DIGITAL MARKETING AS A KEY DRIVER OF SALES IMPROVEMENT AMONG SMALL AND MEDIUM SCALE ENTERPRISES IN LAGOS STATE
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROND OF THE STUDY
A business whether small or big, simple or complex, private or public, etc is created to provide competitive prices. Business in Nigeria has been classified as small, medium and large. However, a small scale industry can be explained by the criteria of project costs, capital, number of employees, sales volume, annual business turnover and the financial strength. The federal and state ministries of Industry and Commerce have adopted the criterion of value of installed fixed capital to determine what a small scale industry is. The fixed capital had varied from as little as N60, 000 in 1972; N159, 000 in 1975; N250.000 in 1979; N500, 000 in 1986, up to the tune of N2, 000,000 in 1992 and N5, 000,000 by 2003. Due to this fact, there may be a need to classify the small scale industry into micro and super-micro business, with a view to providing adequate incentives and protection for the former. In the meantime, any business or enterprise below the upper limit of N250, 000 and whose annual turnover exceeds that of a cottage industry currently put at N5, 000 per annum is a small scale industry. The National Directorate of Employment (NDE) concept of a small scale industry has been fixed to a maximum of N35, 000.
Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ less than a given number of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees. Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most 10, or in some cases 5, workers. Financial assets are also used to define SMEs. In the European Union, a new definition came into force on 1 January, 2007 applying to all Community acts and funding programmes as well as in the field of State aid where SMEs can be granted higher intensity of national and regional aid than large companies. The new definition provides for an increase in the financial ceilings: the turnover of medium-sized enterprises (50-249 employees) should not exceed EUR 50 million; that of small enterprises (10-49 employees) should not exceed EUR 10 million while that of micro firms (less than 10 employees) should not exceed EUR 2 million. Alternatively, balance sheets for medium, small and micro enterprises should not exceed EUR 43 million, EUR 10 million and EUR 2 million, respectively (OECD, 2007).
The emergence of Modern Information and Communication Technology (ICT) has tremendously affected the practice of marketing and other professions in recent years. Modern ICT has necessitated a paradigm shift from analogue or primitive mode of transaction to a system where virtually all marketing activities are performed electronically. Although the digital marketing is most times misconstrued for E-commerce and E-business. Digital Marketing involves getting closer to customers and understanding them better, adding value to products, widening distribution channels and boosting sales using digital media channels while E-commerce is primarily about selling online or ability to transact online. However, E-business refers to the process of using digital technology to enable organizations to know what their customers want and to produce only those products and so do away with guesswork and avoid waste of unsold stock, to enjoy increased productivity, profit and growth (Slywotzky and Morrison, 2008). It is also called digital business.
Cunningham (2010) notes that e-business through digital marketing is the glue that keeps employees, customers, and partners communicating and informed. It involves the use of self-service applications that delivers relevant information to those that need it, leading to tremendous values in business transactions. The development on the internet of transaction tools which affected a greater number of phases compared with traditional transaction systems, have impacted tremendously on the procurement and selling life cycles (Cunningham, 2010). This shows that both digital marketing and E-commerce are subsets of E-business, which means that E-business is the umbrella where the duo hides.
Email Marketing is one of the easiest, most effective and affordable ways to grow any business. This is because it keeps the customers and prospects coming back, in terms of more product demand and feedback on products already bought. Thus the business owner or entrepreneur can make amends as at when due and satisfy its customers more. By using attractive, professional-looking email communications to stay in regular touch with customers and prospects, you build strong relationships. Email is the most personal advertising medium amongst all other forms of digital marketing tools in history (Babalola & Babalola, 2013).
1.2 STATEMENT OF PROBLEM
Small and Medium Enterprises (SMEs) in Nigeria have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development of Nigeria. This situation has been of great concern to the government, citizenry, operators, practitioners and the organized private sector groups. Year in year out, the governments at federal, state and even local levels through budgetary allocations, policies and pronouncements have signified interest and acknowledgement of the crucial role of the SME sub-sector of the economy and hence made policies for energizing the same. Just as it has been a great concern to all and sundry to promote the welfare of SMEs, it has also been a great cause of concern to all, the fact that the vital sub-sector has fallen short of expectation. The situation is more disturbing and worrying when compared with what other developing and developed countries have been able to achieve with their SMEs (Basil, 2011).
However with all the problems above which plaque the SME sub-sector in Nigeria, there is need for a good marketing skill. This is due to the fact that the world is become a global village. The appearance on the scene of the Internet, especially Web 2.0, and the social networks is challenging the levels of power and influence of the agents who build brand image. With the extraordinary power of propagation of these messages on the Web, customer opinions, recommendations and complaints are increasingly the determining factor in creating brand images. The result is that brands are clearly been built bi-directionally. Decisions are made based not only on messages sent by companies to their customers, but technology is making it easier for people to converse. Thus a transfer of power is witness from companies to their consumers. Consumers‟ final decisions to buy are therefore largely based on recommendations from others who have already bought or used the products or service in question, and who share their buying and consumption experiences on the Internet. This phenomenon is taking off at a phenomenal rate, and for many consumers pages like Tripadvisor and Ciao have already become essential pre-purchase references. In this kind of environment, a skilful management of the brand experience seems to be one of the key factors for brand success. Only satisfied customers will give us positive recommendations in these virtual environments, which then favorably influence the decision to buy of our customers who consult these platforms.
