Factors of Successful Online Marketing Strategy to Food Distribution SMEs

Abstract

Purpose: This study aimed to apply factors of successful online marketing strategy for food distribution SMEs and the effects of these successful strategies to achieve higher performances. Research design, data, and methodology: Questionnaires were used to collect data from 400 samples of SMEs in Thailand. We employed structural Equation Modeling techniques for data analysis. Results: The results revealed that distribution strategies directly affected the success of business operations, as follows: 1) Customer communication channels, product variety, preserved privacy, and personal service had direct positive effects on the distribution success in terms of financial perspective, customer perspective, internal process perspective, and earning and growth perspectives; 2) Ability to learn a competitor had a positive direct relationship with the distribution success in terms of financial perspective and learning and growth perspectives, excluding customer perspective and internal process perspective; and 3) Responses to market on time had a positive and direct influence on distribution success in terms of customer, internal process perspective and learning and growth perspectives excluding financial perspective. Conclusions: This research has made an essential contribution to SMEs that they should focus on and adopt these 6ODS+4BSC concepts as development guidelines for food distribution SMEs to be more efficient and effective.

1. Introduction

Distribution in Thailand has become increasingly competitive; innovation and driving innovation can rapidly occur due to changes that should create more innovation, such as adopting innovation to the business sector (Hovgaard & Hansen, 2004). Business sectors applied internet innovation in e-commerce distribution to grow faster, requiring data and being ready for product orders at any time (Ching & Ellis, 2004). In the last decade, much research discussed using more information technology, especially promoting the use of the internet, and the distribution of online sales was found with few online distribution activities and many concepts suggested the role of the internet related to distribution activities and business performance, but they lacked intensive research focusing on specific issues such as limitations of online distribution, successful online distribution strategy, or optimal digital content distribution strategy in the presence of the consumer-to-consumer channel (Feng et al., 2009).

The problems and obstacles are regarding online distribution strategies of SMEs, such as access to high-speed technology, high-speed internet, or internet use. They were increasing these problems affected by the failure of electronic distribution and financial constraints of SMEs, such as choosing e-distribution and expensive website design for competitive advantage. Lacking skills and knowledge of web marketing was a significant problem for SMEs, and in addition, managers and employees in SMEs had limited knowledge of computer technology (Chapman et al., 2000; Jeffcoate et al., 2002). As mentioned above, SMEs experience trouble applying online distribution strategies that can incur great benefits. The internet was a helpful instrument for small companies to gain international and communication benefits and information cross-border exchange (Loane & Bell, 2006). Small companies can create a competitive advantage by using the internet and communication to support the international distribution of goods and services. Online distribution is an essential competitive strategy because it creates a lower cost, makes it easy to get the target, and leads to a successful organization. Electronic commerce application of SMEs was used from the perspective of managers and business owners in Thailand. It is a new concept in which Thailand has collected such limited data from SMEs using social media

Therefore, the researchers were interested in studying the ten successful keys in the food production distribution of SMEs in Thailand. Furthermore, it considered the benefits SMEs obtained from using social online. All of the above were ten successful keys of which the data and results from this study can be applied to be guidelines for effective food products of SMEs. This research aimed to 1) Study online distribution strategies and 2) Study online distribution strategies that directly affected the success of distribution operations.

2. Literature Review

2.1. SMEs and Food Production Business of SMEs

Small and Medium Enterprises (SMEs) are a large number of businesses in Thailand. Most entrepreneurs operate in natural persons, groups of persons, or non-juristic partnerships. Limited partnerships, limited companies, or joint ventures that will engage in selling goods, producing goods, or providing services are related to tax duties under the Revenue Code.

Regarding the Food Production Business of Small and Medium Enterprises (SMEs) and guidelines to promote the business of Small and Medium Enterprises (SMEs) under the plan to enhance Thai SMEs’ competency to link with the international economy in order to get ready for competition increasing in the future, the Office of SMEs Promotion (OSMEP)studied the development guidelines of Small and Medium Enterprises (SMEs) by investigating the critical successful indicators of SMEs High Growth Sectors to find out opportunity and competency for growing. The study emphasized studying problems and obstacles of Small and Medium Enterprises (SMEs) in a group of High Growth Sectors in Thailand, including government guidelines and policies suitable for enhancing the growth of Small and Medium Enterprises (SMEs) in Thailand to be the leaders of industrial sectors in moving to international markets as soon as possible. International research found that the development of High Growth Entrepreneurs can create value-added, especially for new jobs with quality/high-paid labor sectors. It is also a significant accelerator to expand the country's economy. Four percent of enterprises founded during 1977-1978 created 74 percent of the employment growth 6 years after being founded. In addition, Storey (1994) found that 4 percent of businesses in England create more than 50 percent of jobs in the country.

