Procurement and Marketing: Best Practices for MSME Entrepreneurs in India

November 26, 2024
Updated on

For any business to grow and expand procurement of raw materials, components, etc becomes an integral part of the production, supply chain and distribution model. Similarly, without marketing efforts reaching the target audiences becomes hard and no business can survive without some sort of marketing activity. For the MSME sector, small business entrepreneurs need to have the awareness and education about these important business activities to increase their revenues and profits and create a brand for their enterprises. With the help of various schemes and dedicated government sanctioned institutions MSMEs can learn and develop these skills and techniques to streamline their business operations and increase their business profitability.

What is Procurement for MSME Entrepreneurs?

Procurement refers to stages of business operations that include, collecting business requirements, making payments to vendors, collecting payments, sourcing raw materials from suppliers and negotiating terms. But for some of the business owners it comprises fewer functions, such as collecting payments, making payments, etc. There are 4 general types of procurement for business – direct, indirect, services and goods procurement.

It plays a vital role in the growth of the business. It is very important to keep a close eye on the procurement process, as it makes it easier for small business entrepreneurs to improve the process and fill in the loop holes.

Procurement is a key step for understanding the concept of supply chain, because it helps to get trustworthy suppliers at competitive prices for purchase of goods and services in accordance with entrepreneurs’ needs. For example, if someone needs some goods for a long period of time, an MSME entrepreneur can research and get good deals on the product purchase. Procurement process for such stock assessment plays a vital role, where people can easily manage and think about getting the best deals.

Key Strategies for Effective Procurement for MSMEs

For MSMEs to thrive, adopting effective procurement strategies is crucial. Here are key strategies that can help small businesses streamline their procurement processes and secure better deals:

  1. Supplier Relationship Management: Building strong relationships with reliable suppliers is essential for negotiating favorable terms. Regular communication and trust can lead to better prices, faster delivery times, and priority service. It’s important to evaluate suppliers based on quality, reliability, and cost-effectiveness.
  2. Cost-Effective Sourcing: Evaluate different sourcing options to ensure cost-efficiency. Explore bulk purchasing or long-term contracts to secure discounts. Online platforms and market comparisons can also help find the best deals for materials and services without compromising quality.
  3. Just-in-Time Inventory Management: Adopting a just-in-time (JIT) inventory system helps reduce excess stock, which can lead to storage and maintenance costs. This strategy ensures that procurement is aligned with actual demand, helping manage cash flow better.
  4. Technology Integration: Utilising procurement software or digital tools can streamline the procurement process. These tools can track supplier performance, monitor inventory levels, and provide real-time data, allowing for better decision-making and increased efficiency.
  5. Regular Procurement Audits: Regular audits of the procurement process can identify inefficiencies, cost-saving opportunities, and areas of improvement. This ensures that procurement activities are aligned with the business’s objectives and can help make informed adjustments as needed.
  6. Legal and Compliance Awareness: Understanding the legal requirements and compliance standards related to procurement helps avoid risks and penalties. Make sure to stay updated on regulations, such as taxes and environmental standards, to maintain a smooth procurement process.

How Can Marketing be Effective for MSME Entrepreneurs?

In layman terms, marketing simply means communicating, offering and strengthening brand/business through different channels either online or offline or using a feet on the street model to increase the reach, sales, brand awareness for an MSME business. It drastically helps in creating awareness and visibility regarding the product or service portfolio for any businesses. For example, if someone does online marketing through social media channels, they would see a lot of opportunities to grow, to make the customer aware of the brand and selling becomes easier.  With the increase in the number of smartphone users marketing through digital medium and reach is becoming faster for MSME business entrepreneurs. Or for offline marketing use of pamphlets or hoarding are the best medium to reach maximum number of customers for any shops or businesses. 

These types of activities do help MSMEs to grow their business, increase the number of customers, and expand their branding and customer retention activities.