At the same time, another key success factor in this cut-throat environment is the development of effective strategies for influence and communication on Web 2.0 and the social networks. Unfortunately, many companies are clearly still in denial and failing to adopt pro-active strategies for an Internet presence. Some earmark a percentage of their communications investment for the Internet, but with no overall idea of what the medium can offer them, or of how a web presence must be integrated with other brand communications. Too many companies are still trying to control public network conversations on their brands, and too few are dedicating.
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to examine digital marketing as a key driver of sales improvement in small and medium scale enterprises (SMEs) in Lagos Metropolis.
The sub-objectives of the study are to:
- Explore the relationship between the forms of digital marketing (email, search engine, online advertising and blog) and sales improvement in SMEs in Lagos metropolis.
- Examine the effects of the implementation of digital marketing on the performance of SMEs in Lagos.
1.4 RESEARCH QUESTIONS
The study is targeted to providing meaningful answers to the following research questions:
- What is the relationship between the forms of digital marketing (email, search engine, online advertising and blog) and sales improvement in SMEs in Lagos Metropolis?
- What are the effects of the implementation of digital marketing on the performance of SMEs in Lagos Metropolis?
1.5 RESEARCH HYPOTHESIS
In accordance with the objectives of the study, four hypotheses were developed and they are stated as follows.
- H0: Online advertising has no significant influence on sales improvement of SMEs in Lagos metropolis.
- H0: E-mail marketing has no significant influence on sales improvement of SMEs in Lagos metropolis.
- H0: Blog marketing has no significant influence on sales improvement of SMEs in Lagos metropolis.
- H0: Search engine marketing has no significant influence on sales improvement of SMEs in Lagos metropolis.
1.6 JUSTIFICATION FOR THE STUDY
Small and medium scale enterprises play a vital role in the economy of Lagos State in particular and to the Nigerian economy in entirety. SMEs contribute to the gross domestic product of the state, and also serve as the platform of minimizing the rates of unemployment in the land, as it allows individuals to be job owners and creators.
Several studies conducted in Nigeria and Diaspora has assessed the determinants of sales improvement in the context of performance. Studies done by Rondon (2007) and Bitton (2011) showed that the major variables focused on were environmental factors, size of the company, pricing policy, competition, firm’s marketing strategy, field salesperson characteristics, territory/location, and size of customers. Furthermore, studies carried out by Babalola and Babalola (2013); Njau and Karugu (2014) and Agwu and Murray (2014) examined the impact of digital or electronic marketing adoption on the overall performance of SMEs. In the light of this, the study was necessitated by scanty empirical studies on the influence of digital marketing on sales improvement in SMEs particularly in Lagos metropolis.
It is highly believed that this study through its findings and policy recommendations would be useful to micro, small and medium scale enterprises, investors, business analysts, financial institutions, non-financial institutions, stakeholders in the corporate world and government through its agencies such as ministry of trade, industry, investment and commerce. It will also be beneficial to future researchers that intend carrying out studies in this regard.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
The study examined digital marketing as a key driver of sales improvement in SMEs with strong emphasis in Lagos metropolis. The limitations encountered during the course of carrying out the study include control limitation, time limitation and financial limitation.
Control Limitation- The researcher was limited to carrying out the study in Lagos metropolis based on the directives of the project supervisor.
Time Limitation- The time allocated to the researcher to carrying out this study was relatively short, given other academic commitments.
Financial Limitation- As a result of paucity of fund, the researcher was unable to sample SMEs across the length and breadth of the metropolis.
Inspite of these stated limitations, a robust, quality and fact-finding research was carried out.
1.8 METHODOLOGY
The study adopted the descriptive survey research design in addition to the multi-stage sampling technique in order to select suitable sample for the study. At the first stage, the stratified sampling technique was adopted to divide Lagos Metropolis into two strata – Lagos Island and Lagos Mainland. At the second stage, the purposive sampling technique was adopted to select 75 SMEs per stratum to give an aggregate sample size of 150 respondents. A standardized questionnaire was used to collect data for the study and the data obtained were analyzed using the descriptive statistics technique, Pearson correlation analysis and analysis of variance (ANOVA).
1.9 KEY DEFINITION OF TERMS
Marketing: It refers to the communication between a person (sales person) and his actual or prospective customers with the aim of selling ones product or service to them.
Digital Marketing: it refers to the use of electronic devices and tools to create to communicate to actual or prospective customers of a firm with the aim of selling ones product or service to them.
Sales: The exchange of a commodity or money as the price of a good and services.
Sales Improvement: This refers to a significant increase in the level of firm’s sales.
Small and Medium Scale Enterprise: An enterprise which has less than 100 workforce and have an annual turnover not exceeding N1 million.
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