Marketing of SME Products: A Relationship' Approach: Shalini N. Tripathi

ASCI Journal of Management 41 (2): 76–106
Copyright © 2012 Administrative Staff College of India
SHALINI N. TRIPATHI* and MASOOD 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 is
that this type of entrepreneurship influences society and contributes to the
economic development of the region where it is located. This analysis tries to
unearth and concretize some endogenous factors that contribute to the success
of 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 the
basis of size of the workforce and level of business (http://www.dcmsme.gov.in/
ssiindia/MSME_OVERVIEW09.pdf). Enterprises qualify as micro, small and
medium-sized enterprises (SMEs) if they fulfill the following criteria:
Enterprise
Headcount Turnover or Balance Sheet Total
Category
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 if

it meets either the turnover criteria or the balance sheet criteria, not necessarily
both.
However, the above-mentioned definition of small and medium-sized
enterprises is only a quantitative measurement, an effort to classify a business
unit in the market using statistical methods and tests. Adopting a qualitative
* Faculty, Marketing, Jaipuria Institute of Management (JIM), Lucknow (e-mail: shalsnath @

gmail.com, shalinit@jiml.ac.in).
** Faculty, Decision Sciences, JIM, Lucknow (e-mail: mhsiddiqui@gmail.com,
masood@jiml.ac.in).
Tripathi and Siddiqui Marketing of SME Products 77
approach to understanding these enterprises is more important for

entrepreneurship development and an analysis of the SME sector’s primary
influences. We have to examine entrepreneurship by focusing on the potential
of a business unit (what it could offer to society or the market; supply side) and
the resources available for activity development (financing, human resources)
in the context of the dynamics and turbulence of the current business
environment. All these factors bring about important changes in strategic
entrepreneur behaviour (Slávik and Romanova, 2005).
Various economic and political factors have led to the emergence of self-help
groups (SHGs), small and medium enterprises (SMEs), and non-governmental
organizations (NGOs) as alternatives to formal bureaucratic government
agencies. These organizations have begun to provide a large group of artisans
a sustainable source of livelihood by helping them to produce and market their
products.
The SME sector produces a wide range of industrial products, such as food
products, beverages, tobacco and tobacco products, cotton textiles, wool, silk
and 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 terms
of creating a vibrant manufacturing sector, winning the global market through
increased exports, and employment generation has been highlighted on many
occasions.
India’s Socio-economic Structure

With the advent of a planned economy from 1951 and the industrial policy
adopted by the Government of India for the next 40 years, both planners and
the government earmarked a special role for small and medium enterprises.
Due protection was accorded to this sector up to 1991, till the nation adopted a
policy of liberalization and globalization. With the liberalization and
globalization of the economy and the removal of quantitative restrictions, SME
products started facing stiff competition; so far, they have been unable to create
a noticeable position in the urban Indian market. India’s commitment to planned
economic development continued through the 1990s and into the new
millennium. It has again been reflected in the Eleventh Five-Year Plan. Special
programmes, aimed at target groups such as small and micro enterprises,
weavers, artisans and craftsmen, constitute an important part of the activities
of the Eleventh Plan period (http://planningcommission.nic.in/plans/planrel/
fiveyr/11th/11_v1/11v1_ch1.pdf).
78 ASCI Journal of Management 41 (2) March 2012
A sizeable proportion of India’s population still lives in rural areas, where

illiteracy 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 more
employment opportunities in villages by utilizing local resources and skills,
and to provide rural people special opportunities to develop new skills so that
they can get employment in the villages itself. In such a scenario, the SME
sector can play a crucial role in creating opportunities for the economic and
social advancement of all sections of society.
Literature Review: Marketing Practices in the SME Sector

The subject of small and medium entrepreneurship has been widely researched
and analyzed globally. In the current scenario, this field is considered rather
contemporary. The area of management theory which deals with small
entrepreneurial firms was reviewed through the work of many authors, including
Longenecker, 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 orthodox
management theory cannot explain specific elements of a firm or an
environment. These perspectives also compensate for the intense focus of most
existing literature on large firms.
Business growth and performance has been associated with innovation in
marketing orientation both for SMEs and larger organizations (Brooksbank et
al., 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 marketing
practices and activities in a majority of small and medium enterprises has led
to concerns about the potential consequences of this apparent lack of
engagement with innovation in marketing for the business success of SMEs.
Marketing is embedded in business development; it starts with the mission and
philosophy of the company and extends through the design of the product range
to the brand, pricing and distribution strategies. Researchers are therefore
interested 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 practice
innovative marketing without fully acknowledging it or comprehending its
multi-faceted impact. Others have characterized marketing in SMEs as having

