Assessing The Effect Of Relationship Marketing On Corporate Performance In Small Business Enterprises

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Assessing The Effect Of Relationship Marketing On Corporate Performance In Small Business Enterprises


Abstract


The study examined the effect of relationship marketing on corporate performance in small business enterprises using Entrepreneurs of Small Business Enterprises in Lagos state as case study. Relationship marketing is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication. The objective of the study was to evaluate the extent of practice of relationship marketing in Small Business Enterprises in Lagos, to identify how relationship marketing leads to improved performance of Small Busines Enterprises (SBEs) in Lagos and to justify relationship marketing as it impacts SBEs competitiveness in the market place. The study tested the hypotheses that the practice of relationship marketing does not lead to improved performance of Small Business Enterprises (SBEs) and that relationship marketing does not lead to SBEs’ competitiveness in the market place.

Survey research method was used. A self-designed instrument was used as research instrument for data collection. The validity of the instrument was tested using expert opinion while the reliability of the instrument was tested using test re-test reliability technique result of which gave 0.7. the study adopted simple random technique in selecting the respondents while the sample size was one hundred (100) respondents in Ojo local government area of LagosState. chi-square statistical verification method was used in analyzing and interpreting the data gathered from the respondents and was tested at 0.205 significance level.

The study found out that the relationship marketing has positive effect of the corporate performance of small business enterprise in Lagos state as it leads to organizational profitability, organizational growth, increase in revenue base, increased performance and effectiveness, customer retention, increase in client-base, increased customer loyalty and increased sales. This research work however recommends that SBEs should structure their relationship marketing strategies around their consumer/customers, get organized, know their customers, develop a communication plan and coordinate communications, strive to improve corporate performance and market share and improve customer service and focus on customer retention. It was further suggested that SBEs should not limit their focus or attention to only internal markets, but also to external markets and SBEs should build close, profitable and long-term relationship with their customers.


Chapter One


Introduction

1.1 Background to the Study

According to Oyedijo, Idris and Aliu (2012), governments world-wide have come to realize that Small Business Enterprises (SBEs) contribute enormously to the growth and development of a nation’s economy. Small Business Enterprises (SBE’s) play a major role in the world economy, and their contribution to economic and employment growth is widely recognized. Small Business Enterprises (SBE’s) do play a major role in the world economy, and they are recognized as one of the main contributors to economic, development and employment growth.

Small Business Enterprises in conjunction with the medium enterprises are known to employ over 60%of Nigeria’s workforce (World Bank, 1995 cited in Adelaja, 2004).

According to Ojo (2004 as cited in Oyedijo, 2012), in the case of Nigeria, we have witnessed an upsurge in Small Business Enterprise development efforts by successive governments due to multifarious reasons such as, the failure of past industrial policies hitherto anchored on large and capital intensive industries, the discovery that vibrant small business enterprises and medium enterprises can contribute to achieving many of the objectives of Nigeria’s development plans, an increase in emphasis now placed on self-reliance as an approach to development, a world-wide acknowledgement of the successes recorded in economies such as Malaysia, Indonesia and India where small and medium enterprises development have been used to accelerate industrial transformation and the significance of small and medium enterprises in the Poverty Eradication Programme(PEP) of Nigeria’s President Olusegun Obasanjo regime during the period 1999 to 2007 and even beyond.

Small scale business constitutes the real fabric of a nation’s economic development. Globalization has made business system to have undergone a number of changes in recent years. These changes are accompanied bygrowth both in size and magnitude. To cope with these changes, modern marketing techniques are used incontemporary business environment. One of such techniques is relationship marketing. Relationship Marketing is a marketing strategy whose objective is to establish and maintain a profitable, long-term relationship with a customer, which goes beyond the initial contact (Dauda et al, 2010).

Relationship marketing is a form of marketing that evolved from direct response marketing; it places emphasis on building longer-term relationships with customers rather than on individual transactions. Relationship marketing involves an understanding of customers’ needs and wants through their lifecycle and providing a range of products or services accordingly (Adewunmi, 2007).

Ogunleye (2004) buttressed that due to the rise in the number of competitors as well as the buying options in front of consumers, relationship marketing has been on the rise. Relationship marketing involves making strong and deep relationship with the consumers (whether they be individuals or organizations), such that the consumer does not shift a brand and has a long term and satisfying relationship with the brand.

