Full Project – IMPACT OF MARKETING STRATEGIES ON SALES PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The problem of marketing of Small-Scale Enterprises is truly born of our time; it is product of the standard of timing enjoyed by advanced communities and the ways in which those communities organize the resources to meet the standard. The marketing is as old as trade itself but the marketing of small scale product, as it is introduced today has affected a large segment of the economy because of the important position and role occupied by small and medium scale business. But despite this recognized status of SMEs and the adoption of different strategies of marketing excess capacities and satiated appetites is still a dream (Otieno, 2015).
The ideal marketing strategies of Small-Scale Enterprises should be adequate market to cover the job of getting people to buy. The persuasion of the customer should be the centre of a whole complex of activities ranging from the conception of the products through to a point beyond its sale where every endeavour is made to sustain the good will of the customer towards the product and it’s well identified producer. To cover this spectrum of activities and to expand the success rate and the performance of the success rate and the performance of the economy through the small and medium scale enterprises marketing strategy can therefore be defined as adjusting the whole activity of a business to the needs of the customer or potential customer and to give such product (Sma1l Scale Product) and advantage over its competitors. This is really a definition of attitude within the SMEs which demands absolute customer orientation the organization wide generation of market intelligence pertaining to current and future customer need, dissemination of the intelligence across department and organization-wide responsiveness to it (Otieno, 2015).
Marketing is generally considered as the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return (Cavusgil & Zou, 2004). A strategy on the other hand is a firm’s game plan for competition and survival in a turbulent environment. According to Mohamed et al., (2014) a marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales. Sales performance is the sum of all efforts that it takes to deliver a product or service, therefore is measured in terms of items produced and services performed within a given time period. There are several marketing strategies that can take any small and medium enterprises from mediocre to success when utilized correctly. Breaking into a new business climate and finding customers is hard work, but when equipped with innovative ideas and proven techniques, financial markets sales personnel can become extremely successful (Kisaka, 2012). Key small and medium enterprises marketing strategies will always include an in-depth review of the value of follow-up. All successful sales intermediaries understand that consumers need to be contacted again and again in order to make a vital connection.
Marketing strategies and sales performance have been grounded on marketing mix theory and theory of push and pull. Marketing mix theory is still used today to make important decisions that lead to the execution of a marketing plan. The idea of a marketing mix theory is to organize all aspects of the marketing plan around the habits, desires and psychology of the target market (Grönroos, 1994). The theory of push and pull is applied in today’s market; pushing solutions is sometimes seen by the customer as intrusive or overlooked by the customer as the solution gets lost due to information overload. Pulling solutions has always been a part of most organizations. A customer would visit the organization and ask questions and someone would answer them. Financial institutions that emphasize the push theories often do so to increase efficiency. They believe that if, for instance, they create the penultimate user manual that will cover all the questions the customer might have; they will limit the amount of contact the customer needs to make to the financial institutions (Zmud, 1984). This study will focus on the impact of marketing strategies on sales performance of small and medium enterprises in Nigeria. The topic on marketing strategies was chosen as an effort to find out whether different marketing strategies undertaken by the small and medium enterprises in Nigeria has any effect on the sales performance.
The number of small and medium enterprises in Nigeria is shrinking rapidly. Competition is stiff within the small and medium enterprises and product performance has not been effective compared to the last decade (Otieno, 2015). Most small and medium enterprises have sharpened their marketing strategies as a mechanism to guarantee the success of their business in future. The challenge thus facing the small and medium enterprises is the need for diversification of their products better tailored and suited to meet the needs and development of the country. For while the small and medium enterprises can play a very significant and critical role in a nation‟s developmental process, the challenge currently being faced is how small and medium enterprises marketers respond by creatively introducing small and medium enterprises policies, instruments and marketing techniques to serve as a basis for the country‟s sustained economic development (Njoroge, 2015).
1.1.1 Marketing Strategies
Marketing strategy is the fundamental goal of increasing sales and achieving a sustainable competitive advantage (Rotich, 2016). Marketing strategy includes all basic, short-term, and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market oriented strategies and therefore contributing to the goals of the company and its marketing objectives. Market penetration strategy is also known as concentrated growth strategy since a company can thoroughly develop and exploit their knowledge on a specific market. Ataman (2010). Companies do this so that they can expand their customer base. This is possible through size of purchase, maximum rate of product obsolescence, getting new product users, advertising and offering inducements.