a sales orientation (Hill, 2001). That is, to most SME managers, marketing
primarily connotes selling (push strategy) their products without adopting any
formal planning process.
An important aspect of marketing by SMEs is the central role of relationship
marketing. Some authors have attempted to explore this innovative concept.
For instance, Gilmore, Carson and Grant (2001) and Hill (2001) discuss the
centrality of the owner manager’s ‘network’ in its various guises—such as
personal contacts networks, social networks, business networks, and industry
and marketing networks—to marketing in SMEs. Zontanos and Anderson (2004)
go further and suggest that it is difficult to disentangle or even to distinguish
the practice of relationship marketing from entrepreneurial action and that,
possibly, relationship marketing might be considered to be a facet of
entrepreneurship. In a similar vein, some other researchers have also been
intrigued by the marketing/entrepreneurship interface (Day, 2000; Wilson and
Stokes, 2004).
The relevance of transactional and relational marketing variables in relational
exchanges is now well established in marketing literature. However, knowledge
about their relative effectiveness and their optimal mix over time remains very
sparse. An analytical model has been proposed by Fruchter and Sigue (2005)
to help determine the optimal decision rules for transactional and relational
marketing efforts. Alexander and Colgate (2000) have considered the
introduction of financial services, within the context of retailers’ relationships
with their customers and retailers’ ability to build closer relationships with
existing and potential customers. Financial services provision is, therefore,
considered in the context of the relationship marketing paradigm, presenting
an opportunity for retailers to move from a transactional to a relationship
approach to marketing. Relationship marketing has won as many opponents as
advocates, owing to its conceptual ambiguities. Li and Nicholls (2000) have
conceived of relationship marketing as a strategic choice, rather than a marketing
paradigm, delineating the boundary conditions associated with such a marketing
approach. This shows that the appropriateness of relationship marketing depends
on the nature of particular exchange relationships and the governing mechanism
of 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
certain innovations in their marketing strategy, and the focus needs to shift
from ‘traditional’ marketing to ‘relationship’ marketing. This shift is essential
for greater acceptance (among consumers) of the products being marketed by
these SMEs. Thus, the present study attempts to find new forms of partnerships
in marketing and support systems for the development of small and medium
enterprises. It proposes an innovative approach towards marketing by these
firms, so as to take the market forward and fuel future growth. However, as a
precursor to adapting their strategy, these firms need to gauge and develop an
insight into the perceptions of their consumers’ (who exhibit a preference for/
buy artisanal products). The purpose is to cull out those attributes in which
these products lag behind. Thereafter, some strategic initiatives have been
suggested, incorporating the (identified) desired attributes in the marketing
efforts of SMEs. This would consequentially lead to enhanced acceptance of
artisanal products amongst consumers.
Research Methodology
Conclusive cross-sectional descriptive research design has been deployed to
gauge and develop an insight into the perceptions of consumers who exhibit a
preference for/buy artisanal products. The survey instrument was a questionnaire
(See Annexure 1) divided into three sections. The first section of the
questionnaire attempted to gauge, firstly, the general opinion of respondents
towards artisanal products and then acquire deeper insights into the respondents’
perception towards these products. The next section focused on the lacunae in
the existing marketing strategies for these products. The last section of the
questionnaire dealt with different socio-economic and demographic criteria
like 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 two
steps followed in the pilot study were:
• A small-scale survey of customers (of artisanal products) to understand
their perception of various SME products.
• Focus group discussions held with customers and representatives of
different SMEs.
Content analysis of focus group discussions and in-depth interviews were
conducted. In content analysis, the responses (oral as well as written) were
categorized, classified and coded for tabulation purpose. The predominant
categories were: level of awareness about SME products; preference for SME
products; various issues related to SME products (e.g., inadequate infrastructure,
lack of marketing efforts, problem of finances, support desired, issues of
quality); poor acceptance of these products; various categories of demographic
profiles; degree of emphasis (in the discussions) on various issues so as to
identify more predominant issues; related frequencies, etc. These categories of
responses were augmented with those culled from current literature in order to
draw a wider and more in-depth inventory of factors. Finally, 17 variables
encompassing the various dimensions of perception towards artisanal products
were identified through this process. Table 1 provides the source (s) of the
variables included in the perception studies. There were many variables that
were common across different sources. However, seven variables—including
price, after-sales services, government support—were deleted, as they were
suggested 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 X
Good 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 X
customers
Successfully satisfied needs X X
Recommendation will benefit the artisan X X X
Store décor & 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 X
Store visibility X X
Pre-testing (of the initial questionnaire) was performed on a sample of 60

