Effects of Social Media Marketing Strategies on Customer Loyalty of Msmes in Lagos State

Effects of Social Media Marketing Strategies on Customer Loyalty of Msmes in Lagos State

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Chapter One of  Effects of Social Media Marketing Strategies on Customer Loyalty of Msmes in Lagos State

INTRODUCTION

Background to the Study

Over the last decade, global technology has developed swiftly and has brought about a significant change to the way of living in human society. Challenges that have once affected the efficiency and communication speed have been drastically reduced via the developments in technology, which has led to the creation of new platforms or ways which aim to connect audiences globally (Hasnain, Nasreen & Ijaz, 2015). One of these platforms is the use of social network online which has provided the opportunity to use several platforms on the internet as mediums of communication, from email to Twitter and Facebook. This has significantly contributed to social interactions with no need for physical meetings (Picard & Robert, 2011). In Africa, the introduction of social media has been helpful for numerous businesses as it provides them with the platform to generate widespread brand awareness without expending too much marketing resources. Similarly in Nigeria, the usage of social media has been developed into an integrated part of the marketing efforts of business organizations most importantly Micro Small and Medium Enterprises due to the growing number of online consumers. This has however raised the level of interest in the use of social media as a marketing tool.

Social media is assuming a huge part in different facets of life. It supports users in various phases of life such as in business, marketing, politics and education (Hennig-Thurau, 2010). From the business perception, organizations and buyers can connect and communicate directly via social media with each other, and accordingly find out whatever items and services they’re in the lookout for (Parson, 2013). Today, customers are dynamically using innovation and most importantly social media as an effective tool in their online shopping process. This process can be characterized just like an electronic process that allows a client or customer to manage representatives and address their buyers’ needs. According to Pookulangara and Koesler (2011) in their examination of social media showcasing revealed that social media empower twenty five percent (25%) of all consumers to post connects concerning products and services information in their retail sites to update various users or consumers regarding the buying process. Similarly, Miller (2010) expressed in his assessment of online marketing that social marketing has played a significant role in influencing consumers buying decision online. In his assessment, he discovered that about seventy percent (70%) of users or consumers are going by social media to get helpful information about a product or service, forty nine percent (49%) of them settled on the decision to buy specific item and sixty percent (60%) of consumers prefer to share their information regarding the products with another user online using social media platforms. In addition the rate of online users or consumers is increasing in other countries such as China, Japan, India, and Australia for around eighty seven percent (87%), eighty five percent (85%) (North Asia and Europe), eighty three percent (83%) (North America), eighty one percent (81%) (South and Latin America) and fifty three percent (53%) (Africa & Pakistan) (Solorzano, 2011). The general online buying procedure has been able to empower over 875 million buyers to help the rate of other online users or customers to forth percent (40%) over the last two years simply because of product reviews and referrals posted across different social media platforms about items (Hutton & Fosdick, 2018). Hence, social media platforms have been able to provide the perfect place for promotional efforts as a result of the wide span of connected people on the platforms (Sarapaivanich & Patterson 2015). This has however helped to enlarge the coverage that brands have today (Kelton, 2014). However, in the present business environment, having high brand awareness amongst users or customers isn’t enough to guarantee the profitability and ultimately sustainability of an organization. Moreover, it is essential that their customer loyalty is high.

The loyalty of customer shows the customer preference to buy a particular brand; however, the customers believe that a brand offers the enjoyable features, images, or standard of quality at the right price (Saeed, Ahmed & Musa, 2013). This belief and faith of the customer develop into a base for new buying habits. At first, customers can buy a brand for trial; however, if satisfaction is derived from the brand product or service, then it will enable customers to keep buying the product from the certain brand (Oladepo & Ambibola, 2015). Today, the loyalty of customer has increasingly become the key to an organization survival in the business world. According to Claveria (2018) the loyalty of customer is vital in enhancing profitability simply because it is less expensive to retain customers than to get new ones. Furthermore, Moisescu (2014) reckons that the loyalty of customer is the key to the marketing efforts of MSMEs as loyal customers help when it comes to referral marketing and word of mouth marketing. Therefore, satisfying a customer doesn’t only mean to keep the customer however, it also means getting new customers. Furthermore, according to Brain and Co (2018) customer loyalty enhances the profitability of business by as much as 40%.

Majority of business organizations most especially MSMEs are beginning to appreciate and recognize the value of customer loyalty to improving business performance. Furthermore, many MSMEs have come to realize that social media is the key to their marketing efforts to ensure increased customer loyalty. For instance, Claveria (2018) found that loyal customers promote brands that they’re loyal to via word of mouth on social media platforms. In addition, social media platforms have been used by MSME brands to foster cordial relationships with their customers through interaction, receiving feedback from customers and addressing customer complaints on social media platforms (Kaplan, 2010). This has however helped to create an emotional connection between these MSME brands and their customers.

