Acta Universitatis Danubius. Œconomica, Vol 14, No 3 (2018)

Internet Web Marketing Challenges Of South African Smes

Louise van Scheers¹

Abstract: This research aims to establish Internet web marketing challenges of South African SMEs. The research design chosen for this research is descriptive research in conjunction with a quantitative approach. The population includes SMEs in South Africa. The sample for the study encompasses 500 SME owners who currently manage the SMEs in South Africa. The conducted research indicated that SME owners utilize the internet web for marketing their businesses. The research results showed that the wed is promising marketing advertising tool for the future. The results also revealed that older respondents are more successful in stimulating better sales and customer support through their internet marketing communication efforts than younger respondents while younger respondents are more successful in increasing product awareness and overall productivity of their SME than older respondents. Past research has proven that the web will not render traditional media obsolete. This is because traditional media has advantages that advertisers cannot ignore and the web cannot take away. This results show that the web is comparable to other marketing media. It is therefore important that SME owners include the web as part of their communication mix since an integrated approach is needed.

Keywords: Internet web challenges; South African; SMEsAdvertising marketing tool

JEL Classification: L86

1. Background

In South Africa SMEs are providing employment opportunities to 60 per cent of the labour force, and contribute 34 percent to GDP. SMEs experience challenges such as funding and limited access to finance, but the Global Entrepreneurship Monitor (GEM) Reports (2001-2017) noted that South Africa’s SMEs owners also suffer from poor marketing skills to advertise their products on the web. South Africa has one of the highest SMEs failure rates in the world due to these factors. (Sowetan, 2013) Hill (2011) and Mutula and Van Brakel (2006) indicate that sales depend on the targeting of specific groups which usually evolves the use of web search engine and display SMEs providing advertising and routing to the sales page or contact details. Wolf (2011) observes that it seems although that most SMEs have access to Internet to use websites but most still experience challenges to use the Internet.

The Internet is collection of interrelated networks, which allows users to communicate. (O’Connor & Galvin, 2015) The web is the multimedia part of the Internet. Barker and Goenne (1996) (quoted in Lei, 2015) see the web as a hybrid of interpersonal and mass communication processes. The web introduces the concept of interactive marketing which has enabled advertisers to interact directly with customers. (Turban & King, 2013) In interactive marketing a consumer can click on an advert in order to obtain more information or send an email to ask a question. The web can be used to transmit a standardised message to a wide audience and hence functions as mass communication or through e-mail, it can be used as interpersonal communication

A SME survey conducted in 2012 shows (World Wide Worx) that about 410 000 SMEs in South Africa have websites. This research also shows that SMEs with a website are far more likely to be highly profitable than those without. However, limited research was conducted on this field and it seems that there is a gap in the literature. This research aims to establish Internet web marketing challenges of South African SMEs.

2. Literature Review

Smes Internet and Web Marketing

Meeker 1997 (quoted by Turban & King, 2013) examined the length it took for each media to reach 50 million users. The study found that it took the radio 38 years, television 13 years and it took the web only five years to reach 50 million users. Since the web is the fastest growing communication medium this makes it the medium of choice as advertisers are interested in a medium with such potential reach

Sme Internet and Web Usage in South Africa

South Africa has one of the largest Internet economies in Africa. Research conducted by Goldstuck (2012) shows that South Africa had approximately 8.5 million Internet users at the end of 2011. This represented a 25 per cent increase over the 6.8 million recorded in 2010. This high growth rate is the result of the proliferation of “Smartphones” in the South African market – making Internet available to more people without an asymmetric digital subscriber line (ADSL) or other physical connection. South African Internet penetration grew to approximately 17 per cent per year. However, it is by no means the biggest percentage of Internet penetration in the African continent. Nigeria, with its 45 million users, has a 29 per cent penetration. Egypt has a user base of 21.6 million users with a 26 per cent penetration, while Morocco’s 15.6 million users represent a 49 per cent penetration. Kenya has an estimated 10.4 million Internet users with a 25 per cent penetration.

South African Internet web usage and penetration levels compare per population unfavourable to other countries such as Australia and Nigeria. Australia has an Internet penetration of 89 per cent whereas Nigeria ranks as number one in Internet usage in Africa with 94 million of the population of 257 million which use Internet. Of the 54 million South Africans only 26.8 million are active Internet users compared to Egypt with a population of 95 million with a penetration rate of 37 per cent.

Defining the Sme

In South Africa, a “small business” is official defined in Section 1 of the National Small Business Act of 1996 as amended by the National Small Business Amendment Acts of 2003 and 2004 (NSB Act) as a separate and distinct business entity managed by one owner. (National Small Business Act of 1996) The NSB Act also categories small businesses in SA into distinct groups, namely; survivalist, micro, very small, small and medium, hence the use of the term “SME” for small and medium enterprises. The typical South African SME has no more than 50 employees.

