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Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 5SMALL AND MEDIUM ENTERPRISE (SME) INTERNETMARKETING CHALLENGESIN THE TSHWANE AREA, SOUTH AFRICALouise van Scheers*, Johan Botha*, Jacques van Scheers**AbstractThe aim of this paper is to establish Internet marketing challenges of SMEs in the Tshwane area. Itseems that the benefits of Internet marketing seem to be ignored by most SMEs however butunfortunately, Internet marketing challenges prevent SME owners from using these tools effectively. Asurvey study method of research design has been selected for the research. The sample for the studycomprised 200 SMEs in the Tshwane area. Internet marketing usage in SMEs and the impact thereofis viewed as an essential part of modern day organisational operations for SMEs to promote theirbusiness both domestically and globally. ‘Unauthorised access to sensitive or proprietary informationand limited verification of authorship of messages’ is mentioned as the largest challenges. Theconducted research recommends that Internet marketing can be cost effective if the SMEs make use oftheir social networks and use best practises that enable them to get their adverts or posts shared acrosssocial networks. The conducted research also recommends that SMEs with limited resources startwith social media and YouTube as a marketing tool, as the learning curve is low and cost involvedalmost nil. This paper conclude that Tshwane SMEs are using both Internet marketing and traditionalmarketing to promote their businesses.Keywords: SME Social Media Activities, Internet Marketing, Tshwane Area, Benefits of Social Media*Marketing & Retail Department, University of South Africa**Milpark Business School1 IntroductionSecondary studies conducted by Ceglie & Dini (2005)and UN (2012) indicate that research of SMEs in thepast has mainly focused on the funding challenges ofSMEs. According to current research is clear thatSMEs Internet marketing research is needed as theyoften fail to utilise marketing tools available forInternet marketing purposes. The affordability andresearch indicates that the benefits of Internetmarketing seem to be ignored by most SMEs. Itseems that Internet marketing challenges prevent SMEowners from using these tools effectively. A SMEsurvey conducted in 2012 (World Wide Worx: 2012)shows that 410 000 SMEs in South Africa have awebsite, representing only 63% of active and formalSMEs. Secondary research conducted by Ceglie &Dini (2005) and UN (2012) shows that SMEs with awebsite are likely to be more profitable than thosewithout. The question to be asked is then why doSMEs not use Internet marketing to market theirbusinesses.It seems that there is a gap in the literature andtherefore this research aims to establish SMEs Internetmarketing challenges of the Tshwane SMEs. Themotivation to use the Tshwane area is because it is thelargest metropolitan municipality in South Africa, thethird-largest city in the world after New York andTokyo (Tshwane, 2013) and it is an economical hub inSouth Africa. Following this introduction, section twoof the paper considered the review of literature,section three discussed the methodology of the paper,and section four presented the analysis, results anddiscussion while the last section dwelled on theconclusion and recommendations.2 Literature review2.1 SMEs in the Tshwane areaThe Tshwane municipal area had an impoverishedpopulation of around 1,2 million in 2007 (Tshwane,2013) which grew to 1,7 million in 2014. SMEsoperate within a complex and dynamic businessenvironment in the Tshwane area, according to VanScheers (2009). According to Van Scheers (2009), thesmall business failure rate is particularly high in theTshwane area. This is in line with results from the2012 SME Index study where 6% of the South AfriacnSME respondents reported that their survival wasthreatened, followed by 11% who felt their survivalwas not threatened. According to the results of thestudy, South Africa has become less accommodatingto small and medium-sized business with nearly three-590
Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 5quarters of the respondents (74%) agreeing thatrunning an SME had become more difficult. Nineteenper cent of the SME respondents in South Africa feltthat conditions had not changed, while a little over 6%felt that it was easier to operate an SME (Fritsch &Schroeter, 2013).It can be said with some certainty that running agrowing successful SME in the Tshwane area hasalways been a challenge, but even more so in thecurrent environment. In the following sections,Internet marketing challenges will be discussed aswell as the part it plays in the SME sector.2.2 Internet marketingOnline marketing, also referred to as onlineadvertising, consists of activities using the Web oremail to drive direct sales via electronic commerce, orcreating sales leads from websites or email marketing(Dockel & Ligthelm, 2012). Internet marketing is adiverse area with many tools to bring customers to theSMEs’ products and services. The main tools Internetmarketers can use are: Search engine marketing (Google, Bing, Yahooetc.) Directories and listings Email marketing Social media marketing Public relations Online advertising2.3 GlobalusageSMEsInternetmarketingInternet marketing usage (Ching & Ellis, 2004;Hoffman, Novak & Chatterjee,1995; Nguyen &Barrett, 2006) has grown rapidly in relation to theincrease in commercial websites. Nguyen and Barrett(2006) observe that this increase of Internet usage hasalso impacted upon the barriers to export entry and hasprovided hope and opportunities to millions of SMEsattempting to enter foreign markets, by allowing themto communicate globally as efficiently as any largebusiness. Egan, Santos & Bloom (2003) observe thatthere has been an increase of Internet use in corporateenvironments, but the extent to which it is used bySMEs outnumbered it. SME marketing differs tomarketing in the larger organisations and corporations.It is perceived to be more intuitive, innovative,competency based, and operating under financial andhuman resource/time constraints while makingeffective use of networking (Carson, Gilmore, Perry &Gronhaug, 2001). The ability to serve niche marketsand develop strong relationships with customers hasalways been a strong point of SMEs. These days theyare less effective by internet-enabled businesses of anysize (Gilmore, Gallagher & Henry, 2007). Kula andTatoglu (2003) indicate that SMEs can use the Internetfor marketing products and services by providingonline quotes, advertising in more markets with lessmarketing expense, and using email as a marketingtool to enlarge their reach to potential markets. Thisapproach decreases the costs of printing materials suchas catalogues and glossy brochures, and deliverymechanisms such as postal services or courierservices. Downie (2012) and Poon and Swatman(2007) have identified motivation drivers such as theopportunity to promote their company better; thechance to lower operating and marketing costs; enrichtheir overall marketing communications mix and salesfunnel effectiveness, and increase sales and profits forSMEs.A recent study conducted by Friedlein (2014) inBritain shows that 79% of the SME respondents felt itwas critical to their marketing to have a website torepresent their brand and showcase their products orservices.The same study also highlighted thefollowing: SME managers and owners are familiar withsocial media marketing, email marketing and SEO. Over 50% manage their digital activities areoperated in-house and one-third have some sort ofagency support. The least familiar online marketing tactics arecontent marketing, affiliate marketing and inboundmarketing.Summarising the research study findings,Friedlein (2014:21), founder and managing director atBrowser Media, remarked:“It’s heartening to find that SMEs understandthat their website can be a valuable business asset butequally concerning that only half invest in promotingit more broadly. It’s a bit like setting up a new retailoutlet and then only telling family and friends how tofind you. In order to attract new customers and growtheir businesses, these SMEs need to think like a bigbrand and make more noise online.”2.4 SME Internet usage in South AfricaSouth Africa has one of the largest Internet economiesin Africa. A report by Goldstuck (2012) shows thatSouth Africa had approximately 8,5 million Internetusers at the end of 2011. This represented a 25%increase over the 6,8 million recorded in 2010. Thishigh growth rate is the result of the proliferation of‘Smartphones’ in the South African market – makingInternet available to more people without an ADSL orother physical connection. South African Internetpenetration grew to approximately 17%. But it is byno means the biggest percentage of Internetpenetration in the African continent. Nigeria, with its45 million users, has a 29% penetration. Egypt has auser base of 21,6 million users with a 26%penetration, while Morocco’s 15,6 million usersrepresent a 49% penetration. Kenya has an estimated10,4 million Internet users with a 25% penetration.591
Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 52.5 SME Internet marketing challengesSeveral studies (Tan, Chong, Lin & Eze, 2010;MacGregor & Vrazalic 2005; Cavaye & van Akkeren,2009) show that SMEs are not aware of the financialbenefits that could result from using the Internetmarketing. Challenges SMEs reported were that thestart-up investment costs for Internet adoption werehigh, and that the return on investment was not clear.A second challenge mentioned is that SME owners didnot believe that Internet adoption could result in loweroperational costs. Singh, Garg and Deshmukh (2010)identified further challenges constraining SMEs’Internet usage for marketing and sales: Inadequate access and understanding ofInternet technologies pertaining to web presence,marketing and sales channels, Ineffective Internet-related selling techniques,and Limited Internet market research.Dholakia and Kshetri (2004); Johnson, Levine,Smith and Stone (2010:405–413); Poon and Swatman(2009), and Tan, et al. (2010) observe that a lack ofmanagements’ long-term vision on Internet marketingand sales opportunities results in inadequate supportand encouragement to adopt Internet strategies.Resistance to facing a new learning curve (change) isanother challenge to adoption of Internet and socialmedia platforms, tools and strategies (Cavaye & vanAkkeren, 1999; Johnson, et al. 2010; MacGregor &Vrazalic, 2005). Despite the high affordability ofInternet networks, the low time-to- market factor andthe low learning-curve in comparison to other Internettools, it seems some SMEs are still not convinced ofthe value