Quantum Physics

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MARK901 Digital Marketing

AUTUMN 2022 MIDTERM EXAMINATION

Time Allowed: 48 hours.

Total Number of Questions: 3

DIRECTIONS TO CANDIDATES 1. Answer ALL questions. The marks for each question are shown next to each question. 2. Total marks: 100. This Exam is worth 30% of your final marks for MARK901.

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Based on the given study, answer all of the following questions [Max 900 words each]:

Q1. The study discusses the use of a number of different channels in Digital Marketing a) List and explain the usage of each of these channels as mentioned in the study b) Categorize these channels into the 3 types of digital marketing media or trifecta (as

discussed in class). [30 Marks]

Q2. a) Discuss the enablers of and the barriers to digital marketing usage in the SMEs of Finland,

as discussed in the study. b) Speculate the applicabilty of each of the above in the case of SMEs in the UAE,

particularly Dubai. [30 Marks]

Q3. Imagine you are the marketing manager of a mid-scale global fast food chain, and going to open a flagship outlet in Dubai, UAE:

a) Perform the Segmentation,Targeting and Positioning process for your organization.

b) Determine and describe how you will implement the 7Ps (Product, Price, Place, Promotion, People, Process, Physical Evidence) of the Digital Marketing Mix for your chosen target market. [40 Marks]

Notes: • Answers must be clearly organized into headings and sub-headings. • Use bullet lists where suitable. • Use diagrams where suitable. • This exam will assess your synthesis,analysis and critical thinking skills among others.

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The usage of digital marketing channels in SMEs

Taiminen, Heini; Karjaluoto, Heikki

Taiminen, H., & Karjaluoto, H. (2015). The usage of digital marketing channels in SMEs. Journal of Small Business and Enterprise Development, 22(4), 633-651. https://doi.org/10.1108/JSBED-05-2013-0073

2015

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THE USAGE OF DIGITAL MARKETING CHANNELS IN SMEs

Abstract

Purpose: The study provides insights into the utilization and goals of digital marketing, and

examines factors that influence the adoption and use of digital marketing channels in SMEs.

Design/methodology/approach: The data comprises semi-structured theme interviews in

SMEs among 16 managers and 421 survey respondents in Central Finland.

Findings: The results of this study reveal that SMEs seem not use the full potential of the

new digital tools, and so are not deriving benefit from the opportunities they provide.

Furthermore, the results also raise the question of whether SMEs have understood the

fundamental change in the nature of communication brought about by digitization.

Research limitations: The data comes from one region and thus the research context limits

the generalizability of the results.

Practical implications: SMEs seem not to be keeping pace with digital developments, mostly

due to the lack of knowledge of digital marketing. Most of the studied SMEs do not apply the

full potential of the new digital tools and hence are not benefitting fully from them.

Social implications: Discussions on the future regional development of SMEs have called for

training programmes to help SMEs exploit digitization. This is something that the government

should take note of.

Originality/value: Whereas the adoption process of new technologies such as IT in general

and the internet in particular have been examined in the SME literature, this is among the first

studies examining adoption and usage of digital tools from the marketing perspective.

Keywords: digital marketing, channels, tools, marketing communications, technology

adoption, social media, small- and medium-sized enterprises, resources

Article classification: Research paper

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Introduction

Digitization has become part of our daily routines. It is shaping the traditional ways in which

consumers and businesses interact with each other. Digitization, and especially social media,

have been claimed to transform consumer behaviour (Kaplan and Haenlein, 2010), with

important consequences for firms, products and brands (Muntinga et al., 2011). Consumers

are increasingly spending their time online and using social media (Forrester Research, 2008;

Nielsen, 2012). They use online services for browsing, storing and playing music, to email, to

access Facebook, Twitter, and apps with various connected devices such as smart phones,

tablets and laptops and that is transforming the way the internet is being used (Ericsson

Consumer Lab, 2012). The adage, ‘If a company cannot be found in Google, it does not exist’

seems to typify consumer behaviour today. It should be clear that the utilization of digital

channels is important for brands, and it should be a progression that SMEs should follow too

if they want to stay competitive and grow. However, it seems that many SMEs do not use the

full potential of these new digital tools (see e.g. Gilmore et al., 2007). SMEs are a significant

part of the world economy. For example, in Europe 99 % of companies are SMEs (of which

92 % are micro-enterprises) and those companies provide more than 75 % of private sector

jobs (European Commission, 2011). The importance of these companies cannot be ignored.

Literature shows that digitization in its various forms is positively related to small business

growth, performance and competitiveness. Digital marketing and social media provide

opportunities for small businesses to attract new customers and reach existing customers more

efficiently. Even the starting point of digitization, broadband access, has been shown to bring

significant opportunities to SMEs such as reaching new target audiences, increasing

performance and efficiency, and improving growth and competitiveness (Galloway, 2007;

Shideler and Badasyan, 2012; Spurge and Roberts, 2005). In addition, internet use can benefit

SMEs by reducing costs (Chong and Pervan, 2007; Kaynak et al., 2005; Lohrke et al., 2006)

and facilitating both internal and external communication (Bharadwaj and Soni, 2007; Chong

and Pervan, 2007; Eriksson, Hultman and Naldi, 2008; Kaynak et al., 2005). More recent

developments in digitization, namely the social aspects of the web (e.g. Web2.0/social media)

have confirmed the positive relationship between utilization and outcomes. In a recent study

of 12 SMEs in the UK, social aspects of the web were found to improve efficiency and

enhance external communication (Barnes et al., 2012).