Internet and Web Marketing Activities

Technology, as Accenture (2013) explains accelerated by the Internet, is transforming industry and commerce. Internet marketing uses the Internet websites to deliver marketing messages to consumers. It includes email marketing, search engine marketing, social media marketing to create online presence, display advertising, and mobile advertising (Beal, 2014; Ward, 2014) electronic marketing (http://www.quirk.biz/resources, 2014) refers to the application of marketing principles and techniques by using the Internet. According to Beal (2014) Internet marketing is the process of marketing SME’s products or services by implementing the Internet websites. It includes direct response and indirect marketing elements using a range of technologies to help connect SMEs’ businesses to their customers. Internet marketing activities also include creating relevant content on SMEs website; publish articles online; sponsor a local sport team and speak at seminars and write blogs. There are five main issues that the previous studies (Humphrey, 2005; Pearce & Byars, 2012; UN, 2012) noticed with Internet using search engine and display networks:

• The cost and the difficulty are targeting specific groups according to your sales funnel;

• Lack of website advertising knowledge;

• Most SME do not have the knowledge or the time to gain the understanding on how to apply keyword searches and to optimize Search Engine Optimization (SEO) searches;

• Most websites set up by SMEs do not provide adequate customer or consumer experience to ensure high conversion;

• Most SME owners do not understand how to approach Internet web marketing and Internet Customer interaction technologies;

• Even SMEs that do have budgets to source out the building of a web site, they usually do not get the service and technology to enable them to fully service both the desktop, tablet and mobile market.

Using the Web as Advertising Tool for SME

Web advertising uses the Internet to deliver promotional marketing messages to consumers. Web advertising includes email campaigns, social media activity, SME website and blog. Methods such as Pay-Per-Click (PPC) and display advertising are using in conjunction with Social Media or search engines, such as Google and Microsoft’s Bing. Turban and King (2013) observe the following web advertising methods:

Banners. A banner is graphic display on a web page which is linked to the advertiser’s web page. Banners often include video clips and sound;

Pop-under ads. This is an advert that appears underneath the current browser window, so when the user closes an active window, they see the advert. Many users object to these adverts which they consider intrusive;

Interstitials. It is an initial web page or portion of it which that is used to capture the user’s attention for a short time while other content is loading;

Emails. Company information is emailed to people or companies listed in mailing lists;

Standardized ads. These adverts are larger than banners and look like the adverts in newspapers or magazines. They appear on web site in columns or boxes;

Classified ads. There are special sites for such adverts and they also appear in online newspapers and portals. They look like newspaper adverts;

URLs (Universal Resource Locators). Most search engines allow companies to submit their internet addresses for free. This enables indexing of its content and links.

Advantages of Web as Adverting Tool for SMEs

According to Turban and King (2013), the following are advantages of web as adverting tool compared to traditional media:

Web advertisements are available 24 hours a day and 365 days a year with the same costs regardless of audience location;

Large market segmentation because it is accessed because of interest;

Rich in format due to convergence of text, audio, graphics and animation;

Low distribution costs;

Response and results are immediately measured;

Opportunity to create a one to one direct marketing relationship with consumer;

Advertising and content can be updated any time;

Logical navigation which enables users to click and navigate when and where they want.

Disadvantages of Web Advertising for SMEs

Each medium including the Internet web has its limitations as listed below:

No clear standard or language of measurement;

Difficult to measure size of market;

Immature measurement tools and metrics.

Internet Marketing and Web Challenges

Several studies (Tan, Chong, Lin & Eze, 2010; MacGregor & Vrazalic, 2005; Cavaye & van Akkeren, 2009) showed that SMEs are not aware of the financial benefits that could result from using the Internet marketing. Challenges SMEs reported were that the start-up investment costs for Internet adoption were high, and that the return on investment was not clear. A second challenge mentioned is that SME owners did not believe that Internet adoption could result in lower operational costs. Singh, Garg and Deshmukh (2010) identified further challenges constraining SMEs’ Internet web usage for marketing and sales:

Inadequate access and understanding of Internet web technologies pertaining to web presence, marketing and sales channels;

Ineffective Internet-related selling techniques; and

Limited Internet market research.