respondents 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 to
gauging customer perception for these products. Simultaneously, a cautious
approach was adopted to avoid fundamental flaws (misunderstanding of items,
unreadable options, etc.) in the final questionnaire. During content analysis of
the 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 deductive
category application) (Marying, 2000).
After content analysis and detailed discussion and deliberations, the
questionnaire was modified, eliminating some questions and including those
that had been missed out initially.
Quota (multi-stage) and shopping mall intercept sampling schemes were
employed, with the questionnaires being sent to approximately 1,400
respondents (customers). Of these, 1,183 questionnaires were found to be
complete in all respects. The response rate was 84.5 per cent. An attempt was
made to keep the sample fairly representative across all the demographic
variables by constructing quotas according to various demographic
characteristics.
Data Collection
The questionnaires, accompanied by a covering note, were personally distributed
to customers. The areas of sampling were cities like Lucknow, Delhi, Mumbai,
Bangalore and Kolkata. The time frame of the study was December 2009–
June 2010. Primary stage sampling units were the customers (of artisanal
products), while the secondary stage sampling units were various markets,
shopping malls, institutions and localities of the above-mentioned cities. In
order to make the sample representative, sampling was carried out in various
market places, shopping malls, office complexes and some residential localities
considering the desired quotas. A group of respondents was also chosen from
the 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 survey
were administered the formal questionnaire at the places specified by them.
The questionnaires were administered personally to ensure authenticity of the

information provided by the respondents.
The respondents had to fulfil the following criteria for being selected for the
study: they should have either purchased SME products or visited SME stores,
village industry shops, or rural craft exhibitions at least once in the previous
six months. The demographic profile of the respondents is summarized in Table
2.
Table 2: Demographic Characteristics of Respondents
S. No. Respondent’s Characteristics Percentage of Respondents
1. Gender
Male 57.8
Female 42.2
2. Age Group
<30 23.7
31–45 40.6
46–60 22.5
>60 13.2
3. Education
Upto HSC 12.6
Graduate 38.2
Post-graduate 31.4
Professional and others 17.8
4. Occupation
Salaried 37.6
Professional 20.5
Business 15.1
Student 13.0
Retired 5.3
Housewife 8.5
5. Income
<20,000 12.7
20001–35000 25.0
35001–50000 42.5
>50000 19.8
Data Analysis
Validity Analysis
Content validity: For the present study, to ensure the content validity of the
instrument, variables reflective of the customers’ perception of artisanal products
were identified from the literature and exploratory investigations, and were
thoroughly reviewed by professionals and academicians.
Reliability Analysis: The reliability of the data was examined, by running
reliability tests, to check whether or not random errors, causing inconsistency
and in turn lower reliability, were at manageable levels. For various sets of
important associated factors used in the questionnaire, values of coefficient
alpha (Cronbach’s Alpha) were obtained. Amongst the reliability tests that were
run, the minimum value of coefficient alpha obtained was 0.688 (substantially
higher than 0.6), which shows that the data has satisfactory internal consistency
reliability (see Table 3).
Table 3: Reliability Analysis
Dimensions No. of Items Cronbach’s 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), exploratory
factor analysis was performed. Here, we have considered the hypothesis that
there 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 the
KMO statistic is very high (0.871). Bartlett’s Test of Sphericity (with the null
hypothesis 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
the variability in the original 17 variables (see Table 4.2). Hence, the original
data 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 Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy .871

Bartlett’s 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 consolidated
perceptual dimensions related to artisanal products) derived from the 17
variables. In order to confirm the four consolidated perceptual dimensions,
confirmatory factor analysis (CFA) was deployed.
Confirmatory Factor Analysis