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The marketing reality of SMEs is far from that of large corporations and hence digitization is

a greater challenge for them. Literature argues that traditional marketing theories are not even

applicable to SMEs (Reijonen, 2010). SME marketing techniques are informal, reactive and

spontaneous (Gilmore et al., 2004), and there is a considerable gap between marketing

activity in a typical SME and the best practice advanced by marketing theory (Parrott et al.,

2010). SMEs are characterized as strongly sales focused (Hill, 2001; Reijonen, 2010) and the

main goal of their marketing is just to create awareness of the firm and products (Reijonen,

2010). In general, marketing in SMEs has been characterized as disorganized and unplanned,

although some SMEs do engage in formal and conventional marketing practices like

marketing planning (Hill, 2001). Those SMEs that do make and follow a marketing plan

should benefit as the activity has been found to be one of the key factors of successful

marketing in SMEs (Parry et al., 2012). Hill (2001) predicted that formal marketing planning

in SMEs would increase as a younger generation with a more specialized management

education became managers.

The research related to the adoption process of new technologies in SMEs has been widely

covered (Carroll and Wagar, 2010; Chatzoglou et al., 2010; Dholakia and Kshetri, 2004;

Lohrke et al., 2006; MacGregor and Vrazalic, 2005; Parker and Castleman, 2007; Proudlock,

1999) but knowledge of how SMEs utilize digital channels in their marketing requires more

in-depth knowledge.

This study contributes to the understanding of SMEs marketing practices by investigating

digital marketing in the marketing mix of micro and small companies in a regional economy

(Central Finland). The study provides insights into the utilization of digital marketing tools,

and examines factors that facilitate or inhibit the adoption and use of digital marketing

channels in SMEs in Central Finland. In general, Finland is ranked tenth in the world in terms

of internet penetration rate (ITU, 2013) with an internet penetration rate of around 90%. This

means that people in Finland are actively using digital channels like the internet on a daily

basis. On a more general level, the study contributes to the discussion on SME marketing

practices (e.g. Gilmore et al., 2007; O’Donnell, 2011; Reijonen, 2010; Simpson and Taylor,

2002).

The study proceeds as follows. In the next section we discuss the term digital marketing and

its sub-components, and review literature on the enablers of and barriers to the usage of

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digital tools in SMEs. In the subsequent section we present our methodology. This will be

followed by a presentation of the study results. Finally, a discussion of the findings will be

presented alongside the study’s contributions, limitations and suggested avenues of future

research.

Digital marketing and social media utilization in SMEs

Digital marketing

Digital marketing is a new approach to marketing, not just traditional marketing boosted by

digital elements (Järvinen et al., 2012; Liu, Karahanna and Watson, 2011; Rowley, 2008). It

has its own characteristics and dynamics, which should be understood in order to be able to

select effective marketing tactics and strategies. Digital channels can be classified in various

ways. One way to classify the channels is to present them based on the viewpoint of which

party controls the communications (the company or the target audience) and whether

communications is one-way or two-way (see Table 1).

High company control Low company control One-way Website

Email newsletters Online directories Banner adverting

SEO (Search engine optimization) SEA (Search engine advertising)

Two-way Company generated blogs Company’s own communities

Social Media

Table 1 Classification of digital marketing channels

One-way communication channels

Websites and email can be seen as examples of one-way online tools with high company

control. A company’s website can be described as the home of the brand in the online

environment (Christodoulides, 2009). Email can be used for various marketing purposes

including sharing information, promotion, building and maintaining relationships, and guiding

customers to websites (Simmons, 2007). Although email is a two-way communication

channel in its nature, it is often used as a one-way channel to deliver newsletters or

advertisements. These two basic forms of digital marketing are often used in SMEs. Already

in 2008, Eriksson et al. (2008) found that 90% of the Swedish SMEs they surveyed (N=160)

used a website and email to market their products and services. However, they noted that

many of the SMEs were at an early stage of digital channel utilization and that their usage of

the more advanced digital channels remained low. Online directories where a company buys

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its listing for a certain period, and online advertising, can also be considered digital mediums

of the one-way type marked by high company control.

Search engine optimization (SEO), the process of improving the website’s search engine rank

in organic search results, and search engine advertising (SEA), paid advertisements on a

search engine’s results page related to some keywords, are both one-way communication

channels. Their purpose is to inform people of the products or services available, and they are

crucial to a company’s visibility on the web. Both SEO and SEA are commonly used among

larger firms, but at least few years ago, their potential was not fully understood among SMEs

(Karjaluoto and Leinonen, 2009).

Two-way communication channels

The rise of social media has turned the marketer-customer relationship upside down; in so far

as the power has shifted from marketers to customers (Hennig-Thurau et al., 2010). The

essential nature of social media requires company marketing to take the form of two-way

communication with customers instead of monologues from the company. Naturally, in social

media channels the company has less control over its brand. In social media, audiences do not

expect sales pitches and marketing messages but real information generated by conversations

around the brand (Christodoulides, 2009; Weinberg and Pehlivan, 2011), and they expect

authentic stories to be told (Fournier and Avery, 2011). It has been stated that post-internet

branding is about ‘soft selling’, co-creating value and managing customer relationships not

attempting to directly drive sales (Hennig-Thurau et al., 2010; Rowley, 2008).

