Effect of Digital Marketing on Growth of Small Scale Enterprises in Lagos, Nigeria
Chapter One
OBJECTIVES OF THE STUDY
The main objective of the study is to examine digital marketing and growth 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.
CHAPTER TWO
LITERATURE REVIEW
Theoretical Review
The study was anchored on several theories that are captured hereunder:
Network/Social Network Theory
The network approach’s concept originates from several of the structural concepts brought forward by sociological thinkers such as Emile Durkheim, Georg Simmel and anthropologist Radcliffe-Brown whose research were largely based on comprehending the structure and impact of relational webs or “networks” of social associations between and among individuals. Network theory analyses all kinds of relationships, whether it is between people, animals or things. Social network analysis is an overlapping instrument used for learning about patterns that manifest within social networks and their influence on behaviour. Digital marketing channels are important in this respect since they allow marketers to listen and understand what is said by consumers, and also enable them to take advantage of the power of influential users so as to be able to spread the messages to other people in their networks. Research indicates that the very powerful users are those with the most impact across a number of differentiated networks.
The network theory sees social relationships in terms of nodes and ties. The nodes are the players within the networks, and ties are the relationships amongst the players. Various types of ties are present between the nodes, and in its basic form, a social network outlines all the relevant ties between the nodes being analysed. The network can also be used to “determine the social capital of individual players”. These ideas are usually exhibited in a social network diagram, where nodes represent the points while ties are the lines. This theory is useful in the study since it analyses how SMEs can maximize their ‘networks’, in this case their customers.
Theory of Collective Intelligence
Collective intelligence refers to a process where large numbers of people can converge simultaneously upon the same point(s) of knowledge, while at the same time achieving intellectual performance. The theory of collective intelligence postulates that groups are generally smarter and more productive than the sum of the individuals. Crowdsourcing is an internet phenomenon in which projects are broken down into small, individual tasks that are distributed to a large number of individuals for completion, and is known to have collective intelligence characteristics. According to Tapscott and Williams (2008), for collective intelligence to exist, it requires four principles. These principles are openness, peering, sharing, and acting globally.
Openness: for collective intelligence to work to its full potential, it requires people and companies to present and be candid about their ideas to the people on the internet so that their products can be improved. Peering: taking old information or products and modifying them to match yours and others’ personal needs before releasing it to the public so that people can take utilize them. Sharing: it explains how intellectual property is required to be shared with others in the group. It is essential to allow for the constant exchange of ideas and critiques around which productivity is enhanced. Acting globally principle is based on communications technologies advancement that allows organizations to reach out across their entire collaborators’ network and to engage everyone. This concept overcomes challenges such as department and branch borders in an effort to capture and utilize new ideas, new talents, and new markets. This theory is useful in the study since it indicates how digital marketing is able to bring SMEs and its consumers together to interact and be able to exchange ideas to come up with products or services that improve the whole experience.
Generational Theory
Generation theory explains that the era in which a person was born impacts their perception of the world. It also indicates that our value systems are shaped in the formative years of our lives through our families, friends, communities, significant events and the general era in which we are born (Jurkiewicz & Brown, 1998). Initiated by Strauss and Howe in 1991, generational marketing theory stipulates that consumers born during the same era, usually a 20-year period, have similar attitudes and behaviours due to shared experiences that influenced their childhood and moulded their world views. This current era can be defined as that of digital information which can be defined by the use of digital media. Generational theory is relevant to digital marketing based mainly on how each generation communicates and the online places where they can be accessed easily by marketers. This theory is useful to the study since assists SMEs to identify customer generations and homogenous groups and formulate appropriate marketing content for them using digital media.
Forms of Digital Marketing
Digital technologies have the ability to copy almost all aspects of traditional media channels and marketing communications and, in the process, cover the marketing mix. Digital promotions are, however, more specific and are a marketing communication mix component. Digital marketing involves the use of digital media in the process of carrying out the marketing practices. The forms of digital marketing include emails, mobile marketing, search engine optimization (SEO), social media, pay-per-click (PPC), online advertising, and viral marketing.
