality and has more construct validity thanexploratory factor analysis (EFA) (Ahire, Golhar and Waller, 1996). CFA isused here, particularly for the validation of the scales for the measurement ofconstructs derived from EFA. LISREL 8.8 was used for this purpose. Forconfirmatory factor analysis (CFA), the hypothesis was that there would indeedbe four dimensions (factors), as provided by the exploratory factor analysis,i.e., it will validate the results provided by EFA.

Validity Analysis

The estimates of the measurement model and the construct loadings, as providedby LISREL, are presented in Table 5. As there is no offending estimate, thevarious goodness of fit criteria have been assessed.

Table 5: CFA Results-Construct Loadings

Components (Exogenous Construct)

Marketing Quality Fashionable Emotional

Set-Up & Trendy Bonding

Adapt according to innovative .000 .000 .839 .000demands (3.607)

Good quality & refined products .000 .884 .000 .000(3.792)

Symbolize self-reliance .000 .000 .000 .863(3.628)

Symbols of patriotism .000 .000 .000 .841(3.447)

Superior to other comparative .000 .817 .000 .000products (3.215)

Variety in these products .746 .000 .000 .000(3.061)

Advertising & promotion of .827 .000 .000 .000

these products (3.577)In sync with current fashion .000 .000 .711 .000

trends (2.966)


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More suitable for older generation .000 .000 .850 .000of customers (3.711)

Successfully satisfied needs .000 (2.841) .000 .000.687

Recommendation will benefit .000 .000 .000 .740the artisan (3.175)

Store dcor & product display .808 .000 .000 .000(3.419)

Standardization in sizes & designs .000 .759 .000 .000(3.069)

Sales staff efficiency & .659 .000 .000 .000

product knowledge (2.614)

Customized as per personal .000 .000 .695 .000preferences (2.742)

Sales staff responsiveness .835 .000 .000 .000(3.662)

Store visibility .643 .000 .000 .000(2.553)

Note: Figures in parentheses are t-ratios.

Overall Model Fit:The first assessment of goodness of fit for the model isdone for the overall model (see Table 6). It provides the degree to which thespecified indicators (variables) represent the hypothesized constructs(consolidated perceptual dimensions). The three useful overall model fitmeasures are: absolute, incremental and parsimonious fit measures.

Table 6: LISREL Goodness of Fit Measures for CFA

Absolute Fit Measures Goodness of Fit Index (GFI) .946Adjusted Goodness of Fit Index (AGFI) .909

Root Mean Square Residual (RMSR) .079

Incremental Fit Measures Tucker-Lewis Index (TLI) .930

Normed Fit Index (NFI) .911

Parsimonious Fit Measures Adjusted Goodness of Fit Index (AGFI) .902

Normed Chi-Square 1.88

Absolute Fit Measures: The value of goodness of fit index (GFI) is 0.946 andthat of adjusted goodness of fit index (AGFI) is 0.909. Both the values arehigher than the recommended value of 0.90. The value of root mean square


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residual (RMSA) is 0.079, which is quite low. Hence, all the measures indicatevalidity of the overall model.

Incremental Fit Measures: These measures assess the incremental fit of themodel compared to a null model. The null model is hypothesized as a singlefactor model with no measurement error. Here, both the Tucker-Lewis Index(TL=0.930) and the Normed Fit Index (NFI=0.911) are higher than therecommended level of 0.90.

Parsimonious Fit Measures:This is the final measure, which assesses parsimonyof the proposed model. It evaluates the fit of the model versus the number ofestimated coefficients needed to achieve that level of fit. AGFI (0.902) is higher

than the recommended level of 0.90, and Normed Chi-Square (1.88) is withinthe recommended range of 1.0 to 2.0. These results are supportive of modelparsimony.

Thus, all the measures of overall model goodness of fit validate the proposedmodel.

Measurement Model Fit

After analyzing and accepting the goodness of fit for the overall model, all thefour constructs (consolidated perceptual dimensions) were evaluated at twolevels:

Examining the variable loading for statistical significance. Assessing the impact factors reliability, variance extracted, uni-

dimensionality and convergent validity.