Social media has become an important part of an organization’s marketing communications

and branding (Bruhn et al., 2012). For example Facebook has become an important channel in

engaging consumers and creating brand awareness (Malhotra et al., 2013). Blogging is said to

be a good relationship tool for both marketing and PR (Ahuja and Medury, 2010; Cho and

Huh, 2010; Singh et al., 2008) and many large companies have adopted blogging as part of

their routines. Blogging is great way to create content on the web although it requires that one

has something important to say and the ability to express it. It is also a form of social media

where the company retains a relatively high level of control since the blog usually resides on

the company’s own website allowing, the content to be edited and the comments monitored

and filtered.

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According to a recent study on 462 SMEs in the USA, many SMEs struggle with the added

workload of social media (Moyle, 2012). The study also indicates that SMEs are spending up

to six hours each week on social media. Of the tools available, Facebook (90% use) and

Twitter (70% use) are the most popular, whereas the adoption of blogging and use of

LinkedIn (used by around half of the surveyed SMEs), Google+, and Pinterest remain slow.

According to the study, one-third of the surveyed SMEs would like to spend less time on

social media.

Interactivity within the internet seems to have a positive impact on a company’s online

performance by increasing customer’s attention, developing stronger relationships and

thereby increasing overall satisfaction (Simmons, 2007). Social media seems to be a

successful tool for brand building as well as engaging customers and building unique

customer relationships. In addition to the softer outcomes, a recent study indicates that in

some cases, utilization of social media can also drive straight sales-related outcomes;

customers who are committed through social media to the company are more profitable than

those who are not committed to the brand on social media (Rishika et al., 2013).

Nevertheless, opposing views have also been presented. Brands have been claimed to be

uninvited intruders in social media, mostly because companies do not conform the norms of

social media (Fournier and Avery, 2011). According to a study of more than 7,000 consumers

in the USA, UK, and Australia (Spenner and Freeman, 2012), marketers have placed too

much emphasis on online social networking with their customers. The aforementioned

findings show that consumers have little or no interest in having a social relationship with the

marketer that extends beyond the transactional.

Enablers of and barriers to digital marketing usage in SMEs

Not surprisingly, studies suggest that SMEs are in general at an early stage of adopting digital

channels (Eriksson et al., 2008) and that firm size has a strong influence on the adoption, in

that micro firms are the slowest adopters (Bordonaba-Juste et al., 2012; Teo, 2007). Large

businesses are more likely to have the required resources and knowledge to successfully adopt

new digital channels and tools (Barnes et al., 2012). Past research has investigated the

adoption of digital marketing in SMEs from both the internal (firm-specific factors, strategy,

attitudes and experience) and external (infrastructure and environmental factors) perspectives

(Dholakia and Kshetri, 2004). In the small business context, the widely applied resource-

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based theory of the firm (Barney, 1991; Grant, 1991; Lockett and Thompson, 2001) suggests

that resources are the dominating factor explaining decision making in small businesses, and

that external factors play a relatively small role (Lockett and Thompson, 2001; Hawawini et

al., 2003). Karjaluoto and Huhtamäki (2010) have classified the reasons to adopt digital

channels in micro firms under three main categories; 1) firm-specific and owner-manager

factors, 2) resource-related factors, and 3) environmental factors. They note that these can act

either as facilitators or inhibitors of adoption. This classification is followed in this study to

understand the adoption of digital marketing in SMEs.

Firm-specific and owner-manager factors

Firm-specific and owner-manager factors such as capabilities, motivation, background and

experience are focal factors determining the strategic business choices of SMEs (Barbero et

al., 2011; Delmar and Wiklund, 2008; Wiklund and Shepherd, 2003) such as the usage of

digital channels (Dholakia and Kshetri, 2004; Karjaluoto and Huhtamäki, 2010). These

factors are related to expertise and the skill to use new technologies; knowledge of how to

benefit from them in business; and also the attitude of the manager(s) and employees to the

channels and motivation to use the channels (see e.g., Karjaluoto and Huhtamäki, 2010).

In particular, the technological knowledge of the company owner has been proved to be an

important factor (Chao and Chandra, 2012). Based on the last study, owners with a solid

knowledge of IT were better able to adopt useful IT solutions and deploy them in ways that

ensured that investments supported the achievement of strategic goals. Other factors that

support the adoption of digital channels in SMEs related to the perceived benefits of the new

channels. Such benefits might relate to the usefulness of a technology (cf. Davis 1989;

Karahanna and Straub, 1999), individual notions of the strategic importance of digital

channels (Bharadwaj and Soni, 2007) and other tangible benefits that the company has

identified in its business (Chong and Pervan, 2007; Kaynak et al., 2005; Levy et al., 2005).

Furthermore, other important factors affecting adoption previously suggested are the ease of

use of the new channels (Kaynak et al., 2005; cf. Davis, 1989; Gefen and Straub, 2000) and

having an opportunity to try the channels in action (Levy et al., 2005).

