Branding and its Economic Benefits on Small and Medium Scale Enterprises (SMES)

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Branding and its Economic Benefits on Small and Medium Scale Enterprises (SMES)

 

Branding and its economic benefits on small scale enterprise (SMEs): Branding is frequently associated with giant companies. Given the arrogance of most big players in the market, small and medium enterprises (SMEs) end up intimidated thereby making little or no efforts for the branding of their products and services.

This is partly due to the lack of understanding of the real meaning of branding, and also largely due to the lack of knowledge of the immense economic benefits embedded in the branding of SMEs. On the other hand, the contributions of small and medium scale enterprises (SMEs) in Nigeria cannot be overemphasized, as the Nigeria government confirms that 98 percent of the 1.8 million jobs created each year since 2011, are from SMEs (NBS, 2014). Other than highlighting the obvious relevance of SMEs to the Nigeria Economy, this work, reveals in details, the numerous economic benefit SMEs in Nigeria gets from branding their products and services, and the general idea of branding. It recommends that SMEs should be committed to effective branding by exploring the option of either “hiring branding experts” or using the “Do It Yourself” option.  

Branding and its Economic Benefits

KEY WORDS

Brand, branding, small and Medium Scale Enterprises (SMEs), economic benefits.

INTRODUCTION

Branding has been discussed so many times in academic platforms and also among practitioners. The brand is very important to companies, either large organization or small and medium size organization. The brand is said to be about building an emotional relationship and its resultant effect is favorable perceptions, association, and satisfaction with the brand experience at every touchpoint (Fauziah, 2012). Thus, companies use branding as a tool or strategy to get and maintain a loyal customer base. It is very important for a company to create a brand for their products. Based on the Harvard Business Review, 30,000 new products launched in the USA, 90 percent of them failed because of poor marketing. The other 10 percent become successful brands (Chernatory, McDonald, and Wallace, 2011). In Nigerian context, the failure rate of new ventures in the market estimate indicates that 80-95 percent of products failed to be sustainable brands (Abimbola, 2001)

Existing literature shows that the interest in branding among SMES is still at the early stages (Fauziah, Shaik, Ahmad, 2009). It is due to the lack of understanding of the real meaning of branding. Therefore SMES entrepreneurs usually give more attention to financial, promotion, and resources management as compared to brand management. According to Merrilees (2007), many members of the public associate brand with a large advertising expenditure where it reinforces the mindset that only big businesses can be brands, but not small business. However, Nordin (2009) argued that branding is relevant for the survival and growth of all companies big or small. And branding is even more important and highly relevant to the SMEs (Abimbola, 2001; Nordin, 2009),

BRANDING

As there are many scholars in the fields, so are many definitions and explanations to the term branding. According to the American Marketing Association say, Brand is “a name, term, design, symbols or any other features that identifies one seller’s goods or services as distinct from those of other sellers. The legal term for a brand is trademark. A brand may identify one item, a family of items, or all items of that seller. If used for the firm as a whole, the preferred term is trade name”. Baer, (2011) sees branding as the art of aligning what you want people to think about your company with what people actually do think about your company.

Clayman, (2011) further assets that, ‘Branding is the encapsulation of a company’s mission statement, objectives, and corporate soul as expressed through the corporate voice and aesthetic’’.

While in Spin Sucks, Gini Dietrich says ‘‘Branding to me, is the identity of a product or service. It’s the name, the logo, the design, or a combination of those that people use to identify, differentiate, what they are about to buy’’. A good brand should deliver a clear message, provide credibility, connect with customers emotionally, motivate the buyer and create user loyalty.

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Finally, in Branding insights, Philip Kotler chose to be more detailed by explaining that ‘‘when you think about branding you probably think of advertising, tagline, logos, jingles etc., but these, in fact, support a brand and are not the brand itself. A brand is a complex concept incorporating many elements’’. He further explains that:

‘‘A Brand is:

  • The image of a product and a promise to deliver quality
  • An effective and compelling way to communicate the benefits of your products or services.
  • An essence, an idea, an emotion.
  • The totality of perceptions – everything you see, hear, know, read, feel and think about a product or service – based on past, experiences, associations, and expectations for the future.
  • A shortcut of attributes, benefits, beliefs, and values that differentiate, reduce complexity, and simplify decision-making.