2.2 Diffusion of Innovation Theory (DIT)

It is a theory that emphasizes the belief that social and cultural change is caused by the diffusion of innovations from one society to another, including new knowledge, ideas, techniques, methods, and technologies. There are four essential variables (Rogers, 1995) 1) An innovation is something new that will be diffused to society. Innovations that will be diffused and accepted by people in that society generally consist of two essential parts: idea and object; 2) Types of communication are communications between the senders and the receivers through any medium. Innovations are diffused from their sources to the end-users or recipients, a process of human interaction. Therefore, communications are essential for the acceptance of innovations. 3) A time or rate of adoption is to let people in society know about innovations and ideas or to take advantage of what already exists in new ways to achieve economic benefits. The process of diffusing innovations takes time and sequence for individuals to adapt and accept innovations or ideas, and 4) A social system is diffusion into members of society. It influences the distribution and acceptance of innovations. In modern society, the social system will be conducive to the adoption rate of innovations because of the norms and values of the society that support social and cultural changes.

2.3. Online Distribution Strategy (ODS)

Online Distribution Strategy refers to the structure of channels used to move products from a business to a market. Distribution intermediaries are businesses that help sell and sell products to final buyers, consisting of:

2.3.1. Focus on Customer Communication Channels (CC)

The communication channel for website design is a popular communication channel through social media with customers (Laursen & Salter, 2006). Communicating with customers and financial application is convenient for customers (Ariffin & Ismail, 2019). Internal communication of managers must be clear, accurate, and reliable to help employees recognize and deliver messages to customers (White et al., 2010; Marques, 2010). Communication channels will encourage knowledge creation to transfer product knowledge to employees and customers (Scott & Sarker, 2006).

2.3.2. Variety of Product (PD)

A variety of products can help a good cash flow of the company and the suitability of financial policy to stabilize the pricing of a product (Bilbiie et al., 2007). If there are a variety of product designs via online websites, customers will be satisfied with online shopping (Alam & Yasin, 2010). Product variety requires an excellent internal process to conduct suppliers (Koufteros et al., 2005).

2.3.3. The Ability to Learn a Competitor (ALC)

The Ability to Learn a Competitor is essential to organizational learning because learning to use technology is a cost of investment and a competitive strategy (García‐Morales et al., 2008). Learning and knowing competitors positively correlate with market share (Sørensen, 2009). Market learning or learning of marketing competitors and internal learning are influential in innovation and product management (Weerawardena et al., 2006).

2.3.4. Responses to Market on Time (MT)

Responses to Market on Time need a comprehensive strategy in supply chains that encourages higher profitability (Chan et al., 2016). Quick response to customer needs leads to customer satisfaction and affects learning to maintain inventory and cost control (Cachon & Swinney, 2008).

2.3.5. Preserve Privacy (PRI)

Preserving privacy on social media when shopping online, especially banquet transfer is a risk that needs to be carefully concerned. Online distribution is a rapid spread of technology, but it causes problems with consumer privacy (Ashworth & Free, 2006). Marketers’ learning to share and reach into personal data online is essential for protecting customer information (Thomaz, et al., 2020).

2.3.6. Personal Service (PERS)

The personal service industry or personal service is essential in the production and service sectors and affects customers’ satisfaction (Morikawa, 2011). In addition, the importance of employees or service minds is contributed to customer satisfaction (Alhelalata et al., 2017). Professional personnel should be trained and developed with service provision (George, 2008).

2.4. Balance Scorecard (BSC)

Balance Scorecard (Hoque & James, 2000) is a strategic management planning tool used to convert strategy to implementation (implement) according to the strategic plan laid out according to the vision and mission of the organization. The goals are set with the balanced Scorecard (BSC), which will measure the success of operations from four perspectives:

2.4.1. Financial Perspective (FIN)

Financial performance is a measure of financial matters, that is, numbers. It is a view of things that can be measured in money, for example, profits, sales, and financial ratios. Business cash flow and trade accounts receivable, and so on.

2.4.2. Customer Perspective (CUS)

Customer Perspective measures customer and marketing aspects, for example, customer satisfaction. Customer Complaint Rate Returning and purchasing of members.

2.4.3. Internal Process Perspective (INPRO)

The Internal Process Perspective measures the performance of a business’s internal processes, whether management or production—average time to operate production process, procurement, warehouse, and delivery management.

2.4.4. Learning and Growth Perspective (LEADE)

The Learning and Growth Perspective measures the quality of personnel, for example, employee skill training—staff knowledge, and employee attitude towards work.