Resource-related factors

Karjaluoto and Huhtamäki (2010) classified resources-related factors into human resources,

financial resources and technological resources. They suggested that whereas human and

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financial resources were strong determinants of adoption, technological resources played a

minor role for micro firms. Gilmore et al. (2007) stated that SMEs lacked sufficient human

resources, capital and knowledge to adopt digital channels fully. The lack of human resources,

time and expertise are the largest barriers to digital marketing usage in the industrial context

among both SMEs and larger corporations (Järvinen et al., 2012; see also Michaelidou et al.,

2011). In the same vein, the skills of the employees to utilize the channels have been

identified as a significant enabler of (or barrier to) adoption of digital channels in SMEs

(Chen and McQueen, 2008; Gabrielli and Balboni, 2010; Sayre et al., 2012)

A lack of financial resources/capital is typically considered a barrier to the growth of SMEs

(Cooper et al., 1994; Federico et al., 2012; Gilbert et al., 2006) and thus also to act as a

barrier to the adoption and use of digital channels. Although digital marketing, at its best, has

no variable costs, the fixed costs may still be prohibitive for many companies. Some

companies might be surprised by the labour intensity of marketing in this new, dynamic

environment, which requires a dialogical communication style, continuous attention and

participation as well as content be created.

Environmental factors

Environmental factors are outside the company’s control and include factors such as product

or service type, competitive landscape, the industry sector, consumer/customer behaviour and

outside support. Some products and services are simply better communicated through digital

channels (Karjaluoto and Huhtamäki, 2010). External pressures like competition and the need

to expand markets (Chong and Pervan, 2007; Kaynak et al., 2005; Levy et al., 2005,

Karjaluoto and Huhtamäki, 2010) and the need for outside support or its availability have

been identified as significant environmental factors affecting adoption of digital channels in

SMEs (Järvinen et al., 2012; Karjaluoto and Huhtamäki, 2010). Furthermore, the transition in

customer behaviour is also a development that companies should follow. For instance in

Finland, 86 % of people between the ages of 16 and 24 and 80 % of those aged between 25

and 34 regularly use social media (Statistics Finland, 2012).

Methodological issues

This research uses a multiple case study as its research strategy. The main focus is not on

generalizations but on obtaining in-depth knowledge of a certain phenomenon (Johnston et

al., 1999). The empirical data was collected in two phases; first through semi-structured

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theme interviews followed by a survey. The objective of the interviews was to gather

knowledge of the companies’ digital marketing activities, their usage of digital channels and

the difficulties experienced in using them. The survey charted digital marketing usage from a

wider perspective and contextualized the results from the interviews. The knowledge gathered

from the interviews was used along with prior studies (Järvinen et al., 2012; Michaelidou et

al., 2011) as a basis of the development of the survey instrument. The items were related to

marketing budget allocation, the utilization of, and objectives set for, digital marketing

channels in SMEs, and the key drivers of adoption.

We conducted a total of 13 semi-structured theme interviews in SMEs with 16 managers (see

Table 2). Those managers had various titles (many SMEs do not have full-time marketing

managers) but all were responsible for the marketing activity (including digital marketing)

undertaken by their firm. The case companies were selected using a subjective sample, since

the purpose was to inspect companies who were interested in digital marketing but had not

fully adopted digital tools as part of their marketing initiatives.

The transcript materials were read through several times, and notes were taken to help parse

the data. Since the same themes were discussed in each interview, all the material was

organized under the themes. After organizing the data, a thick description was written using

quoted material from the interviewees to support the findings. Qualitative content analysis

was also carried out to clarify the usage of different marketing channels as well as the benefits

of and barriers to that usage.

For the second phase of data collection, a survey sample was collected. The sample

represented SMEs based in Central Finland as identified by a specific database. The survey

was conducted online in September 2012. A batch of 3650 e-mails including a link to the

survey was sent to the CEOs, owners, or chairpersons of the board of SMEs. A total of 421

responses were received, resulting in a response rate of 11.5 %. The effective response rate

was 52 % (calculated by comparing those who opened the survey link (N=816), to those who

filled in the survey (N=421). Over half of the respondents (61 %) were from firms employing

one or two people and 53 % operated in the services sector. The split between B2C (45.6 %)

and B2B (45.1 %) was almost even (Table 2).

Interviews in case companies Company label

Industry and number of employees (in parentheses) Interviewed (age in parentheses) Interview

duration A IT, B2B (9) CEO (35) 118 min

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B Footwear importer, B2C (5) CEO (37) 145 min C Fair and congress services, B2B and B2C (90) CEO (56) 111 min

D Printing materials, B2B (13) Sales Manager (30) Key Account Manager (26) 92 min

E Special construction materials, B2B (40) Marketing Manager (30) 62 min F Emission control equipment, B2B (8) Marketing Manager (41) 61 min G Heat water electricity, B2B and B2C (250) Marketing Manager (32) 97 min

H Payment services, B2B (40) Export Manager (30) Marketing Producer (34) 133 min

I Wood manufacturer, B2B (120) Marketing Manager (39) 113 min J Bakery / Restaurant, B2C (200) Business Controller (45) 84 min K Restaurant, B2C (40) CEO (59) 118 min L Caravan and Cars, B2C and B2B (20) CEO (35) 92 min