Factor analysis is primarily an exploratory technique because of the researcher’s
limited control over which variable are indicators of which latent construct.
Structural equation modelling, however, can play a confirmatory role because
the researcher has complete control over the specification of indicators for
each construct. Thus, confirmatory factor analysis (CFA) provides enhanced
control for assessing un-idimensionality and has more construct validity than
exploratory factor analysis (EFA) (Ahire, Golhar and Waller, 1996). CFA is
used here, particularly for the validation of the scales for the measurement of
constructs derived from EFA. LISREL 8.8 was used for this purpose. For
confirmatory factor analysis (CFA), the hypothesis was that there would indeed
be 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 provided
by LISREL, are presented in Table 5. As there is no offending estimate, the
various 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 .000
demands (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 .000
products (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)
More suitable for older generation .000 .000 .850 .000

of customers (3.711)
Successfully satisfied needs .000 (2.841) .000 .000
.687
Recommendation will benefit .000 .000 .000 .740
the artisan (3.175)
Store décor & 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 .000
preferences (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 is
done for the overall model (see Table 6). It provides the degree to which the
specified indicators (variables) represent the hypothesized constructs
(consolidated perceptual dimensions). The three useful overall model fit
measures are: absolute, incremental and parsimonious fit measures.
Table 6: LISREL Goodness of Fit Measures for CFA
Absolute Fit Measures Goodness of Fit Index (GFI) .946

Adjusted 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 and
that of adjusted goodness of fit index (AGFI) is 0.909. Both the values are
higher than the recommended value of 0.90. The value of root mean square
residual (RMSA) is 0.079, which is quite low. Hence, all the measures indicate
validity of the overall model.
Incremental Fit Measures: These measures assess the incremental fit of the
model compared to a null model. The null model is hypothesized as a single
factor 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 the
recommended level of 0.90.
Parsimonious Fit Measures: This is the final measure, which assesses parsimony
of the proposed model. It evaluates the fit of the model versus the number of
estimated 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 within
the recommended range of 1.0 to 2.0. These results are supportive of model
parsimony.
Thus, all the measures of overall model goodness of fit validate the proposed
model.
Measurement Model Fit

After analyzing and accepting the goodness of fit for the overall model, all the
four constructs (consolidated perceptual dimensions) were evaluated at two
levels:
• Examining the variable loading for statistical significance.
• Assessing the impact factor’s 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 variables
are significantly related to their specified dimensions. This substantiates the
proposed relationship among the variables and their dimensions.
Thereafter, the estimates of reliability, the variance-extracted measures and
the various fit indices for each perceptual dimension were analyzed to assess
the representativeness of each factor (see Table 7). The results of construct
reliability show that the reliability coefficients of all the factors exceed the
recommended 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 the
variance of these variables is accounted for by the consolidated perceptual
dimensions.
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 perceptual
dimensions (related to artisanal products) are more than 0.90 (the recommended
level) as shown in Table 7. This indicates strong evidence of uni-dimensionality,
suggesting good representativeness of the constructs. It establishes the construct
validity of the model. Construct validity is the assessment of the degree to
which an operationalization correctly measures its targeted variables (O’Leary-
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 to
which multiple methods of measuring a variable provide the same results
(O’Leary-Kelly and Vokurka, 1998). Results from Table 7 show that all the
four dimensions had a Bentler-Bonett goodness of fit coefficient of more than
0.90, which is above the required level. This indicates substantial convergent
validity. Finally, goodness of fit (GFI) values for all the four dimensions were
more than 0.90 (which is the recommended level), indicating best fit of the
considered model (Jöreskog and Sörbom, 1990).
The overall model goodness of fit results and the measurement model fit results
provide substantial support for validation of the proposed four-dimension model
of the consolidated perceptual dimensions.
Factors Extraction Results

The confirmatory factor analysis (CFA) reveals four factors (which represent
the four consolidated perceptual dimensions) derived from 17 variables. Table
5 indicates the construct loading for various factors incorporating the variables.
Factors and Their Sub-Factors
No. Factors Sub-Factors

1 Marketing set-up Variety in products
Advertising & promotion of products
Store décor & product display
Sales staff efficiency & product knowledge
Sales staff responsiveness
Store visibility
2 Quality Good quality & refined products