Email marketing is one of the digital marketing techniques earliest used and it involves providing personalized or targeted messages to specific people at the correct time. With the emails, businesses will deliver emails that meet the user’s requirements. Mobile marketing is defined as the use of a wireless medium to provide consumers with time and location-specific, tailored information that promotes products, services and ideas (Scharl, Dickinger & Murphy, 2005). It therefore improves the interaction between consumers and their mobile phones, the consumer- brand relationship, together with the mobile advertising capability to control the viewing environment, giving advertisers with the opportunity to create more meaningful brand relationships (Aaker, Benet-Martinez & Garolera, 2001).
Search engine optimization (SEO) is the process of designing the contents of the website to fit what the business prospects are looking for, and presenting it in a way which is easily accessible to both people and search engines. If a business wants to increase its targeted traffic to the website, the organic or natural search results (the results in the middle of the search engine results page) are the place to be (Ryan & Jones, 2009). Pay-per-click marketing provides businesses an opportunity to be highly ranked in a search pages for specific keywords and phrases through payment. It is viewed as an effective way to rapidly generate search engine traffic depending on the type of business and the specific keywords they want to rank for. Although pay-per- click continues to grow in popularity and competitiveness, keywords are becoming increasingly expensive for smaller businesses (Ryan & Jones, 2009).
Online advertising is when advertisement is done on the internet and consists of advertisements placed on search engine results pages, advertisements embedded in e- mails, and other ways in which advertisers use the internet. The primary aim is to acquire a prospective customer to act immediately by clicking on the advert (The Saylor Foundation, 2020). These advertisements are used to prompt various actions from potential customer and meet several marketing communications objectives such as increasing action, changing opinions, and increasing recall.
Affiliate marketing is a form of online advertising where a digital user or website promotes an online retailer and, depending on the sales or leads is generated for that online retailer, earns a commission (IAB Australia, 2016). In this case, the third party earns revenue every time a potential customer clicks on the link provided by the originator of the advert website. Viral marketing is a mixture of the several elements of digital marketing and it involves publicizing the message content through multiple channels. It may include Youtube videos, email marketing, blogs, and also some traditional components, all with a purpose of ensuring that the content captures the market attention and automatically spreads to other online communities.
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
According to Bryman and Bell (2007) research design can be defined as a general plan that gives an outline on how data will be collected and data analysis procedures. The study used descriptive cross-sectional research design. The descriptive study is one where information is gathered without changing the environment while a cross sectional study is one where there is a one-time interaction (snapshot) with the unit of analysis. An advantage of the cross-sectional research design is that it enables researchers to do a comparison of various units of analysis at an instant.
Target Population
Target population comprises the whole group of individuals or unit of analysis to which researchers are interested in studying in order to come up with conclusions. The study’s target population was all the SMEs in Lagos, Nigeria which comprises of thousands of SMEs in Lagos. The study used a list compiled from https://www.businesslist.co.ke/category/small-business/city:lagos which comprised of 399 small-sized companies. The study also used the list of Nigeria Top 100 companies in the last 5 years between 2012 and 2016 which has an average of 25 new entrants in a year giving a total of 200 medium-sized companies. In total, the study had a population of 699 SMEs.
CHAPTER FOUR
DATA ANALYSIS, RESULTS AND DISCUSSION
Summary Statistics
With the objective of the study being to analyse the impact of digital marketing on growth of sales of SMEs in Lagos, questionnaires were sent to 255 SMEs in Lagos, Nigeria and 190 SMEs responded by sending back the questionnaires. This gave the study a response rate of 74.5% with the other 25.5% not responding either because they were not in a position to give their SME marketing information or could not answer the questionnaire in time required for the study.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary
Marketing in an organization helps to create awareness of products and services by a business. One of the main reason companies create this awareness is to increase sales for both the short run and long run. Conventional marketing has been used by companies for many years and with the growth of technology, digital marketing channels have become greatly used by companies. As large companies have been able to adapt with the technological changes in marketing, the extent of adoption and impact of digital marketing in small and medium enterprises is not yet certain. The study therefore sought to determine the effect of digital marketing techniques on sales growth of SMEs, with the scope of the study being Lagos, Nigeria. The study also set to find out the challenges that SMEs encounter which hinder their digital marketing adoption.