M Measuring equipment, B2B (72) Marketing Manager (44) Sales Manager (56) 59 min

Sample characteristics Industry N % Customers N % a Size b N % Services 223 53.0 Consumers (B2C) 191 45.6 Micro (1–2) 257 61.0 Other 87 20.7 Businesses (B2B) 189 45.1 Small (3-20) 164 39.0 Retailing 59 14.0 Government (B2G) 39 9.3 Industrial commodities 52 12.4 Total 421 100 Total 419 100 Total 421 100 Notes: a Valid percentage (2 missing values), b Size = Number of employees

Table 2 Sample characteristics

Results

Digital marketing utilization in SMEs

According to the survey findings, close to half (46 %) of the respondents said they utilized

digital marketing poorly or extremely poorly. Just 7 % described their current digital

marketing as very good or excellent. Company investment in digital marketing varies

substantially; slightly over one-third (35 %) of the respondents stated that their investments in

digital marketing absorb less than 5 % of their marketing budget, whereas slightly over a

quarter of the respondents (26 %) allocated over 41% of their marketing budget to digital

channels. There are significant statistical differences (p < .05) in the utilization of digital

marketing in terms of SME size (Table 3). As can be seen, firm size does not affect the

allocation of digital marketing budgets, but does have a significant effect on the self-reported

utilization of digital marketing. Larger firms utilize digital marketing better, even though the

majority perceive that they are not doing it well (mean score 3.19 on a scale ranging from 1–

7). Companies who reported investing more in digital marketing perceived that they utilized it

better. This indicates that the companies that have adopted digital marketing and made the

necessary investments have also been able to take advantage of these tools.

All 1–2 employees 3–20 employees Mean Mean Mean sig.

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Utilization of digital marketing1 2.90 2.73 3.19 .007** Digital marketing budget allocation2 2.87 2.78 3.02 .123 Notes: 1Scale anchored with 1= extremely poorly and 7 = extremely well 2Scale: 1= less than 5% (of the marketing budget), 2= 6–10%, 3= 11–20%, 4= 21–40%, 5= 41% or more * significant at p < .05, ** significant at p < .01, *** significant at p < .001

Table 3 SME utilization of digital marketing and allocation of digital marketing budget

According to the survey, the digital marketing channels used most often were the company’s

own website, SEO, and social media (Table 4). However, none of these channels was utilized

very actively. For example, whereas one-third (34 %) of respondents said they utilized their

company’s website actively for marketing purposes, 30 % said it was not utilized at all.

Additionally, close to half (45 %) did not utilize SEO at all and just 12 % used it actively.

With respect to social media, including the use of social media services such as Facebook,

LinkedIn, YouTube and discussion forums, half of the companies (49 %) did not utilize them

at all and just 13 % used them actively. Firm size has an effect (p < .05) on the activity of

digital channel utilization in marketing and communications in all cases except for social

media, companies’ own communities and blogs, and email advertising.

All 1–2 employees 3–20 employees Mean Mean Mean sig.

Company website 3.70 3.46 4.08 .003** Search engine optimization 2.58 2.33 2.98 .000*** Social media in general 2.57 2.44 2.77 .083 Search engine advertising 2.51 2.29 2.86 .002** Email newsletters 2.42 2.16 2.84 .000*** Email advertising 2.26 2.21 2.33 .447 Company’s own communities 2.00 1.97 2.04 .640 Company generated blogs 1.45 1.39 1.56 .143 Online advertising 1.32 1.20 1.49 .000*** Notes: Scale anchored with 1=not in use and 6= in active use * significant at p < .05, ** significant at p < .01, *** significant at p < .001

Table 4 Utilization of digital channels in marketing and communications by firm size

The interviewees representing 13 SMEs support the findings. All the case companies had a

website that was regarded as the most important digital channel for marketing and

communications. The other digital channels most commonly used and ranked as the most

important were email newsletters (used by 7 of the 13 SMEs) and social media (used by 6 of

the 13). In line with the survey findings, the interviewees confirmed that company size did not

explain social media usage for marketing purposes.

Objectives of digital marketing channels

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The sales-centric nature of SMEs was clearly evident from the results related to the goals set

for digital channels (see Table 5). Overall, the most important objective set for each digital

tool was to facilitate sales (always in the top three). Other important goals reported were

facilitating communication and enhancing customer service. Offering the opportunity for

dialogue with customers and assisting recruitment were reported to be the least important

objectives for digital tools.

Slightly over half (55%) rated their website as the most important tool for increasing sales to

existing customers. It was also rated as the number one tool for enhancing customer service,

facilitating communication, disseminating advertising, strengthening the brand and for

recruitment. Search engine marketing, including both optimization and advertising, was rated

as the second most important tool for increasing sales and facilitating advertising. Social

media was not perceived as a tool with the primary purpose of initiating dialogue with

customers. Instead, social media use was viewed as serving the primary objective of

increasing sales. Email marketing was regarded as the most important tool in terms of

facilitating dialogue with customers.