 

SMALL AND MEDIUM SCALE ENTERPRISES

Definition of SMEs varies from different bodies, organizations and institutions in Nigeria. This confirms that there is no specific and generally accepted definition of the term. The central Bank of Nigeria says SMEs is one whose capital employed excluding land is between N1Million and N150 Million and employs not more than 500 persons. The National Policy on Micro small and medium scale enterprises defines SMEs with respect to the backdrop of a number of persons employed and assets possessed. The national council on industry defined small and medium enterprises as follows:

  • Small Scale Industry: Industry with asset basic of more than 1.5 Million but in excess of N50 Million excluding the cost of land, but including working capital and or staff strength from 11 to 100.
  • Medium Scale Industry: Industry with an asset base of more than N50 Million, but not in excess of N200 Million excluding the cost of land, but including working capital and or staff strength from 101 to 300.

SMEs are usually associated with little capital outlay, minimal fixed assets, highly localized in the area of operation, and often with unsophisticated management structure (Ebitu, Basil and Ufot, 2015}. Baumback {1992:4} characteristically states that small businesses are those units that are actively managed by its owners, highly personalized, largely local in the area of operation, of a relatively small size within the industry and largely dependent on sources of capital to finance its growth.

CONTRIBUTIONS OF SMEs TO NATIONAL DEVELOPMENT

The contributions of SMEs to national development cannot be overemphasized. Ogechukwu {2001} has mentioned some of those contributions to include:

1. Generation Of Employment To The Citizenry: Many unemployed people and youth have found employment in small scale industries as SMEs strengthen the manufacturing sector of the economy. In a survey carried by Debbie {2004}, it was shown that SMEs constitute about 97 percent of all businesses in Nigeria and generate about 50 percent of employment. They also produce 30 percent of manufacturing output {National Policy on Micro, Small and Medium Enterprises, NPNSMES. 2006}.  The 2010 National MSMEs collaborative survey puts the number of Micro, Small and Medium Enterprises in Nigeria at 17,284,671 with a total employment of 32,414,884 and contributing 46.54 percent to the GDP in nominal terms {SMEDAN 2012}. Nigerian government confirms that since 2011, 98 percent of the 1.8 million jobs created each year are from small and medium enterprises [NBS, 2014]

2. Establishment Of Man-Power Development Support Scheme: Through the training and retraining of entrepreneurs, SMEs have provided a pool of potential entrepreneurs and business people who are well equipped to start and successfully manage industries, whether small or large.

Not only in Nigeria but overseas. Successful business people in Nigeria like the Aliko Dangote’s, the Ibrus, Mike Adenuga, the Orji Kalu etc started as small and medium scale enterprises, before the growth of their various businesses into conglomerates.

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3. Uplift Of Dignity Of Labour:

There is the spirit of “ME TOO” can do it attitude.

People deriving joy in working for themselves and seeing their businesses grow and mature into conglomerates and deriving joy in being a source of employment to other Nigerians.

  •  It has reduced the dependence on government and large firms on salaried employment
  • It has upgraded the social status of Nigerian youths, by showcasing them as very successful entrepreneurs and operators of small scale industries. This is evidenced in the many success stories of small scale industries as recorded by the print and electronic media houses.

PROBLEMS OF SMEs IN NIGERIA

A study by Ebitu [2015] exposed that in the southern part of Nigeria marketing problems such as difficulty in managing firm’s advertising, lack of adequate marketing research, awareness of competition, poor branding and packaging, low level of knowledge on business market analysis, poor promotion, poor segmentation strategy, poor pricing technique and unplanned distribution contribute negatively in affecting SMEs profit margin and their sales volume.

ECONOMIC BENEFITS

As ambiguous as it sounds, economic benefits could be narrowed down to just gains and saves. What would have been spent ordinarily being saved. Kallie Wells says, economic benefits are benefits that can be quantified in terms of money generated, such as net income, revenues etc. it can also be money saved when discussing a policy to reduce costs.

ECONOMIC BENEFITS OF BRANDING ON SMEs

1. Premium pricing: Consumers pay more for branded items that they believe have value and lower risk than lesser-known alternatives. The brand image plays an important role when a customer decides to buy one product over another. Usually, well established brands have a good reputation and can command preference from consumers, as well as higher price compared to unbranded competitors.

2. Recognition: Familiarity with the business is a must for the consumers to feel at ease while purchasing. Brands that are easy to recognize often attract more customers. Using logos to identify your brand will help consumers to recognize an organization’s products and services. A logo can consist of a letter, a word, a symbol, or a combination of both. Also, the colours used on a logo will help identify your brand [Papadopoulos, 2017].

3. Lower Cost Of Promotion/Referral Generation: Consumers of valued brands spread positive “word of mouth” at no cost to the brand. Papadopoulos [2017] further posits that a strong brand image will ignite the talks amongst the community which will help generate referrals. The importance of the viral distribution of a message through social media can’t be ignored and strong branding can help exploit that medium to the fullest. Valued brands acquire loyal customers who recruit more customers to the firm, increasing the brand’s share of the market while reducing customer development costs and building immunity to competitive attacks.