With the objective, the study analysed theories relevant to the study and conducted a literature review of similar studies. The digital marketing techniques that were used to operationalize digital marketing were email marketing, mobile marketing, social media marketing, search engine optimization, pay-per-click marketing, and online marketing. These techniques were used to assess the extent to which digital marketing affects SMEs’ sales growth in Lagos, Nigeria. The study conducted a descriptive cross-sectional research design by analysing different SMEs in Lagos, Nigeria at the same time. The target population size consisted of 699 small and medium enterprises in Lagos, of which the sample size were 255 SMEs which were randomly selected. Primary data used was used for analysis purpose and was collected using a structured questionnaire. The data was analysed using descriptive and univariate techniques which were Kruskal-Wallis test and Pearson’s correlation test.
From the data analysis, it was found that email marketing had an impact on SMEs sales growth to a great extent. Mobile marketing as a digital marketing technique had an effect on SMEs’ sales growth to a moderate extent. The findings also indicated social media marketing to have an effect on SMEs’ sales growth to a great extent. Search engine optimization, pay-per-click, and online marketing all had an effect on SMEs’ sales growth to a moderate extent. From the study’s second objective, the study findings indicated that lack of digital media knowledge was the greatest challenge for SMEs in the adoption of digital marketing. This was followed by lack of suitable digital marketing techniques which was also a challenge experienced by SMEs in the adoption of digital marketing. The third challenge experienced by SMEs in the adoption of digital marketing was lack of finances, followed by the lack of time for planning and implementation.
Conclusion
From the study findings, conclusions were made in regards to digital marketing adoption by SMEs and its effect on sales growth. From the study results, it can be concluded that digital marketing has a positive effect on SMEs sales growth in Lagos, Nigeria. With regards to email marketing, the study indicated that it is used by SMEs to a great extent and the effect on sales was significant. The study therefore concludes that email marketing is important and should be used more by SMEs to improve their sales. More SMEs should start using personalized email which would be cheaper compared to niche marketing using traditional media. The study findings also indicated that mobile marketing is used to a little extent by SMEs and had a moderate effect on sales and the study concluded that it has not achieved greater sales for SMEs as would be expected.
The findings on social media marketing by SMEs indicated that it is significant factor to SMEs’ sales growth that has been used to a great extent, and it has had a positive effect on sales to a great extent. The study therefore concluded that social media marketing technique is effective to SMEs in Lagos as a means of marketing and helps to grow sales. Search engine optimization (SEO) as a digital marketing technique was found to be a significant factor on SMEs’ sales growth and had an effect on the sales to a moderate extent. The study therefore concluded that SEO as a digital marketing technique is important to sales growth even though its effect is moderate.
The study findings with regards to pay-per-click as a digital marketing tool indicated that it was significant on SMEs sales with a moderate extent. The study findings led to the conclusion that pay-per-click is significant to SMEs’ sales growth but to a moderate extent. The last digital technique to be analysed as a digital marketing tool was online marketing whose results indicated that it was significant on SMEs sales but also to a moderate extent. The study findings led to the conclusion that online marketing is significant to SMEs’ sales growth but to a moderate extent.
Recommendations
From the research findings and conclusions, the study made recommendations on the way forward on digital marketing adoption by SMEs. The first recommendation is that there should be proper sensitization and training to SMEs on available digital marketing options and how it can be done. The government and institutions such as KEPSA should come up with programs to help grow SMEs which would help the economy grow.
From the study findings, one of the recommendations for further research is of more research should be done for other counties outside Lagos as this would provide comparison and reinforcement or disapproval of this study’s findings with regards to digital marketing. The organization should also look at how digital marketing affect other aspects of a business such as brand loyalty and customer relationship management since the organization is more than sales and profits. Also, other factors that affect sales growth and profitability of SMEs should also be analysed since it is known that sales are not affected only by marketing or digital marketing, but a combination of both internal and external factors to an organization. The government should also come up with favourable policies to digital marketing so as not to restrict them when they use them. Finally, other analytical techniques apart from that used by the study should be done by researchers to determine how digital marketing affect sales growth in an organization.
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