SMEs are considered engines of growth - creating a diverse labour force, low to highly skilled jobs and supplying goods and services. But often SMEs fail to deliver on this potential. This is because they lack adequate resources to market their goods and services. The ability of SMEs to grow is constrained by their inability to do market research, by the low quality goods and services, and by insufficient advertising.
A possible solution to the marketing related challenges lies in appropriate use of intellectual property rights. These are collective marks, certification marks and geographical indications. They are used to distinguish goods and services in markets. Examples of certification marks include the FAIRTRADE logo, which certifies that agricultural products are ethically sourced and the Woolmark logo which certifies pure wool products.
I have been researching intellectual property and SMEs for my PhD. My research explored trademarks and geographical indications as tools for advancing economic development in Africa. It focused specifically on how SMEs can use intellectual property rights to gain market access and effectively market their products. The findings of my study were that collective marks, certification marks and geographical indications can be used by SMEs to scale the limitations of size and resource constraints.
The key advantage of such distinguishing marks lies in their collective nature. They can be used by clusters of SMEs, associations of SMEs or other collectives of producers of similar or related goods and services. They are suitable for producers that face size and resource constraints such as SMEs. Research also shows the potential of collective marks to create clusters, enabling SMEs to form networks that help them scale resource limitations.
Size and resource constraints that challenge SMEs
Characterised by small scale production and service provision, oftentimes SMEs find it difficult to market their goods and services effectively due to resource constraints, financial or human. Marketing factors include poor product variety and branding. SMEs are unable to adequately employ product branding which can attract customers.
The challenges SMEs face also arise from their size and isolation. SMEs struggle to achieve economies of scale and seize market opportunities that require standardised production, large and regular supply. They are therefore at a disadvantage in accessing markets for their goods and services, and that is exacerbated by small distribution networks.
SMEs find it challenging to build a recognised brand name and establish a reputation among customers. A brand name would be useful not only in distinguishing the goods and services from others, but also in creating an association of the products or services of SMEs. Using distinguishing marks can therefore help SMEs establish brand names and overcome marketing related challenges.
Key functions of distinguishing marks
An effective marketing strategy creates consumer awareness of SME goods and services. Distinguishing marks such as collective marks, certification marks and geographical indications can be useful advertising devices for associations or groups of SMEs. Distinguishing marks indicate the source of goods and services. They enable product differentiation which trigger in consumers’ minds an association between the source of goods or services and the quality or value of those goods or services.
A collective mark distinguishes the material, mode of manufacture or other common characteristics of goods or services of different enterprises under an association. It distinguishes the goods or services of the members of the association from non-members. The association of producers sets out the requirements for use of the collective mark by the members of the association.
A certification mark usually serves as a guarantee of quality. It indicates that goods or services comply with specific standards. A certifying authority sets out the rules of certification and controls the use of the certification mark. An enterprise that complies with the rules can be allowed to use the certification mark. Examples include Karoo Meat of Origin for lamb from the Karoo region of South Africa and Coffee Kenya for Kenyan coffee.
A geographical indication indicates a link between the local environment and the characteristics of goods. It identifies the origin of goods which have a certain quality, reputation, or unique characteristics, which is derived or influenced by the geographical origin. This can be the climate, geography, and human factors (such a local knowledge and skills) of the place where the goods originate which give the goods their unique qualities. An example is Oku white honey from Cameroon.
These distinguishing marks can be used by SMEs. However, lack of sufficient knowledge about intellectual property rights and inadequate access to legal information limits them from taking advantage of distinguishing marks. For that to change it is important to raise awareness and identify SMEs that can benefit from using product branding.
Are clusters a solution?
Collective marks, certification marks and geographical indications can be marketing devices for associations or groups of SMEs. By developing clusters to improve the quality of products of SMEs and strengthening producer associations, governments can set the framework to develop capacity to use distinguishing marks for access to markets.
Clusters foster collaboration among producers and are a way to overcome size and resource constraints. They enable the standardisation of quality of common goods and therefore an opportunity to use collective and certification marks. Already clusters are a feature in many urban areas in Africa and facilitating their use of distinguishing marks can help SMEs engage in marketing and scale the limitations they face.
Producer associations or collectives of producers of similar or related goods can benefit from branding strategies. Members of an association can craft the rules that govern the use of the collective mark by the SMEs. An independent body can establish rules for compliance for a certification mark to be used by SMEs that comply. And for products that have given attributes due to the geographical origin, SMEs can register a geographical indication.
The collective nature of these intellectual property rights can be useful and transformative for SMEs, especially given the characteristics of SMEs and the marketing related challenges that they face. This can be an effective way to make intellectual property rights work for SMEs.