Product development comes as a result of changes in clients‟ preferences, high competition and advanced technology. These can be regarding products in the market, innovations made on the products or existing products that have been improved. Successful product development strategies are as a result of leveraging three internal elements, technical advantage and experience, marketing savvy and better understanding of the customer. (Onyango, 2016). Market development strategy for a given product is accomplished when a product has gained new clients in a new geographic segment with new institutional segments O‟Leary-Kelly & Flores (2002). Finally, product diversification; which is a corporate strategy aims at entering new market segments. This is the most uncertain section since the business goes in without any experience in the new market and is also uncertain if the product will be successful. Market penetration is key in market penetration since the business works on convincing current clients to new products that they are not used to. This is a great place to start because these clients already know and use the company‟s products and services. Therefore, a relationship that can be expanded has been established earlier.
Marketing methods, especially those that were used traditionally as a blueprint in business activities are gradually fading from markets and innovative methods. According to Cooper and Kleinschmidt (2015) small and medium enterprises need to adopt more modern technological marketing tool such as mobile marketing to improve on their performance since most small and medium enterprises use traditional forms of marketing to reach potential customers and to entrench their brands and only few of them use modern technology in marketing their products and services.
1.1.2 Sales Performance
Sales performance alludes to the volume of offers accomplished inside a predefined period contrasted with predetermined sales levels (Rotich, 2016)). Accomplishing more noteworthy sale execution is the most essential part of sales pioneers as it specifically impacts on their key execution pointers. Sales performance has been conceptualized to incorporate both the result and behavioral measurements (Cavusgil & Zou, 2004)). Sales results have dependably been seen by execution situated sales representatives as proof to their behavioral execution and therefore a positive relationship has been found to exist between occupation association segment of responsibility and sales performance. In today’s dynamic working business environment, organizations that depend on poor information to settle on key deal sales performance decisions, risk being rendered clumsy by the opposition. As organizations develop more idealistic about open doors for development, the weight is on for deals staff to meet ever-higher income.
As businesses grow more optimistic about opportunities for growth, the pressure is on for sales organizations to meet ever-higher revenue targets. For these reasons, optimizing sales performance in economy calls for a more rigorous and data-driven approach to foundational sales processes, including strategic planning, territory allocation, resource planning and compensation programming. Performance can be defined as the extent of actual work performed by an individual or to what extent the actual work is shown by an individual (Cooper & Kleinschmidt, 2015). In an era of intensifying competition and fierce negotiations with buyers, tactical selling approaches simply don‟t work. The key to sales success is creating value the buyer is not currently considering in their decision making.
1.1.3 Small and Medium Enterprises in Nigeria
SME‟s in Nigeria represent a vital part of the economy, being the source of various economic contributions through the generation of income, providing new job opportunities, introducing innovations, stimulating competition and engine for employment (Mohamed et al., 2014). According to Njoroge (2015), the enterprises sector in Nigeria is an important and fast-growing sector employing 42 per cent of the working population and accounting for 75 per cent of all modern establishments in Nigeria as at 2011. Small and medium enterprises dominate in majority of the sectors, including wholesale and retail trade, restaurants, hotels, community and social services, insurance, real estate, business services, manufacturing, agriculture, transport and communication and construction.
According to Otieno (2015) the enterprise sector in Nigeria is critical and strategic in attaining vision 2030 and is one of the crucial components of the economic pillar and is central in national strategies for stimulating economic activity and reducing unemployment and poverty. However, according to (Ataman et al., 2010), small and medium Enterprise sales‟ performance in Nigeria over the last decade has not been impressive. Several marketing strategies have been implemented in the enterprise sector aiming at increasing sale performance of enterprise
1.2 Research Problem
The current globalization of markets has made business to see the internationalization of their activities as a way of remaining competitive. Marketing strategies have become important tools globally for any organization to remain in competitive market environment hence stronger. Epetimehin (2011) sees strategy as a pattern of resource allocation decisions made throughout an organization. This encapsulates both desired goals and beliefs about what is acceptable and most critically unacceptable means for achieving them. Marketing strategy implies that the analysis of the market and its environment, customer buying behavior, competitive activities, their needs and capabilities of marketing intermediaries.
In Nigeria, the contribution of small and medium enterprises sector has been momentous but despite their significance, most small and medium enterprises are faced with the threat of failure with past statistics indicating that three out five fail within the first few months (Rotich, 2016). The mortality rate of small and medium enterprises in Nigeria remains very high and affects both start-ups and older established small and medium enterprises. Statistics indicate that the high failure rates of small enterprises are largely attributed to weaknesses in financial management and marketing. The alarming rate of small business failure is a major concern hence the need to investigate their marketing strategies and determine if they have effect on sales performance.