Superior to other comparative products
Successfully 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 and

promotion of these products”, “store décor and product display”, “sales staff
efficiency and product knowledge”, “responsiveness of sales staff” and “lack
of store visibility”. Since these components primarily reflect the marketing
efforts 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”, and
“standardization in sizes and designs”. As all these variables are clearly reflective
of 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 innovating
demands”, “they are in sync with the current fashion trends”, “they are more
suitable for the older generation of customers vis-à-vis their suitability for youth”
and “customized as per personal preferences”. All these variables are strongly
indicative of the fashion quotient of artisanal products. Hence, this factor has
been labelled as ‘Fashionable & Trendy’.
Factor 4 includes the variables “these products symbolize self-reliance”, “they

are symbols of patriotism” and “recommending these products will benefit the
artisans”. All these variables reflect an emotional connect between the
consumers and these products. Hence, this factor can be labelled as ‘Emotional
Bonding’.
SME (Artisanal) Products: Customer Preference Hierarchy

SME artisanal products, although constituting an important part of our cultural
heritage, do not enjoy a preferred position in the consumers’ shopping list. If
such products are to become more appealing to customers, it is important to
gain insights into their expectations and preferences. Also important is achieving
the milestone of customer satisfaction. The assumption is that, with customer
satisfaction 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 values
of a set of predictor variables. The Hosmer-Lemeshow goodness of fit test (see
Table 8.3) examined the null-hypothesis that the proposed binary logistic
regression model adequately fits the data. A significance value of 0.674 (>
0.05) reflects that the proposed model adequately fits the data. This result is
further substantiated by the omnibus tests of model coefficients (having the
null hypothesis that model coefficients are insignificant) (see Table 8.1), which
indicate that model coefficients were significant at all levels—steps, block and
model (sig=0.000). As seen in Table 8.2, the R Square values (Cox & Snell R
Square=0.704 and Nagelkerke R Square=0.796) reflect that a major portion of
the variation of the dependent variable (i.e., preference) can be explained by
the considered predictors. This shows that the proposed model is good in
predicting the customer preference with reference to SME products, based on
considered predictors, which is further corroborated by a high hit ratio of 92.1
per cent (see Table 8.4). Further, the preference hierarchy related to SME
products can be ascertained by taking into account the values of the regression
coefficient (B), Wald statistic and significance (see Table 8.5). The null
hypothesis that the predictors are insignificant is rejected for all the four
predictors (sig<.05), indicating that all of them are significant in predicting
customer preference with reference to SME products. Accordingly, respondents
accorded the highest priority to “marketing set-up” for these products, followed
by “products being fashionable & trendy”; this preceded “product quality” and
finally “emotional bonding” with these products. Hence, these empirical results
are indicative of the areas or attributes in which these products lag behind, but
are sought after by consumers, and occupy a significant place in their preference
hierarchy.
The proposed logistic regression model for predicting the preference of a
respondent, 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 90.2
artisanal/rural
products
Yes 57 757 93.0
Overall percentage 92.1

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, a
more in-depth analysis of the marketing set-up dimension was required. This
would provide significant indicators for the tactical marketing strategies
proposed later. Analytic Hierarchy Process (AHP) (Saaty, 1990, 2001), a
qualitative analysis tool, and Expert Choice-11.5 software were used for this
purpose. AHP is a multi-criteria decision-making procedure. It is designed for
situations in which ideas, feelings/emotions and perceptions are to be quantified
and decision alternatives based on them are prioritized. According to the
perception and preferences of customers (see Tables 9.1 and 9.2 and Figure 1),
AHP revealed a prioritization that indicates “responsiveness of sales staff”
followed by “sales staff efficiency and product knowledge” were the most
important (perceived) aspects of the marketing set-up. These aspects preceded
variables like “product variety”, “store decor and product display”, “advertising
and promotion of these products” and “store visibility” in the preference
hierarchy.
Findings
The paper purports that small and medium enterprises engaged in the marketing
of rural artisanal products need to adapt and innovate their marketing efforts.
In the current competitive scenario, these SMEs first of all need to gauge and
develop an insight into the perception of consumers who exhibit a preference
for/buy artisanal products. This insight will empower them with an
understanding of the gap between consumer expectations and their perception.
This is the first step towards adopting and managing an innovative marketing
strategy.
Table 9.1: Pair-wise Comparison Matrix
Factors of Variety in Advertising Store Sales Staff Sales Staff

Marketing Set-Up Products & Décor & 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 2
of products
Store décor & 1/2 2 1 1/2 1/3 2
product 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 décor & 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 Statements