Results from Table 5 indicate that all the variables are significant (sig < 0.05),as the t-values associated with each of the variable loadings exceed the critical

value for 5 per cent level of significance. Thus, it can be said that all the variablesare significantly related to their specified dimensions. This substantiates theproposed relationship among the variables and their dimensions.

Thereafter, the estimates of reliability, the variance-extracted measures andthe various fit indices for each perceptual dimension were analyzed to assessthe representativeness of each factor (see Table 7). The results of constructreliability show that the reliability coefficients of all the factors exceed therecommended level of 0.70. Further, there is substantial extraction of variance

(more than 50 per cent) for all the dimensions. Thus, a major portion of thevariance of these variables is accounted for by the consolidated perceptualdimensions.


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Table 7: LISREL Measurement Fit Model

Dimension Construct Variance Comparative Bentler-Bonett Goodness

Reliability Extracted Fit Index Goodness of

(CFI) of Fit Fit (GFI)

Coefficient

Quality .868 .855 .978 .963 .965

Fashionable & trendy .803 .782 .943 .921 .943

Marketing set-up .831 .806 .921 .986 .969

Emotional bonding .779 .801 .909 .910 .914

The comparative fit index (CFI) values obtained for all the four perceptualdimensions (related to artisanal products) are more than 0.90 (the recommendedlevel) as shown in Table 7. This indicates strong evidence of uni-dimensionality,suggesting good representativeness of the constructs. It establishes the constructvalidity of the model. Construct validity is the assessment of the degree towhich an operationalization correctly measures its targeted variables (OLeary-Kelly and Vokurka, 1998).

The Bentler-Bonett coefficient was used to measure the convergent validity of

the model (Bentler and Bonett, 1980), which is a measure of the degree towhich multiple methods of measuring a variable provide the same results(OLeary-Kelly and Vokurka, 1998). Results from Table 7 show that all thefour dimensions had a Bentler-Bonett goodness of fit coefficient of more than0.90, which is above the required level. This indicates substantial convergentvalidity. Finally, goodness of fit (GFI) values for all the four dimensions weremore than 0.90 (which is the recommended level), indicating best fit of theconsidered model (Jreskog and Srbom, 1990).

The overall model goodness of fit results and the measurement model fit resultsprovide substantial support for validation of the proposed four-dimension modelof the consolidated perceptual dimensions.

Factors Extraction Results

The confirmatory factor analysis (CFA) reveals four factors (which representthe four consolidated perceptual dimensions) derived from 17 variables. Table5 indicates the construct loading for various factors incorporating the variables.


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Factors and Their Sub-Factors

No. Factors Sub-Factors

1 Marketing set-up Variety in products

Advertising & promotion of products

Store dcor & product display

Sales staff efficiency & product knowledge

Sales staff responsiveness

Store visibility

2 Quality Good quality & refined products

Superior to other comparative productsSuccessfully satisfied needs

Standardization in sizes & designs

3 Fashionable & trendy Adapt according to innovative demands

In sync with current fashion trends

More suitable for older generation of customers

Customized as per personal preferences

4 Emotional bonding Symbolize self-reliance

Symbols of patriotism

Recommendation will benefit the artisan

Factor 1 incorporates the variables product variety, advertising andpromotion of these products, store dcor and product display, sales staffefficiency and product knowledge, responsiveness of sales staff and lackof store visibility. Since these components primarily reflect the marketingefforts deployed by SMEs, this factor has been labelled as Marketing Set- up.

Factor 2 incorporates the variables good quality and refined products,superior to other comparative products, successfully satisfy needs, andstandardization in sizes and designs. As all these variables are clearly reflectiveof the quality and performance dimensions associated with these products;hence, this factor was labelled as Quality.

Factor 3 included the variables these products adapt according to innovatingdemands, they are in sync with the current fashion trends, they are moresuitable for the older generation of customers vis--vis their suitability for youth

and customized as per personal preferences. All these variables are stronglyindicative of the fashion quotient of artisanal products. Hence, this factor hasbeen labelled as Fashionable & Trendy.