Relationship marketing need not be used only with your end customers. Your stakeholders are equally important. That is why one of the key goals of marketing activities today is to build strong relationships with customers and stakeholders. Thus in all, the various entities involved in relationship marketing are

  • Customers
  • Employees
  • Channel partners (Distributors, suppliers etc)
  • Financial partners (Shareholders, investors etc)

A firm needs to build a strong relationship with all these entities to be in the front. Imagine having a high defection rate, or having a high attrition in the organization. Defection rate is the rate of a customer leaving its brands, whereas attrition rate is the rate at which an employee leaves a company which has hired him. You do not want a high defection or attrition rate. And hence the use of relationship marketing (Oyedijo, et al., 2012)

These four entities together can also be known as the “Marketing network” for relationship marketing. One of the smarter strategies for a company to generate profits is simple – Take good care of your marketing network and your profits will follow. Imagine a highly motivated employee working alongside a highly motivated channel partners. This builds confidence for the company from the point of view of the customers which in turn brings sales and better numbers. This attracts the financial community and they in turn start investing in the company. Thus in essence, relationship marketing can actually take the organization to a whole new level of generating business and profits.

Adekunle (2005) contributed that overall, relationship Marketing builds a tight knit for the company bringing its main players together and thereby taking the company forward. This in turn results in high performance and high rewards. As said by Leonardo Dicaprio in the movie Inception – A positive motivation always trumps a negative thought. This is where the crux of relationship marketing lies. A positive motivation which brings people together builds a strong bond and helps the company in achieving its goals.


1.2 Statement of the Problem

Small Business Enterprises contribute in no small measure to the growth and development of a country and is also seen as tool for entrepreneurial development which in turn impacts the GDP of such country.Relationship marketing has been proffered as a necessary skill if profitable and long-term relationships with customers areto be established, maintained and sustained. However, the extent of practice of relationship marketing in small business enterprises in Lagos is yet to be ascertained, while managers are also left with the task of adjudging if relationship marketing leads to improved performance of small business enterprises in Lagosat all.

Another problem is ascertaining if relationship marketing impacts small business enterprises competitiveness in the market place. It is these gaps in literature that this study sets out to fill.


1.3 Objectives of the Study

The objective of this study can be stated as follows:

  1. To evaluate the extent of practice of relationship marketing in Small Business Enterprises in Lagos.
  2. To find out whether relationship marketing leads to improved performance of Small Business Enterprises (SBEs) in Lagos.
  3. To establish whether relationship marketing impacts SBEs competitiveness in the market place.

1.4 Research Questions

In order to give focus to the study, the following research questionswere set to guide the study:

  1. What is the extent of practice of relationship marketing in Small Business Enterprises in Lagos?
  2. Does relationship marketing lead to improved performance of Small Business Enterprises (SBEs) in Lagos?
  3. Does relationship marketing impact SBEs competitiveness in the market place?

1.5 Research Hypotheses

The study tested two null hypotheses, viz:

  1. That there is no significant relationship between relationship marketing and improved performance of Small Business Enterprises (SBEs) in Lagos.
  2. That there is no significant relationship between relationship marketing and SBEs’ competitiveness in the market place.

1.6 Scope / Delimitation of the Study

This study is limited to Entrepreneurs of Small Business Enterprises in Lagos. It will focus more on enterprises that actively embrace marketing. It will lay emphasis on the extent of practice of relationship marketing on small business enterprises in Lagos, its impact on SBEs competitiveness in the market place, and how it impacts on improved performance in Lagos.


1.7 Limitations of the Study

This research work is limited by finance and time. Time needed to extend the research work to different local government and council areas in Lagos, time needed to take the research work outside Lagos and finance needed to engage this task in terms of transportation, stationery etc.


1.8 Significance of the Study

This research work provides readers with various skills and techniques of relationship marketing with its overall effect on the growth of SBEs. It will also get the researcher acquainted with the concept while prospective entrepreneurs will also be equipped with the rudiments and required marketing skills needed to expand their business and improve their performances. It is also hoped that the society will be empowered with these skills and techniques while government will also be informed on the need to create necessary conditions needed to make SBEs thrive and improved in the country through relationship marketing.


1.9 Definition of Terms

Marketing:

The management process through which goods and services move from conception to the customer.

Relationship:

A connection between variables, such as a correlation, or between people, such as a marriage

Corporate:

Formed into an association and endowed by law with the rights and liabilities of an individual

Enterprise:

A project or undertaking that is especially difficult, complicated, or risky

Relationship marketing:

Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers.

Customer:

One that purchases a commodity or service

Development:

The act, process, or result of developing

Growth:

The process of growing

Performance:

The execution of an action

Organizational performance:

An analysis of a company’s performance as compared to goals and objectives.

