E-ISSN: 2988-0122

ISSN: 2988-0122
PP:29-35

THE ROLE OF INNOVATION IN CREATING DIFFERENCE THROUGH MARKETING STRATEGY

Mukhlisah1, Musran Munizu2, Nuraeni Kadir3

1Master of Management, Faculty of Economics and Business, Hsanuddin University; ichabd@gmail.com
2Master of Management, Faculty of Economics and Business, Hsanuddin University
3Master of Management, Faculty of Economics and Business, Hsanuddin University

Abstract
This study presents an overview of the role of innovation in creating differentiation through marketing
strategies among food SMEs in Makassar City. This study was conducted with a qualitative and explorative
approach. Informants in this study are MSME business actors. The sampling technique was carried out by
snowball. Data was collected using in-depth interview techniques. Then the data were analyzed
descriptively qualitatively with data reduction techniques, displaying data and drawing conclusions. The
results of the study show that innovation and marketing are interrelated in supporting the sales of MSME
products. Innovation is also a differentiator between one MSME and other MSMEs. Innovation can be done
through a marketing strategy.
Keywords: Innovation, Differentiation, Marketing Strategy

A. INTRODUCTION
Product innovation and marketing are closely related to each other(Luchs & Swan, 2011;
Marxt & Hacklin, 2005). During the process of new products entering the market, a different
marketing strategy is needed than before(Paul & Martin, 2007). There is no doubt that innovation
plays a very important role in today's market. In globalization, competition and new forms of
technology are constantly increasing(Martin et al., 2017). Companies must be able to adopt
activities and strategies for utilizing existing knowledge in the production process to satisfy
customers(Zhang et al., 2015). Therefore, innovation in an organization is a fundamental
aspect(Hogan & Coote, 2014). Improvements in a product or service, market expansion or even
repositioning of an organization in the market are all related to innovation practices(Hogan &
Coote, 2014)
Innovation is an integral part of competitiveness and it is transversal to the organization,
related not only to new products or processes but also to organizational practices and marketing
strategies.(Gunday et al., 2011). Innovation is seen through different perspectives from
researchers with different backgrounds related to business and administration(Gupta et al.,
2016). For example, in terms of marketing innovation, it is perceived from two different
viewpoints: on the one hand, economists view innovation types from a creation and development
standpoint and marketing scholars consider innovation from a trade and market
standpoint.(Gupta et al., 2016)
In addition, innovation capabilities facilitate changes in managerial processes and value
creation. Innovative companies can continuously improve the customer value proposition in
meeting customer expectations(Zhang et al., 2015). Innovation activities and marketing strategy
have a strong relationship, companies with innovation capacity will pursue opportunities where
customers actively participate in value creation by creating an atmosphere conducive to
innovation(Ngo & O'Cass, 2013). Additionally, network competence – which consists of building
lasting relationships with customers and collaboration between supply chain partners – nurtures
the environment for innovation.(Zhang et al., 2015)
Business actors need to use strategies in marketing especially in the midst of the
emergence of increasingly competitive online business players based on information technology.

Scientia Human Capital and Organizational Behavior 29

Increasing the competitiveness of Micro, Small and Medium Enterprises (MSMEs) must be more
innovative in this era of disruption. Technological advances that have merged with the economy
and trade have given birth to the industrial revolution 4.0. Digital media products and other
products related to technology have rapidly spread in almost all industries, including
MSMEs(Nuseir, 2018).
In 2023, the development of MSMEs is encouraged to be more vibrant. One of them was
carried out by the Makassar City Office of Cooperatives and UKM. From a report by the Makassar
City Office of Cooperatives and SMEs, at least there are currently around 19,000 MSMEs registered
in the database. Most of them are dominated by the culinary sector, reaching 5,000 (Department
of Cooperatives and SMEs in Makassar City, 2023). Therefore, to be able to survive in their
business, the actors need to innovate as a differentiation in terms of both product and marketing.
This study aims to describe the role of innovation in creating differentiation through marketing
strategies among MSMEs in Makassar City.