Increasing sales to existing

customers

Enhancing customer service

Facilitating communication

Facilitating advertising

Strengthening Brand

Facilitating dialogue with

customers Recruitment

% N % N % N % N % N % N % N

Company's own website 55.3 % 233 43.0 % 181 37.5 % 158 29.2 % 123 27.3 % 115 9.3 % 39 3.1 % 13

Email marketing 41.3 % 174 35.6 % 150 30.2 % 127 16.4 % 69 12.1 % 51 23.0 % 97 1.7 % 7

Social media 27.6 % 116 22.3 % 94 23.8 % 100 16.6 % 70 20.7 % 87 18.3 % 77 3.1 % 13

Search engine marketing 46.8 % 197 15.4 % 65 22.1 % 93 28.5 % 120 16.6 % 70 5.4 % 24 1.4 % 6

Online directories 29.5 % 124 18.1 % 76 16.2 % 68 16.9 % 71 7.1 % 30 3.8 % 16 0.7 % 3

Online advertising 21.6 % 91 7.1 % 30 10.7 % 45 12.8 % 54 9.7 % 41 3.3 % 14 1.0 % 4

Notes: Respondents nominated a maximum of three main objectives for each channel

Table 5 Objectives for digital channels

Among the firms whose representatives were interviewed, only two had set a clear goal for

their website: attracting new customers. For social media channels, the goals set seemed to be

even vaguer although one company stated that the purpose of their Facebook page was to

facilitate communication. Although almost half of the interviewed companies used social

media, none of them used social media for the purposes of dialogical communication; instead

13

they used the channel primarily to post company news. Social media was still seen as a

largely informal and relaxed communication channel.

Basically our Facebook page is used so that it has all the information that is maybe not important

enough for the web site but still something of a more regular update to customers. For example if our

printing house has send us new samples or something and then I take a quick picture with my phone

and upload it there and say, hey new samples, looking great. It is just a regular update there -

collection of pictures, photos and other stuff. (Key account Manager, Case D)

We have 50 active followers on Facebook. So what, when we don’t know what to do with them! The

time we know how the 50 people open their wallets for us we can actually use that information that

there are 50 of them! Otherwise it is plain charity. (Marketing Producer, Case H)

All the companies were also well aware that it is possible to measure the influence of

marketing practices through digital channels; however, only a few respondents were able to

clearly state what should be measured and primarily, what marketing goals they should set. It

seemed that digital marketing within the companies studied was mostly implemented in an ad

hoc rather than a well-planned manner.

We need a common understanding within our company of what we want to communicate in different

channels and what we want to achieve with them. Our marketing is not well planned – we would

need more measuring. I don’t know what we should follow. (Company J)

Key drivers of adoption

The main reasons why the surveyed SMEs started to utilize digital marketing are shown in

Table 6. Speed of communication, cost savings, and changing customer behaviour are the

three key drivers reported. A total of 64 % considered the speed of communication as an

important or very important reason for adopting digital marketing, whereas only 18 %

regarded it as unimportant or very unimportant. Slightly over half of the respondents

perceived cost savings as an important or very important reason for adopting digital channels

in marketing. Over half (56 %) said changing customer behaviour was an important or very

important reason for using digital marketing. Digital channels were not often used to initiate

dialogue with customers. Although close to one-third (28 %) reported this to be an important

or very important reason for use, almost half (46 %) regarded it as either unimportant (22 %)

or very unimportant (24 %). Surprisingly, sales focused SMEs regarded “increasing sales to

14

existing customers” as the second least important reason to adopt digital tools. This indicates

that SMEs might not be aware of the sales-related opportunities that digital platforms like

online stores offer even for SMEs. SMEs with one or two employees generally regard the

various reasons listed as less important than larger SMEs do. No differences (p < .05) were

found with respect to cost savings, increasing sales to existing customers, and facilitating

dialogue with customers.

All 1–2 employees 3–20 employees Mean Mean Mean sig.

Speed of communication 3.67 3.53 3.89 .006** Cost savings 3.46 3.45 3.47 .881 Changing customer behaviour 3.46 3.35 3.63 .031* Customer acquisition 3.43 3.29 3.65 .006** Building awareness 3.41 3.29 3.59 .027* Better targeting of messages 3.39 3.20 3.68 .000*** Enhancing customer service 3.32 3.20 3.52 .012* Increasing sales to existing customers 2.93 2.83 3.08 .064 Facilitating dialogue with customers 2.70 2.61 2.86 .056 Notes: Scale anchored with 1=not at all important and 5=very important * significant at p < .05, ** significant at p < .01, *** significant at p < .001

Table 6 Reasons for digital marketing utilization by firm size

Barriers and enablers of digital marketing in SMEs

Not surprisingly, the interviewees identified the biggest obstacles to wider use of digital

marketing to be company resources, including knowledge (an issue for 8 of the 13 SMEs) and

human resources (an issue for 7 of the 13). A lack of monetary resources was mentioned by

only two of the firms. Uncertainty about how to use new digital tools and finding the right

person to take care of digital marketing within the company were the main obstacles

specified.

The interviews revealed that most managers were aware of the limited IT competence within

their organizations but did not perceive it to be a barrier. There were both digital enthusiasts

and others who were less interested, who had succeeded in building a wide online presence

for the company, either through using internal resources or with outside help. Buying

knowledge from outside was generally considered a good way to develop and maintain

external communications. On the other hand, the two companies with marketing staff, who

were excited and knowledgeable about digital marketing, were far ahead of the others in using

it. It seems that the IT affinity of the staff still influences SMEs’ online engagement.