The generalist nature of managers and employees within SMEs results in limited knowledge about how various computer technologies could contribute to an overall Internet marketing strategy. Previous studies (Dlodlo & Dhurup, 2010; Winthrop, 2012; Barge, 2014) confirm that SMEs perceive the following as Internet marketing challenges:

Start-up investment costs for Internet is high;

Using the web needs specialized knowledge;

Internet adoption could result in lower operational costs;

Inadequate access to technologies, ineffective selling techniques, and limited market research;

Security of information;

Unauthorised access to sensitive or proprietary information, and limited verification of authorship of messages;

Lack of management support and encouragement;

Lack of resources

Despite the high affordability of Internet web networks, the low time-to- market factor and the low learning-curve in comparison to other Internet tools, it seems some SMEs are still not convinced of the value. However, there is strong indication that more SME owners are starting to understand the value of Internet web marketing in enhancing productivity and competitiveness. (Bakeman & Hanson, 2012, p. 107)

This is perhaps the most important statistic from the SME Survey 2012 is that a high 63 percent of formal SMEs in South Africa have a website, which leaves more than a third of SMEs without an online presence. The question can be asked which are Internet marketing challenges that prevent South African SMEs to use Internet marketing?

3. Research Methodology

The research design chosen for this research is descriptive research in conjunction with a quantitative approach. The population includes SMEs in South Africa. The sample for the study encompasses 500 SME owners who currently manage the SMEs in South Africa. The data was collected from 3 March to 30 June 2017.

Research Strategy

The research strategy is a general plan of how the research question that has been set will be answered. It should contain clear objectives derived from the research questions, specify the sources from which data is to be collated, and consider the constraints, which the researcher will inevitably have.

Quantitative Approach

A quantitative approach was utilised for the analysis of the research question, to determine SMEs Internet web challenges the frequency at which the social media are used and the types of social media utilised in a SME setting. To address the topic problem sufficiently, the secondary data as seen in the literature review was substantiated with primary data collected from SME owners.

Populations

A population is the study object, which may be individuals, groups, organisations, human products and events, or the conditions to which they are exposed Welman & Kruger. (2009, p. 18) The population for this research will include all SMEs in South Africa.

Sampling

Greener, (2008) distinguish between probability samples and non-probability samples, the difference being that in the case of probability sampling, the probability that any member of the population will be included in the sample can be determined, while in non-probability sampling, this probability cannot be specified.

Sample Size and Sample Method

The sample for the study encompassed of 500 SME owners who currently manage the small businesses and quota sampling will be used and random sampling will be used.

Data Collection Tools

Primary Data Resource

The primary data resource was a questionnaire;

The questionnaire was develop to answer the research questions asked as well as achieving the primary and secondary objectives;

The questionnaire will be distributed to SME owners and therefore they will be my primary data resources.

Secondary Data Resource

Secondary data sources such as academic books and journal articles were used.

4. Research Findings

Demographics

Describing the South African SMEs

The results reveal that the largest proportion of the respondents was older than 50 years while the rest of the respondents were relatively equally distributed among the other age groups. Almost two thirds (64.5 per cent) of the respondents were male and only 35.5 per cent of the respondents were women which validate the secondary research. Most SME owners in South Africa received good education as only 6.5 per cent) of the respondents had an educational level of less than matric.

The results also show that more than 40 per cent of the respondents have a turnover of less than R50 000, it indicates that the SMEs are small businesses which therefore will not have resources for Internet connectivity as well as limited Internet marketing skills. 18.8 per cent of the respondents have a turnover of R1 million and 20.4 per cent have a turnover of more than a million rand. The Wilcoxon rank sum test indicates that SMEs with a turnover more than R500 000, spent more on Internet activities because they have more resources capability.

The results reveal that the average number of employees is four. Fewer respondents reported large numbers of employees than respondents who reported smaller numbers of employees.

Internet Web Activities – Frequency

The results of Internet marketing, frequency and tools which SMEs are using are shown in Figure 1.

Figure 1. Internet web marketing, frequency and tools

It is clear from Figure 1 that email is the activity most often used by almost all (92.9 per cent) respondents, followed by communicating with others (62.1 per cent) and banking (57.1 per cent). Email is also the one activity for which none of the respondents reported that they never, or even sometimes, use. Although some respondents also engage in all the other Internet marketing activities most often, the proportions of those who do vary from 3.6 per cent for training to 21.4 per cent for advertising. Buying on the web (53.6 per cent) and e-commerce (45. 8 per cent) are the marketing activities for which the largest proportions of respondents reported that they never engage in them.

General Marketing Communication Web Aims

General marketing communication web aims were asked this question and the results are reflected in figure 2.

Figure 2. General marketing communication objectives

Figure 2 refers. Not one of the marketing communication objectives were rated as not important by any of the respondents. In the case of all four of the marketing communication objectives, illustrated in figure 2, there were a small proportion of respondents who were undecided about their importance. Informing consumers about the availability of products is the most important marketing communication objective, followed by building awareness among consumers about products offered by their businesses.

Motivational Reason for Implementing a Website

SME owners giving reasons for implementing a website and the results are indicated in table 1.

Table 1. Motivational reason for implementing a website

Table 1 shows the motivational reasons for using a website. SME respondents confirmed that by using their website to bill customers is the least important motivating reason for implementing a website. The most important motivating reasons are the possibility to have 24-hour accessibility and the possibility to provide more up-to-date information, followed by the possibility of providing clients with information more quickly.