Studies have been done related to marketing strategies. Ayedun et al., (2014) carried a study on effect of marketing strategies on corporate performance of estate surveying and valuation firms in Kaduna metropolis of Nigeria. The study revealed that there is a positive relationship between marketing strategies adopted and corporate performance of the firms. Further Aliata et al., (2012) did a study on influence of promotional strategies on banks performance. A positive relationship was found to exist between promotional strategies expenditure and bank performance. Spending on promotional mixes individually had little effect on bank performance. Ataman (2010) carried a study on long-term effect of marketing strategy on brand sales. The study found that the long-term effects of discounting are one-third the magnitude of the short-term effects and the ratio is reversed from other aspects of the mix, underscoring the strategic role of the tools in brand sales. Epetimehin (2011) further did a study on the impact of relationship marketing on the performance of insurance organizations. Findings of the study revealed that relationship marketing practices have been playing a dominant role in improving the performance of insurance and increasing customers‟ satisfaction through service quality.
Marketing strategies and performance studies have also been done in Nigeria. Mwai (2015) carried out a study on factors that influence sales and marketing strategies adopted by commercial banks. The study found out that corporate strategy, organizational culture, target market and consumer behavior all influence the choice of sales and marketing strategies of the bank to a very large extent. Magunga (2010) also did a study on impact of marketing strategies on the performance of insurance companies in Nigeria. The study registered a positive relationship exists between product innovation as a marketing strategy and firm‟s performance. Muthengi (2015) also did a study on impact of marketing strategies on sales performance of commercial banks in Nigeria. The findings of the study indicated an overall significance of the marketing variables adopted, although not much effect was seen when a marketing variable is compared with bank performance in isolation of other variables. Therefore, there have been few studies in Nigeria on marketing strategies and its effects on sales performance of small and medium enterprises. This, therefore, creates a proper avenue to fill the gap that other researchers have left. The study tries to focus on impact of marketing strategies on sales performance of enterprises in Nigeria which then leads to the question; what are the impact of marketing strategies on sales performance of small and medium enterprises?
1.3 Research Objective
The main objective of this study was to establish the impact of marketing strategies on sales performance of small and medium enterprises in Nigeria.
1.4 Research Hypothesis
The following research hypothesis was stated for the study:
HO: There is no significant relationship between marketing strategies and sales performance of small and medium enterprises in Nigeria.
H1: There is significant relationship between marketing strategies and sales performance of small and medium enterprises in Nigeria
1.5 Significance of the Study
This study will be of significance to small and medium enterprises owners since most of them aim to maximize profitability and the owner‟s interest. Thus, this study will help small and medium enterprises owners and managers to identify the necessary marketing strategies to enhance their sales performance. In addition, the study will be of importance to marketing agencies. This is because marketing agencies provide marketing services to various organizations. Therefore, this study will help them to identify the specific marketing practices, which enhance performance of enterprises.
Additionally, policy makers like the government and other stakeholders around the world have been developing strategies to improve the performance and sustainability of small and medium enterprises. Therefore, this study will highlight the effect of marketing strategies on small and medium enterprises performance. The findings may be used to generate new policies and revision of the existing policies. Further, the study will provide additional knowledge and literature on marketing strategies and performance of small and medium enterprises. Future researcher and scholars may use the research findings to carry out their own studies.
To the academicians the study will contribute to the body of knowledge which will benefit scholars and researchers and simulate further research in this field of strategy implementation. Researchers could also be able to borrow from the findings of this study and may even further the study by varying the various variables used to get more precise results. This study will add to the existing body of knowledge on this very important topic of market strategies. To this extent it will be beneficial to future academic researchers who may wish to understand how different institutions carry out this process.
1.6 Scope of the Study
The study focuses only in the marketing strategies for Small-Scale Enterprises in Lagos state within the Abuja business environment which were duly registered by the Corporate Affair Commission. The study hopes to cover some selected Small-Scale Enterprise within this area with product market. A specific product /or line of related product that can satisfy a particular set of needs and wants for all people on organization that are willing and able to purchase the products.
1.7 Definition of Terms
Small Scale Enterprises: a business unit or organization with less than 50 employees on its payroll. Such organization also uses low technology for production process.
Marketing: The performance of business activities that has to do with direct flow of goods and services from the producer to the consumer or users in order to satisfy customer and accomplish the company’s objective.
Strategic Marketing: Involves planning, objectives, control units, setting objectives for target markets and translation of such plans into short-term result with implementation and evaluation techniques.
Positioning Strategy: The combination of product channel of distribution, price and promotion strategies selected by the management to position a firm against its key competitors in the needs and wants of the target market.
Decision Making: This is defined as the process of selecting the best choice out of the available options
High quality:This can be defined as the standard of degree to which something meets or exceeds the expectations of its consumers
Marketing orientation: This can defined as the approach to which a business or an organisation reacts to what the customer want and not what the organisation thinks is right for the customer.
Marketing Strategy: This is defined as an organisations strategy that combines all of its marketing goals into one comprehensive plan.
Performance: The term performance can be defined as the ability to meet customer satisfaction, business profitability, consumer patronage, customer loyalty within a given time.
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