3. Research Model and Materials

3.1. Research Model

This research focused on examining online distribution strategies to be successful in the food production business for SMEs in Thailand. The reviewed literature, theories, and concepts of the model’s hypothesis consisted of 6 assumptions, as shown in Figure 1.

Figure 1: Research Model

Figure 1: shows this study's new framework (6ODS + 4BSC), including a focus on Customer Communication Channels, a Variety of Products, The Ability to Learn a Competitor, Responses to Market on Time, Preserve Privacy, Personal Service, Financial Perspective, Customer Perspective, Internal Process Perspective, and Learning and Growth Perspective.

3.2. Research Hypotheses

H1-H4: focus on communication channels that directly influence finances, customers, internal processes, and learning and development.

H5-H8: Product variety directly influences finances, customers, internal processes, and learning and development.

H9-H12: Learning competitors directly influence finances, customers, internal processes, and learning and development.

H13-H16: Quick response directly influences finances, customers, internal processes, and learning and development.

H17-H20: Preserving privacy directly influences finances, customers, internal processes, and learning and development.

H21-H24: Personal service directly influences finances, customers, internal processes, and learning and development.

4. Methodology

4.1. Data Collection

This research is quantitative research of which the population was from food productive production of SMEs quantity 1,100 companies in Northeastern Thailand.

The sample group was from food productive production of SMEs in Thailand (400 out of 1,100 companies). Using Taro Yamane’s theory (Yamane, 1973) of computation, the tolerances were determined as 95% confidence intervals. These samples were selected by stratified random sampling.

4.2. Measurement

Five experts and advisors evaluated the qualitative research instruments to verify the content validity. The criteria for considering the content validity and index of an item's objective congruence (IOC) must be greater than 0.50 (Turner & Carlson, 2003). It was found that the IOC of all items was more significant than 0.50. The reliability of the questionnaire by Cronbach’s alpha coefficient is equal to or greater than 0.70, that are accepted (Hair et al., 2010). The result showed that the questionnaire was scored between 0.867-0.971, which means the reliability was accepted.

Basic statistics were used to analyze the data to specify the character of the sample, and distributive variables were percentage and mean. Standard deviation and Pearson’s Product Moment Correlation Coefficient were implemented to examine the relationship between variables. The data were analyzed using Structural Equation Modeling: SEM by considering CMIN-p > 0.05 (Schumacker & Lomax, 2004), CMIN/df < 3, GFI, AGFI, CFI > 0.90, and RMSEA < 0.08 (MacCallum et al., 1996).

4.3. Empirical Analysis

Descriptive statistics were implemented to analyze the population groups. The Structural Equation Model (SEM) was needed for determining reliability and validity before testing the hypothesis. Especially, the factor analysis was performed to determine the validity by Discriminant Validity through the Square.

The root of AVE. Cross-loadings conducted the discriminant validity analysis based on the relationship between out loadings and correlation coefficient between observable variables by Pearson correlation coefficient to verify the preliminary agreement of model analysis and analyze the SEM on the assumptions.

5. Results

5.1. Information of the Sample Group were from Food Productive Production of SMEs in Thailand

Four hundred completed and valid questionnaires were returned. The data collection period was two months (March to April 2021) from 400 (100.00% completed). The majority (70.46%) of the respondents were female, were 31-40 years old (39.85%), earned 30,000 baht or lower for monthly income (61.92%), operated businesses for 6-10 years (41.64%), were businesses with 31-60 employees (38.43%), had investment capital 500,000 -1,000,000 Baht (40.22%), were limited partnerships (60.85%), sold online to achieve access to customers all the world (43.06%) used Line (38.44%) and Lazada (64.77%).

Table 1: Demographic Analysis

5.2. Measurement analysis

The Convergent validity was examined by the Average Variance Extract (AVE) to identify homogeneity to extract variance. The AVE must be greater than or equal to 0.50, which means the observable variables are defined as more than 50 percent of the variance (Hair et al., 2013).

Table 2: showed that 10 observable variables were found with AVE greater than 0.50, and statistical significance was p=0.000 which means all variables have convergent validity.

Table 2: Discriminant Validity through the Square Root of AVE by For nell - Larcker Criterion

Discriminant analysis with cross loadings was considered for the relationship between our loadings of which indicators’ variables were compared to the other variables in the model. The factor loading value must be greater than or equal to 0.70. When considering the relationship between the factor loading and other latent variables in the model, it was found that there were related, as shown in Table 3.

Table 3: The Relationship between the Factor Loading and other Laten Variables in the Model

Pearson’s Product Moment Correlation was implemented to examine the covariance or correlation matrices between observable variables verifying the preliminary agreement of SEM because the variables must be related, as shown in table 4.

