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

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 BusinessEnterprises (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 developmentefforts by successive governments due to multifarious reasons such as, the failure of past industrial policies hitherto anchored on large and capital intensiveindustries, the discovery that vibrant small business enterprises and medium enterprises cancontribute 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 asMalaysia, Indonesia and India where small and medium enterprises development havebeen 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 2007and even beyond.

Small scale business constitutes the real fabric of a nation’s economic development. Globalization has madebusiness 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

1.    Customers

2.    Employees

3.    Channel partners (Distributors, suppliers etc)

4.    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?

1.10    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.

1.11    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.

1.12    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.

1.13    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 managementprocess through which goods and servicesmovefrom conception to the customer (www.businessdictionary.com).

Relationship:A connection between variables, such as a correlation, or between people, such as a marriage (www.businessdictionary.com).

Corporate: Formed into an association and endowed by law with the rights and liabilities of an individual (www.businessdictionary.com).

Enterprise: A project or undertaking that is especially difficult, complicated, or risky (www.businessdictionary.com).

Relationship marketing: Marketingactivities that are aimed at developing and managing trusting and long-termrelationships with larger customers. (www.businessdictionary.com).

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’sperformance as compared to goals and objectives. (www.businessdictionary.com)

Small business enterprise: Independently owned and operated and not dominant in its field of operations. The size will vary from industry to industry (www.frbatlanta.org).

Profitability: The state or condition of yielding a financialprofit or gain. It is often measured by price to earnings ratio(www.businessdictionary.com).

Customer’s loyalty: Likelihood of previous customers to continue to buy from a specific organization (www.businessdictionary.com).

Economic development: Progress in an economy, or the qualitativemeasure of this (www.businessdictionary.com).

Market place: Alternative term for market (www.businessdictionary.com).

Competitiveness:Ability of a firm or a nation to offerproducts and services that meet the quality standards of the local and worldmarkets at prices that are competitive and provideadequatereturns on the resourcesemployed or consumed in producing them (www.businessdictionary.com).

Entrepreneur: Someone who exercisesinitiative by organizing a venture to takebenefit of an opportunity and, as the decisionmaker, decides what, how, and how much of a good or service will be produced (www.businessdictionary.com)

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