Constituting the ‘Marketing Set-Up’
In order to decipher the complicated conundrum of customer psyche, factor

analysis (exploratory followed by confirmatory) was applied to concretize the
consolidated perceptual dimensions representing customer perception of
artisanal products. These perceptual dimensions (as revealed by a confirmatory
factor 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 for
these products, followed by fashionable and trendy, product quality and finally
emotional bonding with these products. Thereafter, further analysis of the
marketing set-up dimension revealed that the highest priority was accorded to
“responsiveness of sales staff” followed by “sales staff efficiency and product
knowledge” as the most significant constituents of the marketing set-up. This
preference hierarchy is distinctly indicative of the gap areas (related to these
artisanal products), as perceived by the customers. Marketing savvy firms
consider investment in the marketing set-up as the foundation for future profits.
SMEs need to revamp their marketing set-up and adapt their products and
designs in accordance with the changing fashion trends as well. This will entail
several strategic steps to be taken by SMEs so as to effectively manage the
innovations. Also, trendy and appealing products in an engaging store set-up
help transform ambivalent or negative customer attitudes and win them for
life. Consistent quality of these products is another key focus area. Further, if
we critically examine the consolidated perceptual dimensions, they are
indicative of inadequate marketing and design support for these artisanal
products. These gap areas need to be addressed with a view to bridging them
with adequate and multi-dimensional support (for these SMEs) so that they
can 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 are
now poised for further growth. The question for these SMEs is: How do they
take forward the market and product development that has the potential to fuel
growth over the next five to ten years? This involves developing a clear view
on innovation in the marketing strategy, and the managers of these organizations
evolving 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 from
each other?
2. What do these SMEs have to offer that is unique in the eyes of customers
and potential customers? How might their marketing communication
be further developed to strengthen awareness about their products among
key audiences?
3. Which product and market development opportunities are open to these
SMEs?
4. What are the options for these organizations in terms of expansion of
their 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 Gandhi
Ashram. The major role being played by the Khadi & Village Industries
Commission (KVIC) and KVIBs is that of financing SMEs/rural entrepreneurs,
rather than providing them with the requisite marketing support. The inability
of the government to cope with the demand for multi-dimensional marketing
support for these products has led the authors to explore alternative marketing
channels. NGOs can meet the demands of this role in devising new forms of
marketing if they are viewed as entrepreneurial organizations.
The answers to the questions posed above provide strategic indicators, which
implicitly support the premise of this paper that there is a need for SMEs to
adopt a relationship marketing approach. This would entail managing the several
innovations comprising this approach. It would consist of collaboration among
different stakeholders and the creation of a seamless system with requisite
forward and backward linkages. Drawing from the consolidated perceptual
factors, various gap areas associated with the marketing model followed by
SMEs are revealed. The following multi-dimensional support areas have been
identified in order to enable SMEs to revamp their marketing processes and
plug the various lacunae.
Product Design Support

In order to keep pace with the times, constant innovation in product design and
variety is of paramount importance. As indicated by the customer preference
hierarchy, significant importance is attached to these products being fashionable
and trendy, and of good quality. Hence, constant feedback to the artisans and
their skill enhancement through regular training programmes is the need of the
hour. Thus, design inputs and quality improvement need to be a continuous
process. The purpose being to diminish the perceptual understanding gap
between customers and artisans. Also, quality check processes need to be
incorporated so as to ensure that product quality standards are maintained.
SMEs can seek assistance from specialized institutes like Department of Science
and Technology, Government of India, and National Institute of Rural
Industrialization (NIRI). These organizations can provide technical assistance
in terms of improved technology, tools and equipment. With the use of these
improved 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 level
and sub-training centres at the district level, working in co-ordination with the
district industries centres (DICs) and district rural development agencies
(DRDAs), has been suggested. For the identification and categorization of
artisans’ training needs, inputs from NGOs should also be considered (since
most artisan self-help groups are associated with some NGO or the other).
This support will ensure that these rural/artisanal products adapt themselves to
the 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 sought
from specialized organizations (through organizational networking). Packaging
has 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 was
accorded 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 requisite
advertising and promotional support. This will help combat the “lack of
visibility” lacuna for these products. Backward linkages, constituting the supply
chain 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
relationship marketing in the form of seamless networking with artisans and