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Factor 4 includes the variables these products symbolize self-reliance, theyare symbols of patriotism and recommending these products will benefit the

artisans. All these variables reflect an emotional connect between theconsumers and these products. Hence, this factor can be labelled as EmotionalBonding.

SME (Artisanal) Products: Customer Preference Hierarchy

SME artisanal products, although constituting an important part of our culturalheritage, do not enjoy a preferred position in the consumers shopping list. Ifsuch products are to become more appealing to customers, it is important togain insights into their expectations and preferences. Also important is achievingthe milestone of customer satisfaction. The assumption is that, with customersatisfaction in place, loyalty, retention and profitability will automatically follow.

In order to arrive at a preference hierarchy with reference to SME products,binary logistic regression was used to predict preference based on the valuesof a set of predictor variables. The Hosmer-Lemeshow goodness of fit test (seeTable 8.3) examined the null-hypothesis that the proposed binary logisticregression model adequately fits the data. A significance value of 0.674 (>0.05) reflects that the proposed model adequately fits the data. This result isfurther substantiated by the omnibus tests of model coefficients (having thenull hypothesis that model coefficients are insignificant) (see Table 8.1), whichindicate that model coefficients were significant at all levelssteps, block andmodel (sig=0.000). As seen in Table 8.2, the R Square values (Cox & Snell RSquare=0.704 and Nagelkerke R Square=0.796) reflect that a major portion ofthe variation of the dependent variable (i.e., preference) can be explained bythe considered predictors. This shows that the proposed model is good inpredicting the customer preference with reference to SME products, based on

considered predictors, which is further corroborated by a high hit ratio of 92.1per cent (see Table 8.4). Further, the preference hierarchy related to SMEproducts can be ascertained by taking into account the values of the regressioncoefficient (B), Wald statistic and significance (see Table 8.5). The nullhypothesis that the predictors are insignificant is rejected for all the fourpredictors (sig


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are sought after by consumers, and occupy a significant place in their preferencehierarchy.

The proposed logistic regression model for predicting the preference of arespondent, based on considered predictors, will be as follows:

Preference = -16.032+ 3.136 (Marketing Set-up) + 2.071(Quality) + 2.403

(Fashionable and Trendy) + 1.411 (Emotional Bonding)

Table 8: Logistic Regression

Table 8.1:Omnibus Tests of Model Coefficients

Chi-square df Sig.

Step 1 Step 106.772 4 .000

Block 106.772 4 .000

Model 106.772 4 .000

Table 8.2:Model Summary

Step -2 Log Likelihood Cox & Snell R Square Nagelkerke R Square

1 224.761 .704 .796

Table 8.3: Hosmer-Lemeshow Test

Step Chi-square df Sig.

1 2.167 3 0.674

Table 8.4:Classification Table

Observed Predicted

Preference for Artisanal/Rural Products Percentage

Correct

No Yes

Step 1 Preference for No 330 39 90.2artisanal/ruralproducts

Yes 57 757 93.0

Overall percentage 92.1


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Table 8.5:Variables in the Equation

B SE Wald Sig. Exp(B)

Step 1(a) Marketing set-up 3.136 0.801 15.328 .000 9.413

Quality 2.071 0.734 7.961 .010 4.221

Fashionable & trendy 2.403 0.725 10.986 .000 7.571

Emotional bonding 1.411 0.611 5.333 .033 1.859

Constant -16.032 13.924 1.326 .206 9.982

Preference Hierarchy of the Marketing Set-up Factor

As indicated by the logistic regression model, marketing set-up for SME/artisanal products was accorded the highest priority by respondents. Hence, amore in-depth analysis of the marketing set-up dimension was required. Thiswould provide significant indicators for the tactical marketing strategiesproposed later. Analytic Hierarchy Process (AHP) (Saaty, 1990, 2001), aqualitative analysis tool, and Expert Choice-11.5 software were used for thispurpose. AHP is a multi-criteria decision-making procedure. It is designed forsituations in which ideas, feelings/emotions and perceptions are to be quantifiedand decision alternatives based on them are prioritized. According to theperception and preferences of customers (see Tables 9.1 and 9.2 and Figure 1),AHP revealed a prioritization that indicates responsiveness of sales stafffollowed by sales staff efficiency and product knowledge were the mostimportant (perceived) aspects of the marketing set-up.These aspects precededvariables like product variety, store decor and product display, advertisingand promotion of these products and store visibility in the preferencehierarchy.