B. LITERATURE REVIEW

Marketing Innovation and Performance

Marketing has developed since 1990 due to globalization intensification and competition,
market segmentation, knowledge addition and customer demands(Marques, 2023). Apart from
that, it is also influenced by technological developments, especially information technology and
by the existence of quality and various market offers(Ruiz-Molina et al., 2015). The company is
currently facing three main challenges, namely:
1. Meet customer needs, create value and ultimately maintain lasting relationships with
clients. Gradually, it can be said that there has been a paradigm shift in marketing science
from which was initially more product oriented and transactional marketing shifted to a
more customer oriented and long term relationship.
2. The evolution of marketing, currently an organization cannot only be market oriented,
because this alone is not enough to bring competitiveness in profits. Organizations need
to invest in close relationships with customers, being collaborative with them and hence
creating added value Companies can enhance this value creation for customers through
excellence in marketing innovation.
3. Marketing innovation can be defined as the use of new marketing activities and
procedures, including changes in product characteristics, marketing communication
tools, new brand launches, new techniques for setting prices, and new market research
methods.(Ramirez et al., 2018)
Competitive growing companies force them to come up with exclusive and distinctive
marketing methods, of course adapted to their target market(Hidayanti et al., 2018). Therefore,
an organization, in order to remain competitive, must invest in innovative marketing strategies,
because traditional marketing patterns are no longer sufficient. A company must always be aware
and pay attention to what concerns the wishes and expectations of customers(Hidayanti et al.,
2018).
Investment in marketing differentiation is fundamental to achieving competitive
advantage, which will result in better performance(Martin et al., 2017). Furthermore, superior
marketing competence has a positive effect on the company's innovation capacity(Zhang et al.,
2015). Marketing capabilities can enhance an organization's ability to identify market needs and
trends, to analyze their potential and consequently adjust the direction of innovation(Ngo &
O'Cass, 2013). Also, the pursuit for improvement in marketing capabilities involves the
continuous investment of the company in marketing efforts which will lead to the creation of
barriers and difficulties for potential competitors to enter the current market.(Zhang et al., 2015).
Besides that,Grimpe et al., (2017)states that marketing innovation involves significant
changes compared to the usual corporate marketing processes and indicates that routine or
temporary changes to marketing instruments are not considered marketing innovations.

30 Scientia Human Capital and Organizational Behavior

Therefore, new or better business and marketing strategies are associated with managerial and
marketing innovations(Bustinza et al., 2017). According toGunday et al., (2011)that in the last 20
years, the concept of marketing innovation and its performance impact has become a highly
relevant topic given its growing practical significance
Several studies have analyzed the link between marketing and product innovation, such
as the relationship between investment in marketing innovation and the performance of a firm's
new products(Grimpe et al., 2017)and has evaluated how companies use external information to
achieve marketing innovation through both product and organizational innovation(Ramirez et al.,
2018). Also, research has addressed marketing innovation and firm performance and examined
the relationship between competitiveness and innovation in the marketing practices of large
manufacturing firms(Gupta et al., 2016)or how marketing innovation affects the performance of
the MSME market(Hasan, 2017).
Many resources associated with marketing activities, which can be considered as any
concrete or intangible, physical or human, knowledge or interpersonal feature that can contribute
to an organization's competitive advantage, are furthermore important potential profit-
generating resources.(Hooley et al., 2005). Therefore, marketing innovation, together with the
ability to build and maintain strong customer relationships, leads to the development of customer
satisfaction and loyalty and further enhances company performance.(Hooley et al., 2005).
Performance is related to an organization's ability to meet its goals and objectives through
methodical procedures and its ability to adapt to changes and keep it functioning in an effective
manner (Damanpour et al, 2009). In addition, performance can be defined as the ability of an
organization to attract new customers and retain existing customers with the quality of the
solutions it provides(Hogan & Coote, 2014). Companies innovate as a way to develop
organizational change. Innovation promotes adaptive changes to the organizational environment,
which means that an organization can then respond in a more efficient and effective way to
changes that may occur in the environment, and as a result, improve their performance
(Damanpour et al, 2009).

C. RESEARCH METHODS

Informant
The informants in this study are MSME actors in Makassar City. The sampling technique for this
study used the snowball sampling technique, namely the number of informants will continue to
increase until the information is considered sufficient and saturated(Sekaran & Bougie, 2013).

Method of collecting data

This research is a qualitative research. In obtaining data, it is done by in-depth interviews,
observation and documentation studies. The form of interview guidelines in this study used open,
semi-structured interviews, namely interviews consisting of questions that gave the opportunity
or possibility for the informant to answer at length and flexibly according to the conditions or
realities in the field.

Data analysis
After the data is obtained in the field, then the data will be checked for validity using the data
source triangulation technique. The next step, qualitative data was analyzed in three stages,
namely data reduction, data presentation and conclusion(M. . Miles et al., 2014).