Small business enterprise:

Independently owned and operated and not dominant in its field of operations. The size will vary from industry to industry

Profitability:

The state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio

Customer’s loyalty:

Likelihood of previous customers to continue to buy from a specific organization

Economic development:

Progress in an economy, or the qualitative measure of this

Market place:

Alternative term for market

Competitiveness:

Ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them (

Entrepreneur:

Someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced (www.businessdictionary.com).


Chapter Five


Summary, Conclusion and Recommendations

1.1 Summary

The study seeks to assess the effect of assessing the effect of relationship marketing on corporate performance in small business enterprises. The sole aim of the study is to find out the role of relationship marketing in increasing or improving corporate performance of small business enterprises in LagosState. In this study, background to the study was examined to describe relevant issues to the project work which involved brief elucidation. Appraised in the research work is the statement of the problem and purpose of the study which explained reasons for carrying out the research work. Also the importance of the research work was expressed in the earlier chapter of this research work while the research questions and hypothesis were also generated as to be able to make proper investigation into the research.

Beyond this, deducible facts from internet and other sources through open literature were presented in the second chapter of this work which enables the researcher to survey frontiers of knowledge and this on the research questions.

The research method adopted for the study was a descriptive survey research method to collect information needed for the study using 100 persons randomly selected from within Ojo local government area of Lagos state as respondents. With the use of a well structured questionnaire, information was gathered from the respondents.

In interpreting and analyzing the data, chi-square was adopted starting with analysis of bio-data and then evaluation of hypothesis where the result of the findings was presented in the fourth chapter. Having subjected the hypotheses to chi-square verification all the null hypotheses raised for the study was rejected.

Finally, the fifth chapter made a general summary of the research work where conclusions were drawn and profitable recommendations were made.


5.2 Conclusion

One of the most effective ways to market your services and brand is through the strong relationships you already have with existing clients. Relationship marketing leads to a greater client experience with your firm. A greater client experience translates into a stellar reputation for your firm, which in turn leads more of the right clients to your door.

Relationship marketing is a strategy designed to foster customer loyalty, interaction and long-term engagement. Relationship marketing is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication. This approach often results in increased word-of-mouth activity, repeat business and a willingness on the customer’s part to provide information to the organization.

As enunciated by Akinyetun (2009) in a study carried out for ‘starbucks int’l’, relationship marketing has been said to have the following benefits

  1. Consistent Customer Experience – Organizations that are aligned across all touch points seamlessly share information and work together to ensure customer’s needs are addressed with minimum effort. This is particularly important when the consumer is experiencing challenges with the product or service. Quickly resolving issues builds trust and it can improve customer satisfaction.
  2. Customer Feedback – When the organization’s culture facilitates open communication and cooperation, consumer concerns, complaints and compliments can quickly be addressed. By paying careful attention to positive and negative trends, organizations can use this feedback to make appropriate adjustments to product or service offerings, ensuring customer satisfaction.
  3. Customer Profitability – Relevant communications and offers motivate consumers to use the full complement of product and service offerings. Because consumers understand the benefits of the offerings, they are typically more compliant and they remain customers for longer periods of time.
  4. Customer Advocates – Consumers who are pleased and enjoy a consistent experience increasingly share this information with each other. Increasingly consumers are turning to each other for suggestions and recommendations. Make it easy for your customers to share their experience, but first make sure they have a consistently good experience.
  5. Innovation – Organizations, invite their customers to provide ideas. Consumers are allowed to share, vote and discuss each others’ ideas. Most important, they are kept apprised of the status of ideas. There are other ways organizations can invite consumers to share ideas and insights.

This study however concludes that relationship marketing is an effective strategy in improving performance of Small Business Enterprises (SBEs) in Lagos and that relationship marketing increasing the competitiveness of SBEs in the market place whilst increasing market share.


5.3 Recommendations

This research hereby makes the following recommendations

  1. SBEs should increase brand awareness
  2. SBEs should improve customer service and focus on customer retention
  3. SBEs should broaden their reach and generate media attention
  4. SBEs should structure their relationship marketing strategies around their consumer/customers
  5. SBEs should build close, profitable and long-term relationship with their customers
  6. SBEs should get organized, know their customers, develop a communication plan and coordinate communications.
  7. SBEs should not limit their focus or attention to only internal markets, but also to external markets
  8. SBEs should strive to improve corporate performance and market share

5.4 Suggestion for Further Studies

This research also makes the following suggestions for further studies

  1. The effect of relationship marketing on customer loyalty
  2. A comparison of relationship marketing in public and private sectors
  3. How relationship marketing improves customer relationship
  4. How relationship marketing affects an organization’s market share
  5. Comparison between the performance of relationship marketing in both developing and developed economies.

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