Findings

The paper purports that small and medium enterprises engaged in the marketingof rural artisanal products need to adapt and innovate their marketing efforts.In the current competitive scenario, these SMEs first of all need to gauge anddevelop an insight into the perception of consumers who exhibit a preferencefor/buy artisanal products. This insight will empower them with anunderstanding of the gap between consumer expectations and their perception.

This is the first step towards adopting and managing an innovative marketingstrategy.


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Table 9.1: Pair-wise Comparison Matrix

Factors of Variety in Advertising Store Sales Staff Sales Staff

Marketing Set-Up Products & Dcor & Efficiency Responsive- Store

Promotion Product & Product ness Visibility

of Products Display Knowledge

Variety in products 1 2 1/2 2 1/3 1/2 3

Advertising & promotions 2/5 1 1/2 1 2/5 2of products

Store dcor & 1/2 2 1 1/2 1/3 2product display

Sales staff efficiency 3 1 2 1 1/2 1& product knowledge

Sales staff responsiveness 2 2 1/2 3 2 1 2

Store visibility 1/3 1/2 1/2 1 1/2 1

Table 9.2: Eigen Values

Factors of Marketing Set-Up Eigen Values

Variety in products 6.5986

Advertising & promotions of products 7.1107

Store dcor & product display 6.5176

Sales staff efficiency & product knowledge 5.7243

Sales staff responsiveness 6.131

Store visibility 6.6949

Figure 1: Hierarchical Arrangement of Perception StatementsConstituting the Marketing Set-Up


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In order to decipher the complicated conundrum of customer psyche, factoranalysis (exploratory followed by confirmatory) was applied to concretize the

consolidated perceptual dimensions representing customer perception ofartisanal products. These perceptual dimensions (as revealed by a confirmatoryfactor analysis) are marketing set-up for artisan products, quality of the products,fashionable and trendy and emotional bonding.

Further, binary logistic regression yielded the customer preference hierarchy,in which the respondents accorded the highest priority to marketing set-up forthese products, followed by fashionable and trendy, product quality and finallyemotional bonding with these products. Thereafter, further analysis of the

marketing set-up dimension revealed that the highest priority was accorded toresponsiveness of sales staff followed by sales staff efficiency and productknowledge as the most significant constituents of the marketing set-up. Thispreference hierarchy is distinctly indicative of the gap areas (related to theseartisanal products), as perceived by the customers. Marketing savvy firmsconsider investment in the marketing set-up as the foundation for future profits.SMEs need to revamp their marketing set-up and adapt their products anddesigns in accordance with the changing fashion trends as well. This will entailseveral strategic steps to be taken by SMEs so as to effectively manage the

innovations. Also, trendy and appealing products in an engaging store set-uphelp transform ambivalent or negative customer attitudes and win them forlife. Consistent quality of these products is another key focus area. Further, ifwe critically examine the consolidated perceptual dimensions, they areindicative of inadequate marketing and design support for these artisanalproducts. These gap areas need to be addressed with a view to bridging themwith adequate and multi-dimensional support (for these SMEs) so that theycan acquire a firm foothold in the current competitive market scenario.

Although small and medium enterprises have been operating for several years,they have displayed their potential only in isolated pockets of success and arenow poised for further growth. The question for these SMEs is: How do theytake forward the market and product development that has the potential to fuelgrowth over the next five to ten years? This involves developing a clear viewon innovation in the marketing strategy, and the managers of these organizationsevolving and articulating clear answers to questions such as:

1. Which markets are these SMEs (marketing rural/artisanal products) in?

Who are their competitors, and what differentiates these businesses fromeach other?


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2. What do these SMEs have to offer that is unique in the eyes of customersand potential customers? How might their marketing communication

be further developed to strengthen awareness about their products amongkey audiences?