15

I think most of that has come through you [Account Manager] and I think your personal interests are

also there, as is usual with people when you have an interest in certain things, you like working with

them, you’re good at that and you develop yourself in those areas. (Sales Manager, Case D)

It’s kind of a hobby basically, this social media marketing thing and that’s why I try to use it on a

company level and see what new things are around, how it works, and how it develops. (Account

Manager, Case D)

The other important reason cited in the interviews for not using social media channels actively

in marketing and communication was management resistance. Some company executives had

acquired prejudices about the use of social media. Some of their fears and assumptions were

unfounded and caused by the unfamiliarity with different channels and how they worked.

Another common reason to avoid using social media like Facebook in marketing was that the

managers did not have a clear goal for it and did not see how it could add value to their

company. Another important issue was that the marketing managers were not confident about

what they should communicate through different channels.

Company orientation and the customers’ demographic location played a major role in the

choice of suitable channels, whereas less evidence was found for the impact of the

competitive situation. The problem was one of choosing the most efficient channels in the

field of digital marketing, where established communication vehicles and traditions are rare,

and that issue deterred investment in new digital tools.

We are wasting huge amounts of money just because we don’t have a crystal ball. We are using too

many channels and vehicles to advertise and our efforts are to a large extent useless. (CEO, Case C)

Conclusions

This study contributes to the emerging digital marketing literature by providing an overview

of the usage, objectives, drivers, and challenges related to digital marketing in SMEs in one

region (Central Finland). Our study shows that the SMEs participating in this research have

not widely adopted digital tools for marketing purposes. When viewed in the light of the

penetration of the internet and social media usage in Finland, the results of this research are

surprising and somewhat alarming. The results indicate that regional development of the

internet and the usage of digital tools for marketing purposes in companies do not go hand in

hand as might be expected.

16

Although digital channels were not actively used, online visibility can be considered the most

important element of the digital marketing mix as the website and SEO were the two channels

most often used. This finding is line with the previous research on SMEs’ marketing goals

related to the creation of awareness (Reijonen, 2010). The usage of more advanced digital

channels such as online advertising and company generated blogs remained lower which is

consistent with the Eriksson et al., (2008) study conducted in Sweden. In the same vein,

increasing sales for existing customers was seen as the second least important reason to adopt

digital tools which might be because SMEs are not fully aware of different online sales

options, which might often be perceived to require more advanced IT skills.

In contrast to the findings of Eriksson et al. (2008), this study did not identify email as among

the top digital channels used in survey results, but among the interviewed companies sending

email newsletters was considered the second most important tool. In addition, our research

identified SEO and SEA as the top used channels; although it is impossible to state with any

certainty whether the lack of understanding of their potential identified by Karjaluoto and

Leinonen (2009) has improved because relative utilization was still low among our

respondents. SEO and SEA have certainly become better known among SMEs in the last few

years. The willingness to utilize these tools is also likely to have improved because their

influence on website visitors is easily confirmed, and both tools are also relatively cost

effective and easy to use. This view is in line with the previous research that indicates that

important factors affecting the adoption of digital marketing tools are tangible benefits that

the company can identify (Chong and Pervan, 2007; Kaynak et al., 2005; Levy et al., 2005);

ease of use of the new channels (Kaynak et al., 2005; cf. Davis, 1989; Gefen and Straub,

2000); and having an opportunity to try the channels in practice (Levy et al., 2005).

Social media was claimed to be the third most important channel. However, the findings

further indicate that social media is not understood as a two-way communication channel

capable of serving relationship building, as had been suggested by the literature (Ahuja and

Medury, 2010; Cho and Huh, 2010; Hennig-Thurau et al., 2010; Kaplan and Haenlein, 2010;

Liu et al., 2011; Malhotra et al., 2013; Singh et al., 2008). In addition, the study confirms that

regardless of firm size, SMEs use social media in the same way they use other digital

channels; as a form of one-way broadcasting while attempting to drive sales. The utilization

of digital tools differs greatly according to company size. Our findings mirror those of

17

Bordonaba-Juste et al. (2012), Teo (2007) and Barnes et al. (2012), indicating that larger

companies (in our study employing 3–20 people) utilize most of the examined digital tools

more actively and get more out of them than smaller firms (in our study, those employing 1–2

people).

With respect to the reasons for SMEs delaying the adoption of digital tools, we can conclude

that external factors advocate the adoption of digital channels in marketing but firm-specific,

owner-manager factors and resource-related factors delay the adoption, a finding in line with

previous research (Lockett and Thompson, 2001; Hawawini et al., 2003). Additionally, the

greatest barriers to adopting digital channels in marketing are lack of resources; mainly lack

of knowledge and time (see e.g. Chen and McQueen, 2008; Gabrielli and Balboni, 2010;

Gilmore et al., 2007; Järvinen et al., 2012; Karjaluoto and Huhtamäki, 2010; Sayre et al.,

2012). In particular, lack of knowledge of different digital channels and also of the new norms

governing digital media were perceived as formidable obstacles. Our data does not confirm a

lack of financial resources to be a barrier to adoption (cf. Cooper et al., 1994; Federico et al.,

2012; Gilbert et al., 2006). The pivotal factor in the usage of digital tools seems to be whether

the marketing manager is knowledgeable about the digital options and actively pursues his/her

personal interest in the tools. In companies where the person in charge of marketing was

active on social media on a personal level, the company was too. This is a common situation,

especially in smaller companies (see e.g. Chao and Chandra, 2012; Chen and McQueen,

2008; Gabrielli and Balboni, 2010; Karjaluoto and Huhtamäki, 2010; Michaelidou et al.,

2011). However, the outsourcing of the utilization of social media tools was considered a

good option and a facilitator of digital marketing usage. The availability of external help to

facilitate adoption of digital tools was also found to be an important factor in previous

research (Järvinen et al., 2012; Karjaluoto and Huhtamäki, 2010).