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Essential Marketing Strategies for MSMEs

For MSMEs, adopting effective marketing strategies is crucial to drive growth, build brand awareness, and attract customers. Here are some key approaches that can help small businesses succeed:

  1. Digital Marketing/Online Marketing: In today’s digital age, online marketing is essential. MSMEs can leverage social media platforms, email marketing, and search engine optimization (SEO) to reach a broader audience. These platforms are cost-effective and can help engage directly with customers, offering tailored messages that resonate with the target market.
  2. Local and Community Marketing: Building strong relationships within the local community can go a long way. Participating in local events, sponsoring community activities, or collaborating with other local businesses can increase visibility and loyalty. Word-of-mouth marketing is powerful for small businesses.
  3. Content Marketing: Content marketing is an effective way to establish authority in your industry. By creating valuable and informative content, such as blogs, videos, or infographics, MSMEs can engage potential customers and foster trust. Consistent content sharing can also help improve search engine rankings.
  4. Customer Relationship Management: Retaining existing customers is as important as acquiring new ones. Implementing a solid customer relationship management (CRM) system helps maintain personalised communication, offers, and follow-ups, ensuring customer loyalty and long-term business success.

Procurement and Marketing Support Scheme Launched by the Indian Government

The Procurement and Marketing Support Scheme (P&MS) was launched to create awareness, educate and increase accessibility to vendors, which are critical for the growth and survival of MSMEs. Lack of information, resources and unorganised way of selling and marketing, led to the introduction of the P&MS scheme and this will help in enhancing the marketability of the goods and services offered by MSMEs. The main objective of this scheme is to promote new market access like trade fairs, exhibitions, or to create awareness and teach MSME business owners about the importance and process of procurement and marketing techniques or to create awareness about trade fairs, digital advertising, Government e-Marketplace (GeM) and other related topics. MSMEs which are registered under Udyog Aadhar Memorandum (UAM) portal are eligible for these schemes and take opportunities to grow their business through procurement and marketing their products or business.

Conclusion

Procurement and marketing practices are crucial for MSMEs to expand and grow their businesses and get business loans to meet expenses. The impact of these practices has a significant impact on the economy and contribute to efficient business operations for an MSME. With the help of business loans, these practices can be maintained and in turn result in increased profitability for the business.

To implement procurement and marketing best practices, funds are important and to bridge the gap in MSME lending, NFBCs play a pivotal role. With increased competition in the lending sector and the high cost of borrowing, every lending institution must be as flexible as possible in their practices. When it comes to credit services, modern borrowers are tech-savvy and have high-tech demands. Therefore, a more customer-friendly approach with technical integrations and improvements can offer a lending company an advantage over the competition. Kinara Capital, an RBI registered Systemically Important NBFC in India, providing collateral-free business loans to MSME entrepreneurs. These flexible loans with 24-hour disbursement are bridging the credit gap between small businesses who aren’t able to borrow from traditional lending institutions. With Kinara’s digital first solution, the myKinara app enables MSMEs to check their eligibility in 1 min and choose from 7 different languages to complete their loan application. Also, we have a dedicated customer support team available between Monday – Friday (9.30 AM – 6.00 PM) at our toll free number 1800-103-2683 for any questions or assistance. This ensures that entrepreneurs can get the help they need throughout the loan process.

FAQs

1. What are some cost-saving strategies in procurement for small businesses?

Small businesses can save costs in procurement by negotiating bulk discounts, building long-term supplier relationships, optimising inventory management, leveraging technology for automation, exploring local suppliers, and regularly reviewing contracts to ensure competitive pricing.

2. How can MSMEs build a strong brand with limited marketing budgets?

MSMEs can build a strong brand with limited budgets by focusing on social media marketing, creating engaging content, leveraging word-of-mouth, offering exceptional customer service, collaborating with local influencers, and utilising cost-effective digital tools.

3. How can MSMEs ensure that their procurement aligns with their marketing goals?

MSMEs can align procurement with marketing goals by sourcing quality materials that support brand promises, ensuring timely delivery, maintaining cost efficiency, and collaborating with suppliers who share similar business values.

4. How can MSMEs negotiate better deals with suppliers?

MSMEs can negotiate better deals by building strong relationships with suppliers, purchasing in bulk, discussing long-term contracts, exploring alternative suppliers, and highlighting consistent payment histories to secure discounts or favourable terms.

5. What role does technology play in procurement for MSMEs?

Technology streamlines procurement for MSMEs by automating processes, improving supplier management, enhancing inventory control, reducing costs, enabling data-driven decisions, and increasing efficiency through digital platforms and procurement software solutions.

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