D. RESULTS AND DISCUSSION

MSME Product Marketing Conditions

Scientia Human Capital and Organizational Behavior 31

In this section, the condition of the MSME product marketing strategy in Makassar City is
explained. The marketing function for SMEs is considered as an additional requirement for them.
As stated by one of the MSME actors who said:
"Our product marketing, yes, is usually done by entrusting it to shops or selling directly to
buyers, this is also mostly done by friends with the same type of product" (AP, Informant
1)
In this context, some SMEs in selling their products have not yet planned their marketing
activities. Even though the activity process in marketing planning can include new innovations.
Even though several MSME marketing studies have identified a unique form of marketing in
micro-enterprises(Stokes, 2000). Business actors need to adapt marketing concepts, practices
and theories to their own goals(Carson, 1993), and businesses need to maintain their focus and
concentration on incremental innovations(M. . Miles & Darroch, 2006)

Things that need to be considered by MSME actors are in handling marketing strategies(Murray
et al., 2002). Careless, unstructured and unsequential marketing decisions will lead to informal,
spontaneous and reactive marketing activities. As stated by one of the SMEs
"I only market my products in streams, I market according to customer demand, so far I
haven't tried any new innovations, both products and marketing strategies...." (SMH,
informant 2)
Based on this information, it can be said that MSME marketing in Makassar City develops
following the MSME life cycle in responding to demand for new products and markets, while
meeting consumer needs. The MSME marketing strategy is carried out based on experience in
business processes(Gilmore et al., 2001). So the formation of maturity and depth of knowledge is
the key for MSME business actors to continue to develop(Ariescy et al., 2021).

MSME Innovation Design

Innovation can be interpreted as a process of change, changing to what it currently stands for.
Innovation is embodied in new product designs, new production processes, in new marketing
approaches or new training methods. The current understanding of innovation is associated with
creativity, change, adaptation, success, profit and customer satisfaction(Azar & Ciabuschi, 2016;
Ramirez et al., 2018). Based on the results of interviews and observations, it shows that some of
the actors have designed marketing innovations in their products. So that new innovations
emerge among MSME actors. According to the third edition of the Oslo Manual (OECD, 2005), four
main types of innovation can be identified: product, process, organizational and marketing
innovation. This consideration has been widely accepted in the literature(Ramirez et al., 2018).
Type of Informant Types of MSMEs Results of Interviews and Observations
Innovation
Product AP Food Just adding some flavor variations
BW Fashion Added new patterns and styles according
to the trend
Process AP Food Still using conventional tools, not using
more sophisticated and modern
equipment
BW Fashion Still using the usual machine
Organization AP Food Technology-based management, involving
the family
BW Fashion Involve skilled workers
Marketing AP Food Using social media, food delivery services
(Go-Food and Grab-Food)
BW Fashion Through social media, using marketplaces
(Shopee, Lazada)
Source: Processed Research Data (2023)

32 Scientia Human Capital and Organizational Behavior

 A business strategy is a plan that must be prepared and made by a businessperson
including a comprehensive plan covering plans for all its business functions taking into account
changes in the external and internal environment in order to achieve the targets and goals that
have been set. In addition, the MSME business strategy is also used to maintain the viability of
MSMEs and to increase the scale of their business.

Innovation Source
Results in the field show that ideas or sources of innovation come from customers, knowledge
and experience of MSME business actors. The close relationship between business actors and
customers becomes a source of new ideas and stimulates business actors to try and implement
them. As stated by SY.
"Our customers, sometimes give input to add variations in our products" and for us, what's
wrong with trying it ...."

Innovations originating from customers, sometimes MSME business actors tend to only develop
one product prototype for certain customers and for customer needs only ((Ariescy et al., 2021).
Sometimes SMEs have difficulty assessing whether this new prototype solution can expand new
customers.

Innovation as Differentiator
Data in the field shows that innovation is the difference between one MSME and one MSME even
though they sell the same type of product. As stated by MI
"My product may be the same, but my product has advantages with similar products, and
I also market products with various strategies"
Investment in marketing differentiation is fundamental to achieving competitive advantage,
which will result in better performance(Martin et al., 2017). Then, superior marketing
competence has a positive effect on the company's innovation capacity(Zhang et al., 2015).
Marketing capabilities can enhance an organization's ability to identify market needs and trends,
to analyze their potential and consequently adjust the direction of innovation(Ngo & O'Cass,
2013)
Innovation requires technical and marketing skills (the Abernathy-Clark model); requires
knowledge of the components that go into the manufacture of products as well as knowledge of
the interrelationships between the two, also known as architectural knowledge (Henderson-Clark
model); requires holding complementary assets if necessary as well as the ability to protect its
innovations through patents, copyrights, trademarks, trade secrets, tacit knowledge, causal
ambiguity (Teece model). Innovation also follows the evolution of technology as a life cycle as well
as the evolution of technology in the market(Milreu et al., 2015).

E. CONCLUSION
Innovation and marketing are interrelated in supporting the continuity of MSME businesses. The
MSME marketing strategy in Makassar City develops following the MSME life cycle in response to
demand for new products and markets. The design of the innovation follows the aspects of
product, process, organization and marketing innovation. The source of MSME innovation comes
from customers, experience and knowledge of business actors. Innovation is also a differentiator
between one MSMEs and other MSMEs.

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