3. Which product and market development opportunities are open to theseSMEs?

4. What are the options for these organizations in terms of expansion oftheir distribution networks?

Managerial Implications

However, the existing government infrastructure for the marketing of SME/artisanal products is grossly inadequate as khadi and village industries boards(KVIBs) in various states have drastically reduced their sales outlets. The SME/artisanal products procured by KVIBs are primarily sold at outlets like GandhiAshram. The major role being played by the Khadi & Village IndustriesCommission (KVIC) and KVIBs is that of financing SMEs/rural entrepreneurs,rather than providing them with the requisite marketing support. The inabilityof the government to cope with the demand for multi-dimensional marketingsupport for these products has led the authors to explore alternative marketing

channels. NGOs can meet the demands of this role in devising new forms ofmarketing if they are viewed as entrepreneurial organizations.

The answers to the questions posed above provide strategic indicators, whichimplicitly support the premise of this paper that there is a need for SMEs toadopt a relationship marketing approach. This would entail managing the severalinnovations comprising this approach. It would consist of collaboration amongdifferent stakeholders and the creation of a seamless system with requisiteforward and backward linkages. Drawing from the consolidated perceptual

factors, various gap areas associated with the marketing model followed bySMEs are revealed. The following multi-dimensional support areas have beenidentified in order to enable SMEs to revamp their marketing processes andplug the various lacunae.

Product Design Support

In order to keep pace with the times, constant innovation in product design andvariety is of paramount importance. As indicated by the customer preference

hierarchy, significant importance is attached to these products beingfashionableand trendy, and of good quality. Hence, constant feedback to the artisans and


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their skill enhancement through regular training programmes is the need of thehour. Thus, design inputs and quality improvement need to be a continuous

process. The purpose being to diminish the perceptual understanding gapbetween customers and artisans. Also, quality check processes need to beincorporated so as to ensure that product quality standards are maintained.SMEs can seek assistance from specialized institutes like Department of Scienceand Technology, Government of India, and National Institute of RuralIndustrialization (NIRI). These organizations can provide technical assistancein terms of improved technology, tools and equipment. With the use of theseimproved tools and techniques, artisans will be equipped to produce value-added items. In order to develop and upgrade their skills and provide continuous

design and variety inputs, regular training should be imparted, based on sector/area-specific needs and priorities.

For purposes of decentralization, establishing training centres at the state leveland sub-training centres at the district level, working in co-ordination with thedistrict industries centres (DICs) and district rural development agencies(DRDAs), has been suggested. For the identification and categorization ofartisans training needs, inputs from NGOs should also be considered (sincemost artisan self-help groups are associated with some NGO or the other).

This support will ensure that these rural/artisanal products adapt themselves tothe current fashion trends, while adhering to high standards of quality.

Packaging Support

Another important area of focus is the lack of training and support for packaging.Training related to the packaging of products, for artisan groups, can be soughtfrom specialized organizations (through organizational networking). Packaginghas gained in importance in terms of not only providing protection but also

enhancing the marketability of a product.

Marketing and Promotional Support

In the customer preference hierarchy, the marketing support dimension wasaccorded the highest priority. This was expressed as an important action area.Marketing support was concretized in terms of provision of sales outlets(geographically located at or near shopping hubs), accompanied by the requisiteadvertising and promotional support. This will help combat the lack of

visibility lacuna for these products. Backward linkages, constituting the supplychain for these firms, will ensure a large product variety at the sales outlets.Product variety was identified as another gap area. Here too, the concept of


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relationship marketing in the form of seamless networking with artisans andNGOs comes into play. Besides this, factors such as trained sales personnel

and ambience and dcor of the stores address lacunae like responsiveness ofsales staff and sales staff efficiency and product knowledge. There is a strongneed to change the perception of customers regarding artisanal products so asto make them more acceptable. Therefore, persons managing the sales outletsof these products should be empowered (through training/counselling) withadequate soft skills, so as to be able to espouse the attributes and uniqueness ofthese products.