4. Higher Stature: Baers [2011] says valued brands enjoy a level of awareness and esteem in the minds of consumers, industry leaders, community leaders, news editors, financial analysts and investors, which leads to yet higher brand reference and market place prominence.

5. Competitive Differentiator: Mostly, small firms are coming with ideas that are already in place. Differentiating yourself from the competition will place you ahead of the pack. This will help you to create your identity and allow the consumers to relate to your products and services, thus enticing them to become your new customers. [Papadopoulos 2017].

6. Ease Of Introducing New Products: By having a strong brand name, the introduction of new products becomes less risky. More so, the product will be accepted by your customers with relative ease. They have used and are satisfied with your products, so, getting to know about the new products, they will be willing to give a try. Being that it is from a valued brand. This leads to brand loyalty.

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7. Staff Motivation: A clear branding strategy lets your staff understand the goals set and strengthen their beliefs in the organization. A strong branding strategy will ensure the long term survival of the firm and that will enhance the motivation and job-security of the employees. Also, employees can puff their chest out and feel proud to be a member of their employer’s organization.

CONCLUSION/RECOMMENDATIONS

SMEs by themselves is a big laboratory for innovation but due to poor branding and packaging or no branding at all, they fail to reach their full potentials. However, with the huge economic benefits branding is tailored with, the need for executives of SMEs to make the branding of their products and services a business culture is rather imperative.

Thus, there is a need for SMEs to:

  • Conduct timely surveys to get opinion of its customers and the public at large, to ascertain what impression they have of the organization, and where the organization ranks amongst its competitors
  • Create a marketing/strategy communication department where employees of the said department have brand management backgrounds.
  • In a case where they cannot create a department to handle its branding, SMEs should hire a branding expert/strategist who will not only help with the brand management but as well, educate and train staff on how to sustain the branding campaign.
  • SMEs can also utilize the ‘Do It Yourself’ option where, if the executives are confident enough and willing to take the risk, they give it a try. But before attempting to do this, they should ensure that they know very well the process of branding a company.

REFERENCES

  • Baumback, C. M. (1992). Basic Small Business Management.
  • Ile-Ife; OAU Press Ltd.
  • Debbie, A. (2004) “small Firms are the backbones of Nigerian Economy”. Economic Analysis www.mycbsearch.com
  • SMEDAN (2012), Survey Report on Micro, Small and Medium Enterprises (MSMEs collaborative survey. Collaboration between national Bureau of statistics (NBS) and the Small and Medium Enterprises Agency (SMEDAN)
  • Ahmad, Fauziah  sh, Omar, R. Zaleha S., Amin, M. (2012) Leader Branding for Sustainable Customer Engagement, World Academy of Science, Engineering and Technology, 62, 153-160
  • Abimobola, T. (2007) Branding as a competitive strategy for Demand Management in SMEs. Journal of Research in Marketing and Entrepreneurship, 3 cs), 97-106. doi:10.1108/14715200780001480
  • Ahmad, Fauziah Shaik. (2009) Branding Dynamics: Building the Most Valuable assets in business 137-163
  • Merifees, B. (2007) A theory of Brand-led SME New Development. Qualitative Market Research: An International Journal, 10(4), 403-415 doi:101108/13522750710819739.
  • Nordin, N. (2009) Plan Talk on Branding for SMEs, Institute of Marketing Malaysia, 18-20
  • Kolter, P. Keller, K. L. (2012) Marketing Management (14th Edition, pp263-289) England; Pearson Education Limited.
  • Cherntory, L. de McDonald, M. H. B., Wallace, E (2011). Creating Powerful Brands (fourth) Great Britain: Elsevier Ltd.
  • Bonigala, M. (2014) “Branding Appeal: Emotional or Rational?” www.spellbrand.com
  • Papadppoulos, M. (2017) Digital Marketing Guide. Machigan: Potential print Ltd.
  • Clayman, M. Dietrich, G., Baer, J., Kotler, P. (2011) “Branding Insight: A compilation of branding definition”. www.convinceandconvert.com
  • Ebitu, E. Basil, G. Ufot, J. (2015). An Appraisal of Nigeria’s Micro, Small and Medium Enterprises (MSMES): Growth, challenges and prospects. European centre for Research Training and Development UK (www.eajournals.org) vol. 4, pp1-15.
  • Ogechukwu, A. (2007) “The Marketing Interface: Global Journal of Management and Business Research  Marketing. Vol.13. Global Journals Inc. (USA).

 

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