Digital Marketing Solutions For SME In Russia: Challenges & Opportunities

Executive summary

In this paper we would like to discuss and analyze the application of web-based technologies supporting SME sector in developing markets (Russian and Armenian markets) in digital marketing. We all know, that SMEs sector development has wide -scale implications for growth and development of national economies, which in case of developing markets has even more pronounced importance. Wider usage of digital marketing is even more important if we analyze is in the context of digital economy, where digital transformation should not be perceived just as an attempt to gain productivity, but more as a prerequisite of survival in digital economy we live in today.

A systematic review of literature has identified that there is quite a lot of uncertainty and contradiction on application of web-based technologies by SMEs. Even fewer discuss and analyze what are the main drivers and barriers for SMEs in terms of usage of full digital marketing tools box available for SMEs businesses today at developing markets. Trough out research we have identified, that digital marketing has a big untapped potential in our national economies, with just quite small number of SMEs using quite few digital marketing tools and only for a quite limited business dimensions. Our research points out that SMEs both in Russia and Armenia are generally inclined to use traditional technologies, rather that updates ones.

Even with ‘’traditional’’ technologies (e. g. social media in that sense), SMEs are more ‘’ reactive’’ and less adaptive to fast technological changes due to several reasons, e. t complexity, no/ low transparency in evaluating ROI in terms of customer acquisition and retention, lack of skill within SME organization and most of all, costs and usability of those tools for SMEs. These research questions have been subsequently addressed by us through a survey of 106 SMEs operating in health and beauty sectors of economy. By identifying all main challenges that SMEs are faced in applying web-based technologies, in our paper we discuss some potential of a recently- shaped approach that in our view, might address those challenges.

In our research, we point out, that newly shaped approach & business model ‘’ MAAS’’ (Marketing as a Service) might be one of the solutions that address all identified SMEs barriers and challenges. MAAS is described as an outsourcing model allowing to integrate marketing tools and IT services in a single offer. This model is predicted to grow up 33 % by 2020. If developed and shaped correctly by telecom companies/ IT companies, this approach has significant potential to accelerate this sector growth by double digits even in short-terms perspective. In our research we discuss and analyses potentials of MAAS solutions and values, it might create for SMEs in that regard. As a conclusion, we discuss managerial implications of our findings: user friendly, ‘’MAAS’’ designed platforms, specifically aimed at that type of enterprises might prove to be very efficient, creating value for all the vendors of that values chain.

Introduction

Importance of small and medium-sized enterprises and digital marketing tools

Small and medium-sized enterprises (SME) are considered to be playing a major role in the national economies creating jobs and added value. In Russia its share in the GPD accounts for 21. 2% with 5,9 mln SMEs registered in the end of 2016 and by 2030 it should showcase a stable growth up to 40% ( (Segodnyashnee chislo, 2017). In other CIS countries, such as Armenia, SMEs represent more than 98% of all the registered legal entities, but their contribution to the GDP is limited to 30% only ( (EU4Business, 2017). Meanwhile in the OECD area SMEs are the main employers generating up to 70% of jobs and delivering 50-60% of GPD (Meeting of the OECD Council at Ministerial Level Paris report, 2017). Digital tools are perceived as an opportunity for small and medium enterprises to provide growth and empower their performance and competitiveness (Taiminen & Karjaluoto, 2015), and as such this powerful instrument should be observed in order to identify and elaborate real business opportunities.

While a number of researches was conducted across the globe covering different geographies and industries aimed at understanding of the digital marketing tools adoption and usage by SMEs, the Russian and CIS SMEs landscape is still unexplored in this regard. Given the country specifics provided by the social, political and economic factors, this exploratory study is dedicated to fill in these gaps in the knowledge. Its objectives are as following: to review the current literature on the digital marketing tools usage by SMEs, to identify the digital marketing tools which can be used by SMEs, to identify drivers and barriers for digital tools adoption and usage and finally to empirically evaluate the opportunities to efficiently implement and develop new tools for SMEs. The objective of the research: to provide recommendations for the development of digital marketing solutions / platforms which create value for SMEs growth.

The goals:

• To clarify the perception of digital marketing tools, key drivers of usage and perceived value among SMEs decision makers
• To identify penetration and the level of usage of different tools
• To explore drivers and barriers of usage Stakeholders:
• big companies and startups providing digital marketing solutions for SMEs
• SMEs that look for a map of digital marketing tools

Literature overview

Digital Marketing Tools Landscape

Digital marketing is described as the process of attracting and retaining the customers thus building and supporting customer relationships using digital channels such as websites, email, mobile notifications and others (Chaffey & Ellis-Chadwick, 2012). As perceived by the SMEs themselves in the research report provided by Infusionsoft & Leadpages (Leadpages. net, Infusionsoft. com |, 2017), the key areas of the digital marketing tools usage are about driving sales (either direct sales boosting or leads collection which accounts for more than 80% cumulatively), communications with their customers (about 50%) and customers retention (30%). It’s important to mention that still about one-fifth of the research panel was not going to use any digital marketing instruments in 2018 and 15% of the respondents only mentioned the efficiency of the marketing automation processes as the major area for digital tools usage. To the current date the digital marketing tools landscape can only be described as diverse and flourishing. Picture 1 represents the diversity of digital marketing tools according to the Smart Insights. As we can see, the digital tools today allow to boost performance in all the marketing fields: from information collection and analysis to communications to the end consumers development. According to the authors’ own model the digital instruments can be classified within the groups according to their goals.

