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    Small Firms and the Internet: Force or Farce?

     

     
     
    International Trade Forum - Issue 1/1999, © International Trade Centre

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    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 the Internet 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 the Internet 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 the Internet. 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 sales for 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 a marketing 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 other marketing 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 and Internet 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 use Internet 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 searching for 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 important for 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 slowly for 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 invest marketing 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 the Internet 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 the Internet 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?" Michigan Small Business Development Center, United States

    Tips:Questions to Ask a Person Who Will Design Your Web Site

    • How many web sites have you developed for a fee?

    • What are the web site addresses of the best sites you've designed?

    • What are the least and most expensive sites you created?

    • How long have you been creating web sites?

    • Who does your graphic design?

    • How will graphics be used in our site?

    • Explain your techniques for reducing the size of images.

    • Have you worked for our competitors?

    • How will you help us publicize our web site?

    • Do you charge for changes to be made to the web site?

    From SMEs for a Good Web Site

    • Keep it "fast" by using a minimal number of graphics and photos.

    • Put information on your site that responds to exactly what your buyer wants to know.

    • Include educational information.

    • State trends in the industry.

    • Post employment opportunities.

    • Articulate the firm's strategic goals.

    • List the key contacts within the firm.

    • Include a complete list of products.

    • State delivery schedule, warranties, and technical assistance offered.

    • Explain how the product is packaged and mode of transportation used

    for export.

    • List the firm's terms of payment.

    • Answer most commonly asked questions.

    • Develop an online newsletter.

    • Respond to e-mail within three days.

    • Provide links to kindred organizations.

    • Register with search engines.

    • Articulate the firm's production capacity, manufacturing processes, quality control systems, previous export experience, firm history, number of employees, and financial standing.

    • List your products on web sites that advertise foreign buyers and contacts.

    • Place phone, fax, e-mail, and mailing address on each page of the web site.

    SME Viewpoints "Having a web site adds tremendous value to a business-it contributes infinitely more than it costs. You have an international "office" with little overhead. You can project an image that puts SMEs in the same league with "the big guys"."

    "Every morning I check our e-mail for requests from potential customers who visit our home page. Usually we have two or three e-mails. The good prospects are requests for our business services that we probably would not have received if we were not marketing on the Internet."

    "Benefits of marketing on the Internet will be realized in three to five years; the sooner a business gets on-line, the sooner the business will notice a positive change in his or her business."

    "I learned about the need to focus the content of my web site in response to my customers' need for information."

    "Marketing on the Internet has made our business look more professional, placed us with top people in the industry, help compete with large business, and help broaden the customer base."

    "We have developed a low-cost, high-impact web site which we feel will generate sales for us, which would have been inaccessible without the development of our web site."

    "Internet is good for sending an impression about my business, but it did not generate sales."



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