"Digitalization is a long-term process, not an overnight transformation."
By Cheryl Ng
The pandemic has taken a toll on micro, small and medium enterprises (MSMEs) worldwide, but in the Philippines, we noticed that it became a catalyst for entrepreneurship.
When initial lockdowns began in April 2020, unemployment in the country rose as high as 17.7 percent. Many Filipinos lost their jobs. They couldn’t wait for government assistance as they had to support their families financially, especially in rural areas. So many created their own small businesses for an alternative source of income.
Starting a business is one thing, but turning it into a successful operation is another. Since launching Lemi for Business – a free suite of digital services for MSMEs – in the Philippines last November, we’ve brought over 1000 Filipino businesses on board. We’ve learned a lot about their struggles and their successes from working closely with them. With their help, we’ve identified some common factors to help other Filipino MSMEs rise above the pandemic.
Do not fear digitalization.
The mantra of businesses needing to digitalize to survive has been said to death. The underlying issue that needs to be addressed is the knowledge gap. Many MSME owners don’t understand the transformative potential of digitalization or how to do it. However, they’re constantly bombarded with doomsday messages of their businesses failing if they don’t. This comes off as intimidating and also increases their reluctance to embrace change.
Digitalization is a long-term process, not an overnight transformation. It’s fine to start small. MSMEs should first identify how technology improves their operations and work from there.
There are many easy-to-use apps on the market that are designed to digitalize aspects of their businesses. A digital payments system makes payments faster and more convenient. A digital bookkeeping system means they spend less time doing accounting. Over time, it will be easier to transition into a digital-first way of doing business.
Do not limit your digitalization to social media.
Having a social media presence is a basic and very important step for MSME customer engagement. But too many MSME owners stop there and think that’s enough. Social media is first and foremost a platform for people to connect with other people, not to do business on. We have seen many businesses come on Lemi because they found success through social media, but who ran into difficulties when they tried to scale up their operations.
Social media is a useful starting point, but it doesn’t provide many of the business functions that MSMEs need. Social media pages are only searchable if the customer already knows the brand, limiting exposure to new audiences. Discovery is often gated behind advertising and requires investing precious capital for limited benefit. Spending money to build a proper digital presence such as a website or investing in operational technologies such as a digital payments system will go much further in terms of return on investment (ROI).
Create brand loyalty through loyalty programs.
According to our research, 87 percent of Filipinos prefer buying from businesses with loyalty programs. This makes digital loyalty programs a good way for Filipino MSMEs to reward customers for their support and keep market share intact. Historically, only larger brands had the resources to do so, but apps and services like Lemi for Business are now levelling the playing field by making loyalty programs more accessible and simpler for MSMEs to use.
Besides giving customers more bang for their buck, digital loyalty programs also help MSMEs know their customers better and create a more personalized customer experience for them. These programs enable MSMEs to send their users birthday coupons and greetings, remember purchasing preferences and make tailored recommendations. This builds a better relationship between the brand and the customer, which increases brand loyalty and customer stickiness.
Diversify sales strategies.
One of the greatest benefits of digitalization for MSMEs is that their sales now go beyond the limitations of physical walk-in customers. Being able to reach customers online and having the digital infrastructure to conduct transactions online significantly expands their audience. It also enables them to offer different kinds of products and services to increase their earning potential, even during downtimes.
When businesses were closed during lockdown, Lemi users purchased coupons on our platform to use later at their favorite businesses. This provided an immediate injection of cash flow that helped tide businesses over through the zero-income phase. Many businesses also began offering special discounts and packages on their digital channels to encourage customers to buy from them online, ensuring steady revenue generation while maintaining a safe environment.
There is opportunity in every crisis. Despite the challenges that they have faced through this worldwide health crisis, 88 percent of Filipino MSMEs are still confident of growth in the next three years. These resilient entrepreneurs are precisely who we strive to support through our work at Lemi.
We remain committed to our mission to uplift businesses like theirs around the world, and I urge everyone to do the same. We vote with our dollars every day to support businesses and causes. The next time you make a purchase, think about the positive difference it makes to your local MSMEs. Your choice matters.
Cheryl Ng is the founder of Lemi, a technology company dedicated to building a digital ecosystem for small local businesses.