The next question asked the respondents to identify internet web marketing challenges and the results is shown in figure 3.

Figure 3. Internet web marketing challenges for SME owners

Figure 3 indicates that 94% of the respondents remarked that they consider “Unauthorised access to sensitive or proprietary information, and limited verification of authorship of messages” as the largest challenge to Internet marketing.

Figure 3 also shows that most respondents (92%) have problems with “security of information”. 87% of the respondents experienced inadequate access to technologies, ineffective selling techniques, and limited market research whereas 85% of the respondents mentioned that time and cost are challenges to using social media and Internet marketing. Lack of resources (76%), Start-up investment costs (75%) point out that South African SMEs also have challenges with funds. Of the respondents 67% indicated that they are still not convinced that Internet adoption could result in lower operational costs while resistance to change as reason not to use Internet marketing was giving by 82% of the respondents. Lack of management support and encouragement were challenges mentioned by 72% of the respondents.

The paid and unpaid marketing strategies used within the Social media network Facebook to promote SME services and products, cost effectively.

A comparison study of the use of search and display networks like Google and Facebook, focussing on the cost, learning curve, competition on these networks influence and effect on cost effectiveness, marketing effectiveness with focus on sales funnel and target markets alignment.

5. SME Managerial Implications

SMEs are aware of the intense competition that exists thereby it is imperative that the managers get the right communication mix. As a result of the advantages posed by the web which allows companies to advertise both globally and locally simultaneously, an advantage which no other possesses as yet. South Africa being an emerging global market, it is important that South African SMEs make use of the web to reach audiences that are beyond its borders.

6. Conclusion and Scope for Further Research

The research aims to establish Internet web marketing challenges of South African SMEs. The conducted research indicated that SME owners utilize the internet web for marketing. The research results showed that the wed is promising marketing advertising tool for the future. This study serves as a stepping-stone on the road to understanding consumer perceptions about the web. All the respondents think that small businesses should utilize the internet for marketing while just over half (54.8%) of the respondents are currently marketed through the internet. Although the results show that, most SMEs have access to internet only 54.8 % of the respondents use internet marketing to promote their businesses.

The non-parametric Wilcoxon rank sum test was used to determine whether current internet marketing has an effect on the overall internet activity levels of the respondents. The Wilcoxon rank sum test revealed a significant difference between respondents who are currently marketing on the internet and those who don’t, z=-2.288, p<.05. Respondents who currently market on the internet (M rank=18.03) exhibits a higher internet activity level than that of respondents who do not currently market on the internet (M rank=10.71). Therefore, the results show respondents currently using the internet for marketing shows a higher activity of their business activities.

The respondents also reported an increase in sales; product awareness; customer support and overall productivity of the business as a result of internet marketing. There seems to be an effect of age on the percentage increase in sales, product awareness, consumer support and overall productivity. In the case of sales and customer support, larger proportions of the respondents that are 40 years or younger reported increases of 40% or less while larger proportions of the respondents older than 40 years reported increases of more than 40%. In the case of product awareness and overall productivity, larger proportions of the respondents older than 40 reported increases of 40% or less while larger proportions of the respondents that are 40 years or younger reported increases of more than 40%.

The results reveal that the marketing communication element that is used at the highest rate is creating awareness for their product or service, followed by attracting clients to their business through personal selling and relying on word of mouth promotion (social media tools). The marketing communication element that is used least often is using sales promotion to increase their business revenue and using the internet. The two elements that are used by all respondents at various rates are personal selling and word of mouth promotion.

The Wilcoxon rank sum test revealed a significant difference between respondents with a turnover of R500 000 or less and those with a turnover that is more than R500 000, z=-2.165, p<.05. Respondents with turnover of R500 000 or less (M rank=12.67) exhibits a lower internet activity level than that of respondents with a turnover of more than R500 000 (M rank=19.75). The Wilcoxon rank sum test indicates that SMEs with a turnover more than R500 000, spent more on Internet activities. It seems from the conducted results that the SME owners have a misconception about costs involving the utilizing of Internet web to advertise their products or services.

Past research has proven that the web will not render traditional media obsolete. This is because traditional media has advantages that advertisers cannot ignore and the web cannot take away. This results show that the web is comparable to other media. It is therefore important that SME owners include the web as part of their communication mix since an integrated approach is needed.

Further research is needed on the following:

Research on the paid and unpaid marketing strategies used within the Social media network Facebook to promote SME services and products, cost effectively;

A comparison research study of the use of search and display networks like Google and Facebook, focussing on the cost, learning curve, competition on these networks influence and effect on cost effectiveness, marketing effectiveness with focus on sales funnel and target markets alignment.

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