of the social media component. However,there is strong indication that more SME owners arestarting to understand the value of Internet marketingin enhancing productivity and competitiveness(Bakeman & Hanson, 2012:107).Perhaps the most important statistic to come outof the SME survey is that 63% of formal SMEs inSouth Africa have a website, which leaves more than athird of SMEs without an online presence (WorldWide Worx, 2012). Next the methodology will bediscussed.3 MethodologyA survey research was designed and primary datawere collected from SMEs in the city of Tshwane.The population of study was 200 SMEs in the city ofTshwane. In selecting the sample, simple randomsampling techniques were adopted by using a list ofregistered SMEs from the Tshwane municipality. Thequestionnaire was developed based on existingliterature and pretested with five small businesses toensure clarity and comprehension, as well as to gaugeaverage completion time. Minor revisions were madein question wording and order as a result of thepretest. Because of careful monitoring, the total of 200questionnaires were returned representing 100%response rate. To assess the internal consistency of theinstrument, Cronbach’s alpha was run and a reliabilitycoefficient of 0.836 resulted. The instrument wasvalidated through content validity. The instrumentwas structured and multi-chotomous in designcovering demographic and research variablequestions.Descriptive statistical analysis wasemployed to establish the SME Internet marketingchallenges in the Tshwane area. The outcome of thedetermination was used to make decision.4 Results, analysis and discussion4.1 Characteristics of respondents4.1.1 Gender of the Tshwane SMEWomen are increasingly joining the work force, butbecause of child-rearing duties lack formal educationand work experience. They are also too busy withfamily duties, therefore most SMEs are owned bymales. The study confirms that almost two-thirds(64,5%) of the respondents were male. Only 35,5% ofthe respondents were women, which validates thesecondary research conducted.4.1.2 Education of the Tshwane SMEsEducation plays an important role in the success of anSME, as highlighted in the introduction.Amultivariate analysis of comparing the education levelof respondents and Internet usages are reflected inTable 1.It seems that (Table 1) on average, educationallevel has an effect on how successful the respondentsare to increase their sales, product awareness,consumer support and overall productivity throughtheir Internet marketing communications. Morespecifically, the proportions of respondents thatincrease their sales, product awareness, consumersupport and overall productivity by 40% or less,decrease as the level of education increases. Theinverse is true for the respondents who increase theirsales, product awareness, consumer support andoverall productivity by more than 40%. In fact, noneof the Grade 10 / Standard 8 respondents increasedtheir sales, product awareness, consumer support andoverall productivity by more than 40%.4.1.3 Internet activities – frequencyQuestion 11 inquiries into Internet activities,frequency and tools that Tshwane SMEs are using.The results are shown in Figure 2.592
Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 5Table 1. Multivariate analysis of comparing the education level of respondents and internet usagesWhat is the estimated percentage (%) 40 % or lessIncrease in salesMore than 40 %TotalWhat is the estimated percentage (%) 40 % or lessIncrease in product awarenessMore than 40 %TotalWhat is the estimated percentage (%) 40 % or lessIncrease in customer supportMore than 40 %TotalWhat is the estimated percentage (%) 40 % or lessIncrease overall productivity of SMEMore than 40 %TotalGrade 10/ Standard 8 Matric Degree & higher Total261018100.0% 75.0%66.7% 72.0%02570.0% 25.0%33.3% 28.0%28152516714100.0% 85.7%53.8% 66.7%01670.0% 14.3%46.2% 33.3%17132116613100.0% 75.0%50.0% 61.9%02680.0% 25.0%50.0% 38.1%18122115612100.0% 62.5%50.0% 57.1%03690.0% 37.5%50.0% 42.9%181221Source: Question 10 of field reportFigure 1. Internet activities, frequency and toolsSource: Question 11 of field reportIt is clear from Figure 1 that email is the activitymost often used by almost all (92.9%, n 26)respondents, followed by communicating with others(62,1%, n 18) and banking (57,1%, n 16). Email isalso the one activity for which none of the respondentsreported that they never, or even sometimes, use.Although some respondents also engage in all theother activities most often, the proportions of thosewho do vary from 3,6% (n 1) for training to 21,4%(n 6) for advertising. The proportions of respondentswho appear not to know enough of the Internet toknow what they are doing are small, while for marketresearch and buying on the web, nobody reported thatthey did not know. Buying on the web (53,6%, n 15)and e-commerce (45,8%, n 11) are the activities forwhich the largest proportions of respondents reportedthat they never engage in them.In both the Kolmogorov-Smirnov and theShapiro-Wilk tests, the null hypothesis the distributionof the internet activity index conforms to a normaldistribution. With the p-value (sig.) .05, the nullhypothesis cannot be rejected.4.2 Internet marketing challenges forSMEsQuestion 30 the field report asked the respondents toindicate the challenges they experience with using593
Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 5Internet marketing. In the literature section, the SMEsocial media challenges were described and the resultsof the Tshwane SME challenges are illustrated belowin Figure 2.Figure 2. Challenges for SMEs to use Internet marketing85%76%82%72%94%92%87%67%75%Problems with time factor and the learning factorLack of resourcesResistance to changeLack of management support and encouragementUnauthorised access to sensitive informationSecurity of informationInadequate access to technologies, ineffective selling techniquesInternet adoption could result in lower operational costsStart-up investment costs for Internet is high0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%Source: Question 30 of field reportFigure 2 indicates that 94% of the respondentsremarked that they consider ‘Unauthorised access tosensitive or proprietary information, and limitedverification of authorship of messages’ as the largestchallenge to using Internet marketing. This confirmsthat the Tshwane SME also experience the samechallenges as indicated in the literature review. Figure3 also shows that most respondents (92%) haveproblems with ‘security of information’; 87% of therespondents experienced inadequate access totechnologies, ineffective selling techniques, andlimited market research whereas 85% of therespondents mentioned that time and cost arechallenges to using social media and Internetmarketing. Figures for lack of resources (76%) andstart-up investment costs (75%) point out thatTshwane SMEs also have challenges with funds. Ofthe respondents, 67% indicated that they are still notconvinced that Internet adoption could result in loweroperational costs, while resistance to change as reasonnot to use Internet marketing was giving by 82% ofthe respondents. Lack of management support andencouragement were challenges mentioned by 72% ofthe respondents.4.3 Internet marketing or traditionalmarketing, or bothThe question was asked: Do you prefer internetmarketing or traditional marketing, or both? Theliterature section shows that most SMEs use internetmarketing and traditional marketing. This questionwas asked to establish whether Tshwane SMEs preferInternet marketing or traditional marketing, or both.The results are indicated in Figure 3.Figure 3. Internet marketing or traditional marketing, or bothSource: Question 28 of field studyFigure 3 shows that 87,50% of the respondentstend to favour both internet and traditional marketing.In the literature section it was mentioned that mostSMEs use both Internet marketing and traditionalmarketing to promote their businesses and thisconfirms that the Tshwane SMEs use the samereasoning as other SMEs.594
Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 55 Conclusion and recommendations3.Based on the analysis and the findings thereof, thispaper concludes that 94% of the respondents remarkedthat they consider ‘Unauthorised access to sensitive orproprietary information, and limited verification ofauthorship of messages’ as the largest challenge tousing Internet marketing. This confirms that theTshwane SMEs also experience the same challengesas indicated in the literature review section. Mostrespondents have problems with ‘security ofinformation’. The results confirm that 87% of therespondents experienced inadequate access totechnologies, ineffective selling techniques, andlimited market research, whereas 85% of therespondents mentioned that time and cost arechallenges in using social media and Internetmarketing. Figures for lack of resources (76%) andstart-up investment costs (75%) point out thatTshwane SMEs also have challenges with funds.Of the respondents, 67% indicated that they arestill not convinced that Internet adoption could resultin lower operational costs while resistance to changeas reason not to use Internet marketing was given by82% of the respondents. Lack of management supportand encouragement were challenges mentioned by72% of the respondents. The research shows 87% ofrespondents’ referred to time and costs as challengesin using social media and Internet marketing.The majority of the respondents of the Tshwanecommunity reported that they do use Internetmarketing for their businesses. The conducted resultsreflect that LinkedIn is the website known to thelargest proportion (89,7%) of respondents, followedby Facebook, Twitter, Google and YouTube, with allof them known to more than 70% of the respondents.Digg is the social website that is known by the leastnumber (6,9%) of respondents.The conducted research recommends thatTshwane SME owners utilise YouTube channels toeducate and train themselves on effective usage ofInternet marketing instruments, specifically themarketing use of Facebook and YouTube, especially ifthey use social media for promoting their services andtheir products. Internet advertising instruments can beutilised effectively for marketing and customerinteraction without spending large amounts ofresources. 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**Milpark Business School 1 Introduction Secondary studies conducted by Ceglie & Dini (2005) and UN (2012) indicate that research of SMEs in the past has mainly focused on the funding challenges of SMEs. According to current research is clear that SMEs Internet marketing research is needed as they .Author: Louise van Scheers, Johan Botha, Jacques van Scheers