Table 4: Correlation Coefficients, Mean and S.D.

Notation: **p<0.05, **p<0.01

Table 4: illustrates the correlation coefficient values of the latent variable. All the latent variables related in the same direction with positive values had a relationship at a statistically significant of 0.01. The mean score of latent variables ranged from 3.76–4.14, which were interpreted as latent variables were at very high and maximum levels.

The results of the component weight of the observable variables shown in Table 5 showed that all values were the positive weight of the observable variables between 0.59-1.33 and were significantly different at 0.10. Most of the observed variables were communication channels, with a weight of 1.33.

Table 5: The Results of the Component weight of Observable Variables

Notation: *p<0.05, **p<0.01, ***p<0.10

Table 6: The Results of the Research Hypothesis

6. Discussion

This research was the study of online distribution strategies and the success of the food production business of SMEs, of which the results can be discussed based on the assumptions.

Online distribution strategies include communication channels, product variety, learning from competitors, quick response, preserving privacy, and personal service, influencing a successful finance business, customers, internal processes, and learning and development. The assumptions were as follows.

A customer communication channel directly influences the successful business to finance, internal processes, learning, and development. That is the ability of the organization to use online communication tools to communicate and connect with their customers, and that affected customers' decision to buy goods online differently that customers' differences needed to be considered regarding communication. This study was consistent with Guo and Heese (2017).

A variety of products, services, and product information collected via online communication channels directly influenced finance, internal processes, and learning and development. In addition, the factor of customers was the key factor to be considered and discussed that the business success was the most profitable; therefore, producing products or services to meet customer needs, the process must be efficient and focused on the customer and efficient internal process. This study was consistent with Song et al. (2001); Berger-Walliser et al. (2011); MacDuffie et al. (1996).

The ability to learn from competitors, competitive analysis, and assess the competitive situation has a direct influence on a successful business. For example, the competitors' backgrounds needed to be studied to assess the competitors' cost and performance. It is helpful to find unexpected information about its competitors, e.g., unexpected services and products that its competitors offer. With this information, we can learn from its competitors and design countermeasures to improve its competitiveness.

Timely response to the market. The organization’s ability to respond to the market using social media directly influenced business success. Marketing in modern communication is necessary for business operations. A timely response to the market will encourage a business opportunity to grow their business and make it easy to reach customers. Moreover, a timely response will lead to customer satisfaction. This study was consistent with Jagongo and Kinnyua (2013), Iyer and Bergen (1997), and Cachon and Swinney (2011).

Privacy protection influences business success. Entrepreneurs should set policies to enhance credibility, especially regarding private information. That good relationship between buyers and sellers enhanced customers’ special feelings, and privacy protection influenced business success to keep the customers remained in the future. The customers’ privacy protection will lead to customers’ loyalty, satisfaction, and verbal communication between customers in the form of word of mouth. This study was consistent with Walter et al. (2001) and Eisingerich et al. (2014).

Personal service influences business success—solid personal relationships and familiarity with customers resulted in customers’ decision to return to shop again. Online communication created customer interaction and online stores, which was essential and helped provide online stores credibility. In addition, it was an individual service that enhanced customers’ satisfaction. This study was consistent with Ranganathan and Ganapathy (2002), Zhou et al. (2020) and Beatson et al. (2006).

7. Conclusion

This paper discusses the factors of successful online marketing strategy for food distribution SMEs and the effects of these successful strategies to achieve higher performances. This research aims to study 1) Online distribution strategies and 2) Online distribution strategies that directly affect the success of distribution operations.

Interestingly, six strategies are as follows: Focus on Customer Communication Channels, Product Variety, The Ability to Learn a Competitor, Responses to the Market on Time, Preserve Privacy, and Personal Service. There can't still answer success

In addition, 6ODS+4BSC concepts, including a focus on Customer Communication Channels, a Variety of Products, The Ability to Learn a Competitor, Responses to Market on Time, Preserve Privacy,

Personal Service, Financial Perspective, Customer Perspective, Internal Process Perspective, and Learning and Growth Perspective. There can answer success through our development guidelines for food distribution SMEs to be more efficient and effective.

7.1. Limitations

This research limitation was about the sample group. Further research may exclude other countries. In addition, qualitative research methodology, such as in-depth interviews and focus groups, should be conducted to obtain insights. In addition, other factors related to customers' decision-making via online applications should be studied.

7.2. Suggestions for Further Research

Further research is suggested to study the company or business operators of beverage, rubber and plastic, furniture and manufacture of machinery, and tools to find out the customers’ behaviors to prepare a plan for successful distribution. There should be qualitative research to create forms or models of online shopping to develop online shopping distribution.