Innovative, revenue-generating SMEs in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia that received a combination of master classes, mentoring, and training on attracting customers and using digital marketing tools like search engine optimization saw a significant increase in a number of customers relative to SMEs that received more generalized training on the same topics, according to a World Bank study funded by the European Union and detailed in a report presented at an event here today.
The report, Capacity building as a route to export market expansion: A six-country experiment in the Western Balkans, found that offering 30 hours of group-based virtual training sessions, and 5 one-on-one virtual mentoring sessions with experts led to a significant increase in customers compared to similar SMEs which were offered four hours of training via three webinars with light coverage of these topics.
Treated firms improved their digital presence in a way that made it easier for potential international customers to find the firm’s offerings and be attracted to contact the firm. Treated firms were also 10 percentage points more likely to show up on the first page of search results and improved their Facebook pages by being 15 percentage points more likely to include posts in English, 10 percentage points more likely to use special offers, and 6 percentage points more likely to include customer testimonials and stories. A year after starting the program, treated firms had also significantly increased the number of customers.
One of the key challenges facing innovative small and medium enterprises is customer acquisition. This is especially true in countries like those in the Western Balkans, where domestic demand can be limited for specialized services and products. Exporting to larger and richer countries provides a potential solution, but expanding into foreign markets involves considerable barriers, and small firms may lack the skills and confidence to market to foreign buyers.
This study aimed to test the effectiveness of a program called PowerUP to help firms bounce back from the COVID-19 pandemic, expand their markets, and export more.
“The Economic and Investment Plan and the Innovation Agenda for the Western Balkans emphasize the importance to strengthen the competitiveness of the business sector in the region and to promote innovation ecosystems,” said Holger Schröder, Head of Unit, Western Balkans Regional Programmes and Economic and Investment Plan, European Commission, Directorate General for Neighbourhood and Enlargement Negotiations.
“The Power-Up study identifies approaches how SMEs can build up their capacity to change and resilience to crisis through innovation and digitalization. The study also demonstrates the positive impact and benefits of virtual training to firms with different needs at a regional level.”
“With close proximity to the European single market and important trade routes, the Western Balkans have the potential to become a natural hub for innovation and entrepreneurship,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans.
“A program such as PowerUp demonstrates to investors and business owners the significant growth potential SMEs can unlock when they improve skills required to expand their sales across national borders. It also shows citizens who may be considering starting a business that success is possible and that they do not have to go it alone.”
The PowerUP program was launched in September 2020. Firms had to be small or medium, innovative, and already generating revenue. The mean (median) size of firms was 17.6 (8) workers. The majority were in services and B2B (e.g., producing customized software solutions and professional services such as legal and energy consulting). One quarter produced specialized manufacturing products. 71% were exporting already, with their main challenge being how to gain new customers and expand exports.
In total, 225 firms were selected for the program and randomly allocated into two groups: a treatment group of 113 firms was offered 30 hours of group-based training sessions over Zoom, and five one-on-one virtual meetings with management consultants. Training sessions focused heavily on building customers and markets and using digital marketing tools (such as search engine optimization), with additional sessions also covering human resources, financial management, and pitching. A control group of 112 firms was offered three webinars, lasting a total of four hours, which provided light coverage of these topics.
“Investors often look for company leaders who are ‘coachable,’” said Maja Anđelković, World Bank Senior Private Sector Specialist.
“This training program showed that innovative firms from the Western Balkans are not only keen to learn, but also able to quickly apply new knowledge to adapt to demand shocks, such as those caused by the COVID-19 pandemic.”
The study also identified areas to improve such programs going forward: improve the targeting and selection of firms: the heterogeneity of firms across sector, size, and lifecycle made it difficult to provide content that met the needs of all firms – but in small countries, there are often very few firms in any industry-size category, and more work is needed on how to trade-off specificity versus serving many firms; A narrower and more actionable content may be better than trying to cover all areas. The specific content that firms could directly implement such as using search engine optimization had the most uptake; A mixed modality program may be preferable to all online or all in-person, stated the World Bank.