Digital Marketing Tools Adoption by SMEs

The idea of digital tools as of an affordable and efficient marketing instrument thus ideal for SMEs is widely discussed in the literature ever since the 1990s (Chaston & Chaston, 2000; Chaston & Chaston, 2000; Chaston & Chaston, 2000; Chaykowski, 2017). The main goals that SMEs can achieve using digital tools are considered to be in the fields of the new customers acquisition and retention by providing better audiences reach, increasing communications efficiency and empowering competitiveness including cost reduction as a powerful digital tools effect (Taiminen & Karjaluoto, 2015). But as the same authors notice, the marketing reality of SMEs differ a lot from the large-scale businesses and digital tools implementation and usage can be perceived as a challenge for them. As Canadian researchers found out (Dimick, 2014), decision-making process for new technology adoption among SMEs starts with meeting certain obstacles and realizing there should be a way to increase productivity. This disruption is usually realization that despite old methods proven themselves the current conditions have changed too much to keep it going the same way. This motivation can be external (peer pressure) or internal (not being able to increase performance and thus facing stagnation).

Factors of the Digital Marketing Tools Adoption

In-depth factor analysis conducted by some researchers (Lim, 2010; Laxton, 2017), (Iddris & Ibrahim, 2015) indicates that there are some major prerequisites to digital marketing tools usage which affect the implementation process. These macro-factors can be structured into 5 groups:

• Perceived usefulness – as a measure of the decision-making person’s belief that the marketing tools will provide a way to increase the efficiency. Researchers mention that the perceived usefulness of the digital marketing tools among the SMEs is quite high all around the globe;
• The alter ego of the previous factor - Perceived ease of use – the assessment of efforts required to adopt new tools - has direct effect for the willingness to try and adopt the new technologies;
• Job performance – the opportunity to increase the performance for the company processes;
• Resource availability – perceived or real estimation of resources sufficiency to integrate and develop digital tools;
• Technological compatibility – potential compatibility of the newly introduced digital tools with the existing systems and business processes.

Different sources mention a number of factors which influence usage of digital marketing tools by SMEs. To provide the holistic picture and elaborate the factors for the empirical analysis the authors tried to collect the full scope of the factors mentioned and organize them into a table (see Table 2).

Top management and organizational (leadership) model define the limits of digital marketing tools adoption according to some sources from the very first researches in this field (Tarafdar & Vaidya, 2003). Leaders knowledge and enthusiasm about innovations and digital marketing specifically is regarded as a powerful factor which can both boost or brake the new technology adoption.

National culture

National culture is acknowledged to provide a significant impact on organizational culture and as such it is regarded as a factor of the digital marketing tool adoption (Shailashree & Mlemba, 2013).

Company size

So called “digital maturity” has positive correlation with the company size, according to the PriceWaterhouseCoopers research report (PriceWaterhouseCoopers, 2016). Some sources also state that larger businesses among SMEs are more adept to the new technologies (Thong & Yap, 1995)

Company industry

There’s a number of industry-focused research papers, while a comparative study on the industry impact especially in Russia and CIS region wasn’t conducted yet. Research conducted in different countries provide evidence that some industries due to business processes specific features are more prone to adopt digital technologies while the others tend to be much slower with new trends adoption (PriceWaterhouseCoopers, 2016). Media, telecommunications, education and consulting sectors, retail, financial services and travel industry due to their nature are proven to be earlier adopters of the digital marketing tools. Agriculture and other “traditional” industries seem to be the least interested in the digital technologies adoption.

Marketing planning approach

A number of scholars state that the most SMEs in terms of marketing are “fast sales” focused, not organized and don’t possess neither a long-term marketing strategy nor any formal approach towards marketing planning, and the same group is the “non-adopters” of the innovative marketing technologies. Meanwhile, there’s a smaller group, whose marketing activity is formal and planned which is more beneficial for successful technology usage (Hill, 2001).

Manager’s demographics (age, education)

Digital technologies adoption may depend upon the top-managers age and education (Hill, 2001) where younger managers with specialized education show more interest for the digital tools implementation. “Digital maturity” also shows negative correlation with the age of the manager, according to PriceWaterhouseCoopers (PriceWaterhouseCoopers, 2016).

External Factors: Peer Pressure

As Canadian research shows (Dimick, 2014), the need for new technologies is connected to facing some challenges. Competitors being active in the digital sphere and showcasing growth via new instruments is such of a “company pain”. Thus, the level of digitization across the industry and competitiveness provide an impact for a certain company willing to adopt digital marketing tools.

External Factors: Infrastructure Available

Some factors that also impact the digital marketing tools adoption are the external one like the infrastructure availability (Internet, transactions available, partnerships) and the opportunities of globalization and overseas business. This connection works both ways and the more businesses use the digital promotion tools, the more eager they are to get involved into the international trade (Chaykowski, 2017; Dimick, 2014; Dimick, 2014).

Barriers

The most barriers for digital tools adoption are considered to be result-focused or cost-focused. The literature review allowed the authors to identify a few groups of barriers:

• Inability to allocate time and resources and other organizational issues:
• Time and human resources;
• Financial resources / perceived high costs;
• Efficiency measurement / low perceived efficiency;
• Prejudices (resistance) and “loyalty” to traditional marketing tools.

Inability to allocate time and resources and other organizational issues

Time and human resourcesImportance of these barriers seem to differ with different sources. Some (Dimick, 2014) emphasize that the key barrier for the Canadian SMEs was time: daily operations don’t let the managers to allocate enough time to investigate the new opportunities, although they sometimes even realize that digital tools could have helped them to save this time.