NGOs comes into play. Besides this, factors such as trained sales personnel
and ambience and décor of the stores address lacunae like “responsiveness of
sales staff” and “sales staff efficiency and product knowledge”. There is a strong
need to change the perception of customers regarding artisanal products so as
to make them more acceptable. Therefore, persons managing the sales outlets
of these products should be empowered (through training/counselling) with
adequate soft skills, so as to be able to espouse the attributes and uniqueness of
these products.
Adequate promotional support also needs to be provided with an attempt to
establish artisanal products as a brand by extensive advertising campaigns in
the print, audio and visual media. The visibility of, and demand for, these
products can also be enhanced by organizing promotional events like national
handicrafts exhibitions across various states at regular levels and establishing
ongoing sales points on the lines of Delhi Haat. This will help create an exclusive
image of these products in the customers’ mind, thus affording a discernible
competitive advantage.
The proposed marketing strategies can only be implemented and sustained
with an underlying premise of transparency, effective participation and mutual
benefit of all the stakeholders. The aim is to provide an enabling environment,
by seamless and effective networking and relationship building with all the
stakeholders.
Conclusions
The present paper opines that SMEs (selling rural/artisanal products) need to
adopt an innovative approach in order to take the market forward, accompanied
by revamped marketing efforts and product development that have the potential
to fuel future growth. They need to articulate their marketing strategy in terms
of relationship building. In common with many other SMEs, relationship
building ought to be central to their approach to marketing, which would be
more consistent with the current practice and philosophy. A relationship
marketing approach would entail SMEs being involved in:
1. Identifying consumer market segments (which could be an area for future
research) and businesses with whom they wished to forge, build and
maintain relationships—an ongoing assessment of the preferences of
customers; and seeking training and marketing support. The purpose is
to cull out those attributes in which these products are lagging behind.
The training and marketing support would thereafter help eliminate these
lacunae.
2. Articulating a clear view of the strength, intensity, lifetime, and current
and potential value to the company of each of those relationships—
establishing communication and support linkages with training and
product design institutes. Thus, the study explores new forms of
partnerships in marketing and support systems for the development of
small and medium enterprises (SMEs). Also, networking with non-
governmental organizations (NGOs) involved in the marketing of
artisanal products may pave the way for a supplementary and alternative
marketing channel. Over the last decade, the role of NGOs in
development has been widely recognized. These organizations play a
catalytic role in mobilizing local human and physical resources, creating
an appropriate entrepreneurial environment, and generating new
opportunities.
3. Planning and executing marketing actions to support those relationships.
The resultant plan for marketing actions will incorporate strategic
initiatives for relationship marketing besides building on and extending
existing marketing actions. For example, marketing communications
include web marketing, public relations and advertisements in specialist
magazines, and links with professional advisors. Marketing actions also
extend to product quality and brand building, pricing strategies, and
selection and maintenance of the distribution network (backward and
forward linkages). The difference is that the relationship marketing
perspective encourages a longer-term perspective and offers a framework
not only for integrated marketing communications but also integrated
marketing actions.
This paper attempts to critically analyze the marketing efforts of SMEs in order
to offer some insights that have wider application and are not restricted to the
specific type of SMEs (marketing rural/artisanal products) under analysis. It is
not, therefore, sufficient to comment on the way ahead for these SMEs. The
specific discussion in the preceding sections is designed to illustrate the
difference between the ‘traditional’ approach to marketing strategy and an
innovative ‘relationship’ approach. It also illustrates the benefits of a relationship
marketing approach. SMEs, like all businesses, have to ‘make sales’ today to
survive for tomorrow. This drives them to specific marketing actions, some of
which are born out of a very sound understanding of their product and market
and are honed very carefully.
On the other hand, the rather disjointed nature of these actions, coupled with
the 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, and
leads to the hypothesis that many do not. The absence of a clearly articulated
marketing strategy, which embraces objectives and long-term directions as well
as actions, may well be a barrier to business growth. Investors and policy-
makers’ instinctive reaction to this absence of a visible strategy is to encourage
SME owners and managers to develop a traditional marketing strategy.
However, in order for SMEs to be successful, they need to undergo a paradigm
shift in their marketing approach, incorporating and successfully managing
the innovations—right from understanding customer expectations, to revamping
the marketing set-up for their products and establishing a successful network
of relationships with all their partners and stakeholders.
This study confirms the centrality of relationships to the marketing strategy of
SMEs. The concluding proposition is that the adoption of a relationship
marketing approach by SMEs would be more viable and appropriate to the
development of an effective marketing strategy, which would act as a platform
for a programme of long-term marketing actions.
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Annexure 1
Questionnaire
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 of
Indian 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 to
buy a product
Foreign-made products are superior to domestic products
You enjoy surfing the Net
You 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 an
unorganized 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
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 5
Family & 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 ashram
Exhibitions 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
Festivals
Marriage
11. Which of the following products do you purchase frequently when you visit Gandhi
ashrams/village industry sales outlets?
1 = Always ———————————— 5 = Never 1 2 3 4 5
Khadi
Silk
Woollen
Food/edibles
Cosmetics/daily utilities
Leather
Paper
Handicrafts
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 No
14. 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 5
These 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 trends
They are more suitable for older generation of
customers vis-à-vis their suitability for youth
They successfully satisfy the needs of customers
Recommendation of these products will