Adequate promotional support also needs to be provided with an attempt to

establish artisanal products as a brand by extensive advertising campaigns inthe print, audio and visual media. The visibility of, and demand for, theseproducts can also be enhanced by organizing promotional events like nationalhandicrafts exhibitions across various states at regular levels and establishingongoing sales points on the lines of Delhi Haat. This will help create an exclusiveimage of these products in the customers mind, thus affording a discerniblecompetitive advantage.

The proposed marketing strategies can only be implemented and sustained

with an underlying premise of transparency, effective participation and mutualbenefit of all the stakeholders. The aim is to provide an enabling environment,by seamless and effective networking and relationship building with all thestakeholders.

Conclusions

The present paper opines that SMEs (selling rural/artisanal products) need toadopt an innovative approach in order to take the market forward, accompaniedby revamped marketing efforts and product development that have the potentialto fuel future growth. They need to articulate their marketing strategy in termsof relationship building. In common with many other SMEs, relationshipbuilding ought to be central to their approach to marketing, which would bemore consistent with the current practice and philosophy. A relationshipmarketing approach would entail SMEs being involved in:

1. Identifying consumer market segments (which could be an area for futureresearch) and businesses with whom they wished to forge, build andmaintain relationshipsan ongoing assessment of the preferences ofcustomers; and seeking training and marketing support. The purpose isto cull out those attributes in which these products are lagging behind.


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The training and marketing support would thereafter help eliminate theselacunae.

2. Articulating a clear view of the strength, intensity, lifetime, and currentand potential value to the company of each of those relationshipsestablishing communication and support linkages with training andproduct design institutes. Thus, the study explores new forms ofpartnerships in marketing and support systems for the development ofsmall and medium enterprises (SMEs). Also, networking with non-governmental organizations (NGOs) involved in the marketing ofartisanal products may pave the way for a supplementary and alternativemarketing channel. Over the last decade, the role of NGOs indevelopment has been widely recognized. These organizations play acatalytic role in mobilizing local human and physical resources, creatingan appropriate entrepreneurial environment, and generating newopportunities.

3. Planning and executing marketing actions to support those relationships.The resultant plan for marketing actions will incorporate strategicinitiatives for relationship marketing besides building on and extendingexisting marketing actions. For example, marketing communications

include web marketing, public relations and advertisements in specialistmagazines, and links with professional advisors. Marketing actions alsoextend to product quality and brand building, pricing strategies, andselection and maintenance of the distribution network (backward andforward linkages). The difference is that the relationship marketingperspective encourages a longer-term perspective and offers a frameworknot only for integrated marketing communications but also integratedmarketing actions.

This paper attempts to critically analyze the marketing efforts of SMEs in orderto offer some insights that have wider application and are not restricted to thespecific type of SMEs (marketing rural/artisanal products) under analysis. It isnot, therefore, sufficient to comment on the way ahead for these SMEs. Thespecific discussion in the preceding sections is designed to illustrate thedifference between the traditional approach to marketing strategy and aninnovative relationship approach. It also illustrates the benefits of a relationshipmarketing approach. SMEs, like all businesses, have to make sales today tosurvive for tomorrow. This drives them to specific marketing actions, some ofwhich are born out of a very sound understanding of their product and marketand are honed very carefully.


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On the other hand, the rather disjointed nature of these actions, coupled withthe implicit nature of much of the marketing activities in SMEs, makes it difficult

to discern whether or not an SME has an integrated marketing strategy, andleads to the hypothesis that many do not. The absence of a clearly articulatedmarketing strategy, which embraces objectives and long-term directions as wellas actions, may well be a barrier to business growth. Investors and policy-makers instinctive reaction to this absence of a visible strategy is to encourageSME owners and managers to develop a traditional marketing strategy.However, in order for SMEs to be successful, they need to undergo a paradigmshift in their marketing approach, incorporating and successfully managingthe innovationsright from understanding customer expectations, to revamping

the marketing set-up for their products and establishing a successful networkof relationships with all their partners and stakeholders.

This study confirms the centrality of relationships to the marketing strategy ofSMEs. The concluding proposition is that the adoption of a relationshipmarketing approach by SMEs would be more viable and appropriate to thedevelopment of an effective marketing strategy, which would act as a platformfor a programme of long-term marketing actions.