In addition, another sizable barrier to adoption of digital channels was their perceived

usefulness, as Gilmore et al. (2007) also noted. The interviewees were not familiar with the

real benefits of the channels for marketing purposes. SMEs do not have the luxury of trying

out new tools where there is no clear sales goal associated with the tools. However, theory

still suggests that trying new channels is an important factor in enhancing perceived

usefulness (Levy et al., 2005).

18

To summarize the main findings of this study, these results confirm the assumption that many

SMEs do not use the full potential of the new digital tools and hence are not fully exploiting

the opportunities they can bring (Gilmore et al., 2007). The results of this study also raise the

question of whether SMEs have understood the fundamental change in the nature of

communication brought about by digitization. The unplanned digital marketing activities and

the ad hoc nature of marketing implementation reported in the interviews with SME

marketing representatives speaks for the lack of knowledge of the whole digital marketing

concept. In addition, opportunities for dialogue were considered the least important reason to

adopt digital marketing tools thought interactivity within the internet was seen as having an

important impact on a company’s positive online performance (see Simmons, 2007).

Employing digital marketing as a non-dialogical tool and seeing increasing sales as one of the

least important reasons to adopt digital tools might mean that firms are not using social media

and other digital devices efficiently and so might not be fully exploiting the potential of the

new tools. SMEs seem not to be keeping pace with digital development.

Managerial implications

The digitization of buyer behaviour is a progression that SMEs should follow to enhance their

ability to compete in the market of the future. The low adoption of digital channels among

regional SMEs in a digitally well-developed territory might open up new market opportunities

for new digitally aware companies from beyond its borders. There is evidence of this

phenomenon in the context of online shopping: a study of 9,300 Finnish online shoppers

found that online purchases from other countries rose by 15 % in 2012 and currently account

for around 15 % of the total online shopping market (TNS Gallup, 2013). The reality is that

companies should make sure they can be found online. That nowadays requires far more than

just setting up a website and optimizing it for search engines.

The results revealed that firms that have adopted digital marketing and made the necessary

investments have also been able to take advantage of those tools. This indicates that acquiring

digital marketing requires investing monetary resources, but more importantly, requires the

investment of time. This study again highlights the importance of training key marketing

personnel in the company to use the new digital tools. Marketing managers should be trained,

but so should both other middle managers and senior management, at least in terms of the

new order brought by digitization. Companies should first understand this new environment

before they can utilize the full potential of the new social media tools (cf. Fournier and Avery,

19

2011). Discussions on the future regional development of SMEs have called for training

programmes to help SMEs exploit digitization. This is something that the government should

take note of.

With regard to the importance of social media usage in SMEs, as Spenner and Freeman

(2012) pointed out, consumers have little interest in building social ties online with brands:

they just seek information about products and good deals. The utilization of social media in

SMEs is challenging as few SMEs are media houses, and in most cases are not capable of

creating interesting content on the various platforms available to them like a blog, Facebook

or Twitter. To do so would be complicated first by the creation of such content not being their

main line of business. Costs are also difficult to justify as the return on investment is difficult

to evaluate. Instead of considering focusing on content marketing and spending time on social

media, it might still be smarter to focus on the core business of the company, making sure it

offers the best possible products or services to its customers and to build its digital marketing

strategy around the website. Such a strategy is likely to be served by the use of SEO, SEA,

and online advertising, and would ensure the online strategy remains simple.

Nevertheless, social media is about listening, participation and sharing. The dialogical nature

of digital media does not necessarily mean that companies have to maintain an active

presence in social media. However, understanding that dialogical nature of the digital age will

bring about a fundamental change in business practices. Customers expect to be heard,

listened to and taken notice of, which challenges SMEs to be genuinely customer centric. If a

company is able to provide the best possible experience to its customers, those customers are

likely to relate their experiences of dealing with the company on the web.

Limitations and future research

The findings of this study should be interpreted in the light of certain key limitations. First,

the study is explorative in nature. Second, as with any case study, the results are limited by

the study context. Third, although the empirical material consisted of both company

interviews and survey data, the data comes from one region (Central Finland) and therefore

the results cannot be generalized to other settings. Moreover, half of the surveyed companies

are micro firms, and the vast majority operate only in the domestic market, which influences

our results. The interviewees in this study were responsible for marketing activities in the

20

companies, but they also often had other roles in the organization, which might also have

influenced the results.

The worrying aspect of the results is that SMEs are not aware that they could use digital

channels in their marketing programmes. There seems to be a requirement to improve

knowledge of how the various channels available can work together, and of their potential to

benefit an SME. This is where researchers can help SMEs to keep up with developments. It

would also be beneficial to inspect in more detail the reasons why some firms use less and

some more digital marketing and also find out whether the product type, customer type, or the

region where the company is located explains the differences.

We would also strongly encourage researchers to examine SMEs across various industries

that have gained measurable benefits from using social media as a two-way communication

channel. Finally, more research is warranted into the utilization of digital tools to grow sales.

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