Small and Medium Enterprises (SMEs) are starting to contribute significantly to India’s GDP. Although these are considered to be the backbone of our country’s economy, these businesses face innumerable challenges primarily from traditional practices and lack of digital influence. Whether it is the intense competition, ever-demanding customers or even funding-related challenges, these often turn out to be hurdles in the growth of SMEs. Digitization of SMEs can prove to be helpful in overcoming these issues and help small businesses reach more customers and reap larger profits.

For small and medium enterprises to prosper, they must adopt the latest technology and tools to promote workforce efficiency, reduction of human errors, and measure growth parameters in a concrete manner. SMEs should go digital to help in faster growth globally without the necessity of heavy investments.

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Challenges Faced by SMEs

  • Infrastructure Issues – Infrastructure often requires government or private intervention and is ignored due to a lack of sufficient funds. Many SMEs are not aware of the various financing options available to them from NBFCs and banks. Most lack digital knowledge to gather information online.

  • Low productivity – Digitization has enhanced productivity in progressive companies by getting rid of manual processes and making them technology-based. Traditional SMEs have slow processes and their employees often lack basic computer skills. This hampers productivity.

  • Insufficient funds – Funds are required for marketing or advertising the products offered by traditional SMEs. Lack of digitization results in minimal monitoring of cash flow and absence of cost-benefit analysis. Digital marketing can prove to be cheaper as compared to physical marketing, which traditional SMEs cannot employ.

  • Absence of Innovation – Due to the absence of digital literacy, conventional SMEs cannot think of new ways to attract customers. Since most buyers go online and use their tablet or smartphone to buy things today, traditional SMEs cannot attract them. Sometimes they cannot accept payments online or send e-invoices.

  • Riskier – Since traditional SMEs depend on manual operations for selling their products, there are high chances of human errors in terms of quantity sold, payments made, total revenue, total cost etc., resulting in less precision and more risk.

  • Higher Costs – Operational costs, advertising costs and expansion costs are always higher for a traditional SME as compared to a digitized one. 

  • Lack of Training and Skills – Lack of knowledge about computer usage, digital marketing, websites, social media and web analytics hamper conventional SMEs by negatively impacting productivity. There is no one to monitor the day to day sales, profit, and competition this way.

Additional reading: How Small and Medium Enterprises (SMEs) Can Get Access to Funds?

Benefits of Digitization for SMEs

  • Enhanced Customer Acquisition – Digitization allows SMEs to engage more with their target audience and reach customers in any country, for enhanced visibility. Customer relationships can be managed more efficiently and they can gain customer insight through different tools. This will help in marketing products better and devise new sales channels.

  • Operational Efficiency – As a digitized SME, technology can help in automating core processes, making an SME more efficient. This will help use resources in a better manner and give more control of logistics.

  • Workforce Enhancement – With digital tools, SMEs can figure out areas which need skill development and identify shortfalls in the workforce. It becomes easy to track employee productivity, train them and make them aware of the latest concepts in digitization.

  • Risk Management – By going digital, SMEs can protect sensitive information and financial data through security software. It allows for better protection of physical assets through advanced surveillance and makes logistics more powerful.

  • Improves Productivity – Incorporation of digital tools can help employees work faster and more efficiently. They can work remotely as well and at any time, to meet business emergencies immediately.

  • Innovation – By adopting digital tools, SMEs can assess the business better with metrics. Activity metrics like web traffic, process metrics like sales and acquisition, knowledge metrics like consumer insights, and people metrics like employee satisfaction can help improve different aspects of the enterprise easily.

  • Saves Costs – Digitization will help reduce operational costs by automating core processes and making everything streamlined. Moreover, SMEs can open up to any country in the world for business, without spending anything on advertising.

  • Reduces Manpower – Since digital tools will make most business processes automated, the need for manpower will go down. There will be less chance of human error and less monitoring will be required.

Digital Marketing Trends for SMEs in 2020

  • Influencer Marketing - Influencer marketing is effective in beauty, fitness, fashion, sports and other similar industries. These are strongly influenced by important figures. It may be cost-prohibitive for small businesses, however, if you know a local influencer or someone on a smaller scale that still appeals to your customer in a big way, try partnering with them or giving them a mention. 

  • Social Media Marketing - Social media is an extremely important marketing tool for digital marketers, and this is because prospects, clients, and audiences spend so much of their time on these networks. Many small businesses are jumping on the social media marketing bandwagon. 

  • Voice Strategy - Vocal communication is one of the easiest and most common forms of human interaction, so it shouldn’t come as a surprise that people also want to use voice when interacting with technology and their favourite devices. One of the voice strategies that SMEs can adopt is creating an Alexa skill or Google action, which can help to reach customers who use Alexa or Google Home voice assistants.

  • Innovative Content - Content is the currency of digital marketing, and while there are some staple content types that will likely always be around, new kinds do crop up now and again that temporarily revolutionize the way people consume content. A growing trend right now is interactive content that allows audience members to actively engage with brands.

End Note

Digitalization in the services and manufacturing sector specifically for SMEs will help enhance effectiveness, profitability, and overall growth. This, in turn, benefits the economy and allows for maximum consumer benefits and satisfaction.