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Annexure 1Questionnaire

1. Please indicate your agreement with the following statements:

1 = Totally disagree 3 = Neutral 5 = Totally agree 1 2 3 4 5

You prefer to use e-banking rather than traditional banking

You prefer sending cards/writing mails instead of using e-mail

You prefer to buy through credit cards rather than cash

You always buy branded products

Entry of foreign companies has increased the efficiency ofIndian companies

People today are more conscious about the quality of products

You prefer to go to restaurants with your family on weekends

Advertising plays an important role in making decisions tobuy a product

Foreign-made products are superior to domestic products

You enjoy surfing the NetYou prefer veg to non-veg food

You feel TV has become an integral part of Indian urban life

You prefer buying from a shopping mall as compared to anunorganized retail shop

You prefer readymade clothes

You like tailored clothes, customized to your personal preference

A store/showroom should provide guarantee for products

A store/showroom should have discount schemes

The display of items is important for the sale of products

I like seasonal shopping

2. Are you aware of Gandhi ashrams and their sales outlets? Yes No

3. Have you visited the following in the recent past?

Gandhi ashram

Yes

No Sales outlets selling village industry products Yes No

Rural craft exhibitions Yes No


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4. Do you like khadi/village industry products?

Not at all Somewhat Neutral Likely Very Likely

5. Do you buy khadi/village industry products? Yes No

6. With whom do you mostly visit a khadi/village industry shop?

Alone With friends With colleagues With family members

7. Do you know about following village industry products?

Khadi Yes No

Silk Yes No

Woollen Yes No

Food/edibles Yes No

Cosmetics/daily utilities Yes No

Leather Yes No

Paper Yes No

Handicrafts Yes No

Medicines Yes No

8. From where do you get information about khadi/village industry products?

1 = Rarely 5 = Mostly 1 2 3 4 5Family & friends

Radio & television

Billboards

Newspapers and magazines

9. Frequency of your visit to the following places

1 = Rarely 5 = Mostly 1 2 3 4 5

Gandhi ashramExhibitions selling khadi/village industry products

Showrooms selling khadi/village industry products

10. When do you consider buying khadi/village industry products?

1 = Always 5 = Never 1 2 3 4 5

Summer

Winter

FestivalsMarriage


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11. Which of the following products do you purchase frequently when you visit Gandhiashrams/village industry sales outlets?

1 = Always 5 = Never 1 2 3 4 5Khadi

Silk

Woollen

Food/edibles

Cosmetics/daily utilities

Leather

PaperHandicrafts

Medicines

12. Do you know about the sale/discount periods of khadi village products?

Yes No

13. Is your shopping for khadi/village industry product stimulated by the sales/discount period?

Yes

No14. What will be the frequency of your visits to these stores if there is no sale/discount

period?

Remains the same Will decrease marginally

Will decrease substantially Will never visit

15. Please indicate your agreement regarding khadi/village industry products

(1 = Totally disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = Totally agree)

1 2 3 4 5These products adapt according to innovative demands

These are good quality & refined products

These products symbolize self-reliance

They are symbols of patriotism

These products are superior to other comparative products

There is variety in these products

Advertising & promotions of these products is adequate

They are in sync with current fashion trendsThey are more suitable for older generation ofcustomers vis--vis their suitability for youth


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They successfully satisfy the needs of customers

Recommendation of these products will

benefit the artisansStore dcor & product display of these products is good

There is standardization in the sizes & designs ofthese products

Sales staff for these products is efficient & hasproduct knowledge

They are customized as per the personal preferencesof customers

Sales staff for these products is responsive to consumerchoices/demands

Stores selling these types of products lack visibility

16. Rank the following factors responsible for the low acceptance of khadi/villageindustry products

1 Most important factor 5 Least important factor

Lack of visibilityLack of promotion and advertising

Lack of variety

Dcor and display of products

Lack of professionalism in the salespersonsof khadi/village industry product stores

Demographic Profile

Gender Male Female

Age Below 20 2030 3145 4560 Above 60

Occupation Salaried Professional Business Student

Retired Housewife

Monthly Income

Documents

small medium enterprise (SME) positioning