Low marketing spend limits manufacturing MSMEs' customer outreach

CRISIL has analysed the marketing costs of about 3,600 micro, small, and medium enterprises (MSMEs) from the manufacturing sector, rated on the basis of their 2013-14 (April 1-March 31) financials. The study looked into their marketing spends as a percentage of total costs of sales, and found that while the figure for the sector overall was 1.41 per cent, those for the four main segments - leather and footwear, fast-moving consumer goods (FMCG), consumer durables, and textiles - were only 3.99 per cent, 2.60 per cent, 2.34 per cent, and 2.12 per cent respectively, even as these segments are mainly retail-based industries.

This shows that MSMEs' spending on marketing their products is low in this sector, and they are relying more on traditional modes of reaching out to the customer, such as word-of-mouth publicity and using established customer relationships for obtaining repeat orders. Marketing spend as a percentage of total cost of sales for MSMEs across the sector effectively remains below four per cent.

As competition intensifies and with the growing use of online media, it is important for these MSMEs to increase their marketing spends through various media in order to create awareness about their products, so as to widen reach and scale up their businesses.

Note: CRISIL has rated over 75,000 MSMEs in India. This fortnightly tracker presents to our readers insights on MSMEs, a key element of the Indian economy.