The COVID-19 crisis has engulfed the globe like nothing else has done in recent times. Governments across the globe have been focused on reducing the impact of the pandemic on its citizens and its economy. However, despite all the effort, the global economy is expected to contract by about 3% in 2020 according to the IMF.
India is the fifth largest economy in the world and is considered to be one of the fastest growing, projected to grow at a reasonable 5% before COVID-19 struck the shores of India. Currently, the IMF expects Indian economy to grow at 1.9%.
This decline in the growth rate has significant implication for a developing country like India where the economic growth drives business sustenance. However, it is the Micro, Small & Medium Businesses (MSMEs), businesses with less than 500 employees, who will be the most significantly impacted in such cases.
For a country like India, MSMEs are a lifeline. They contribute to 99.8% of all businesses in India, employ more than 120 million people and contribute to almost a third of the total gross domestic product (GDP) of the country. However, these businesses are also run by the day, and do not hold significant investments or working capital to run their business in difficult times. The lockdown and the resultant loss of revenue has severely impacted these businesses pushing many of them on the verge of shutting down their business.
Research by Kantar amongst 400 businesses in the Micro and Small business segments (with less than 100 employees) indicate that the overall sentiments are extremely low amongst the business owners: 79% of the businesses state that the lockdown has negatively impacted their business. Lack of customers is the key challenge that the businesses are facing with an overwhelming 92% of the businesses seeing a decline in customer enquiries/walk-ins.
In light of this, the outlook towards the business has also reduced considerably. In a study among similar businesses in December 2019, Kantar witnessed the “Wave-riders” – those who have a positive view of the country’s economic outlook and a high willingness to invest in their business – to be around 48% of the total businesses sampled. This dropped to 11% in April 2020. At the same time, the “Safe-players” – low on economic outlook and low on willingness to Invest – have increased from 35% in December 2019 to 75% in April 2020.
However, the study also highlights the resolute nature of the Indian small business owners. Down that they may be, they are looking at this as an opportunity to remain relevant and build stronger relationship with their clients/customers. More than half of the businesses are able to visualise opportunities to in spite of the current challenges to streamline their businesses and are looking towards implementing the changes. Technology and digital leads the way with almost two thirds of the businesses looking at solutions to streamline their businesses.
Five trends will underpin MSME decision making
Based on the study, we believe that the following are the top five trends that will drive MSMEs in India:
- Technology and digital solutions will be at the centre of all business strategies. MSMEs believe that technology and digital will address several of their concerns, especially, those around customer acquisition. In order to boost revenues, MSMEs will adopt digital payments and online sales. Higher listings on e-commerce portals, registrations for digital payment solutions and related services are going to pick up.
- Foolproof products and solution offers will always be more successful than complex products. The level of solution maturity for MSMEs will be significantly different from that of a large enterprise and the brands/ marketers will need to be aware of it. A MSME solution is not necessarily a stripped-down version either. In most cases, it is a simplified but integrated approach that works with them.
- Business models will undergo rapid changes during the period. New supply chains will emerge, novel delivery mechanisms will be adopted, and experimentation will be at its peak.
- Customers will remain the key, but they will need to pay more! As cost of compliances increase and taxes/surcharges go up, the cost for MSMEs will go up. This will push up the costs of products too.
- Sentiments will be low, and survival will be key. Most businesses will find the going tough and their core objective will be to survive and tide through the year rather than driving revenues. Businesses will tend to hold money close to them and will try not to part with it. This means that brands and marketers will need to build more compelling value propositions to get the MSMEs to part with their money.
So, what does it mean for the marketers?
Based on the study, it is evident that the Indian MSMEs continue to be positive and resolute in times of need. However, they do need help and support. This also offers significant opportunities for brands and marketers to market their products and solutions to the MSMEs. However, it will be important for marketers to adopt a few golden rules for communicating with these audiences. Here are five golden rules for communicating to the MSMEs:
- Segment and target: MSMEs are of various hues and there are many who are riding the tide currently while others are weathering the storm. It is important for the business to identify whom to speak to for what. Businesses like travel and tourism will not be looking for technology investments currently but might be looking for financial solutions to bolster their current savings. At the same time, services verticals might need several technology products and solutions as their employees start working from home, possibly for the very first time.
- “Built for MSME”: MSMEs know if the communication is for them or for someone else. Businesses that are serious in targeting MSMEs should have a customised communication line created for targeting. Remember, the one that worked for a large organisation or for consumers may not work here! In many cases, communication meant for one type of MSME may mean something completely different for another type of MSMEs.
- Be a friend, not a hands-off consultant: MSMEs do need guidance at this stage. Most of the things that the MSMEs are exploring are alien to them. However, they do not need someone who advises them from a point of position and stature. Rather, they will want to connect with those who connect with them as a friend. For a brand to be successful, they need to explore this effectively.
- MSME owners are individuals too and they like engaging communications: There is a popular belief that MSMEs look for factual and rational communication only. There can be nothing further from the truth than this! MSME owners are like any other individual. The decision making in MSMEs is more individual-centric than large businesses. Engaging communication with a strong message is as critical for the success in this segment as it is in the consumer segment.
- Positivity and experimentative approach: Brands and marketers need to build positivity and experimentative approach in their communication. Brands that encourage MSMEs to take the plunge with the right precautions and guard rails are brands that will be successful in creating a positive disposition for themselves.
Editor's note: This article originally appeared in WARC in May 2020