benefit the artisans
Store décor & product display of these products is good
There is standardization in the sizes & designs of

these products
Sales staff for these products is efficient & has

product knowledge
They are customized as per the personal preferences

of customers
Sales staff for these products is responsive to consumer

choices/demands
Stores selling these types of products lack visibility
16. Rank the following factors responsible for the low acceptance of khadi/village
industry products
1– Most important factor 5 – Least important factor
Lack of visibility
Lack of promotion and advertising
Lack of variety
Décor and display of products
Lack of professionalism in the salespersons

of khadi/village industry product stores
Demographic Profile
Gender Male Female
Age Below 20 20–30 31–45 45–60 Above 60
Occupation Salaried Professional Business Student

Retired Housewife
Monthly Income <20,000 20,000–35,000 35,000–50,000 Above 50,000
Educational HS Graduation Post-Graduation

Qualifications Professional & Others

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ASCI Journal of Management 41 (2): 76–106

Copyright © 2012 Administrative Staff College of India

SHALINI N. TRIPATHI* and MASOOD H. SIDDIQUI**

Marketing of SME Products: A ‘Relationship’ Approach

Medium < 250 50 million 43 million

In addition to the staff headcount criteria, an enterprise qualifies as an SME if

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

approach to understanding these enterprises is more important for

India’s Socio-economic Structure

A sizeable proportion of India’s population still lives in rural areas, where

Literature Review: Marketing Practices in the SME Sector

multi-faceted impact. Others have characterized marketing in SMEs as having

Objectives of the Study

Table 1: Identification of Perception Variables

Variables Identified Source from Where “Variables” Were Suggested

Pre-testing (of the initial questionnaire) was performed on a sample of 60

The questionnaires were administered personally to ensure authenticity of the

Table 2: Demographic Characteristics of Respondents

S. No. Respondent’s Characteristics Percentage of Respondents

Table 3: Reliability Analysis

Dimensions No. of Items Cronbach’s Alpha

Marketing set-up 6 .842

Exploratory Factor Analysis

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .871

Table 4.2: Total Variance Explained

Compo- Initial Eigen Values Extraction Sums of Rotation Sums of

1. 7.467 43.924 43.924 7.467 43.924 43.924 5.156 30.329 30.329

Confirmatory Factor Analysis

Table 5: CFA Results-Construct Loadings

Components (Exogenous Construct)

More suitable for older generation .000 .000 .850 .000

Note: Figures in parentheses are t-ratios.

Table 6: LISREL Goodness of Fit Measures for CFA

Absolute Fit Measures Goodness of Fit Index (GFI) .946

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

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

Measurement Model Fit

Table 7: LISREL Measurement Fit Model

Dimension Construct Variance Comparative Bentler-Bonett Goodness

Quality .868 .855 .978 .963 .965

Factors Extraction Results

Factors and Their Sub-Factors

No. Factors Sub-Factors

2 Quality Good quality & refined products

3 Fashionable & trendy Adapt according to innovative demands

4 Emotional bonding Symbolize self-reliance

Factor 1 incorporates the variables “product variety”, “advertising and

Factor 4 includes the variables “these products symbolize self-reliance”, “they

SME (Artisanal) Products: Customer Preference Hierarchy

Table 8.1: Omnibus Tests of Model Coefficients

Step 1 Step 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.

Table 8.4: Classification Table

Preference for Artisanal/Rural Products Percentage

Overall percentage 92.1

Table 8.5: Variables in the Equation

B SE Wald Sig. Exp(B)

Preference Hierarchy of the Marketing Set-up Factor

Table 9.1: Pair-wise Comparison Matrix