However, despite the increase in the usage of social media by MSME brands and business organizations the world over, majority of MSME in Lagos State don’t use it for marketing purposes and those that simply use it aren’t aware of the right combination and integration of social media marketing strategies that’ll be effective in delivering an enhanced customer loyalty. Therefore, this study will aim to determine the effect of social media marketing strategies on customer loyalty of MSMEs in Lagos state.

Statement of the Problem

For any economy to thrive, the growth and success of MSMEs plays a vital role. Therefore, it is a sad fact that over 80% of MSMEs in Lagos State have shut down in the past five years (Onugu, 2015). Several studies have sought to investigate the root of this remarkable experience and have attributed it various reasons to lack of managerial skill, wrong business decisions, improper or insufficient accounting record keeping, harsh economic policy, bad debt, inadequate capital, internal fraudulent activities and many more (Onugu, 2015; Olorunshola, 2003; Owolabi&Makinde, 2013). According to Chijioke (2013), one major obstacle to the success and sustainability of MSMEs in Lagos State is their poor customer loyalty. He further attributed their inability to ensure a high customer loyalty to their poor usage of social media as a marketing strategy. However, the dilemma is the fact that there aren’t studies in Lagos State that show MSMEs the most effective strategies to use on social media.

According to Miller (2010), he opined that the best strategy for MSMEs to use on social media is content marketing. Content marketing entails the use of social media posts in words, images and videos to communicate to customers and target customers alike. According to Miller (2010), he stated that, it is the best way of increasing customer engagement and ultimately customer retention and conversation. However, Paquette (2013) in his study showed that content marketing doesn’t have any effect on the retention of customer. Therefore, there isn’t certainty as to the effect of content marketing on customer retention.

Furthermore, Kietzmann (2011) opined that influencer marketing was simply the best social media strategy for MSMEs to key into. Influencer marketing entails the use of popular social media personalities to promote brands on social media platforms. These social media personalities could be athletes, artistes, actors, hypemen or bloggers. However, Ashley (2015) reckoned that MSMEs can’t afford the costs of influencer marketing as it’s of no assurance to improve customer’s commitment. Thus MSMEs in Lagos State are uncertain of the relationship of influencer marketing with customer commitment.

Similarly, Furlow (2011) opined that the best social media strategy for MSMEs to use is the social media interaction with customers. Social media interaction entails the use of social media platforms to converse with customers and get their feedbacks. According to Jahn and Kunz (2016), 33% of social media users however prefer to contact brands using social media rather than the telephone. Furthermore, Accenture (2018) 51% of consumers are found loyal to brands that interact with them via their preferred social media channels. However, Paquette (2013) in his study showed that social media interaction with customers can either be good and bad depending on the product or service quality. He further noted that social media interaction with customers can bring about negative publicity for brands if they don’t smartly handle customer complaints concerning their products or services on social media leading to disgruntled and unsatisfied customers. Consequently, MSMEs in Lagos State are reluctant to key into social media interaction as a strategy to enhance customer satisfaction.

Additionally, Kempe and Chin (2013) stated that, the most effective social media marketing strategy for MSMEs is the use of referral marketing. Referral marketing entails the use of word of mouth on social media to spread awareness concerning a brand. It can either be organic or strategically driven by a brand. Studies have shown that online consumer are twice more likely to purchase a product or service recommended to them by a friend on social media than a product or service advertised to them by the brand. According to Kempe and Chin (2013), the use of referral marketing enhances the trust that consumers and customers have in a brand. However, Amaefule (2017) disagreed noting that consumers in Lagos State are generally distrusting and can’t be easily persuaded even through referral marketing. He therefore notes that brands who key into referral marketing on social media in Lagos State more often than not end up wasting their marketing resources. As a result, MSMEs in Lagos State aren’t keen on the use of referral marketing as they are not sure if it enhances customer’s trust in a brand.

These problems have restricted the adoption and usage of social media as an effective marketing strategy and subsequently reduced the customer loyalty of MSMEs in Lagos State. Therefore, it is against this backdrop that this study aims todetermine the effect of social media marketing strategies on customer loyalty of MSMEs in Lagos state.

Objectives of the Study

The general aim of the study is to determine the effect of social media marketing strategies on customer loyalty of MSMEs in Lagos state. The specific objectives of the study are to:

1. determine the significant effect of content marketing on customer retention;
2. determine the significant relationship between influencer marketing and customer commitment;
3. determine the significant effect of social media interaction on customer satisfaction; and
4. determine the significant effect of referral marketing on brand trust.

Research Questions

The study will aim to answer the following questions during the course of the study

1. What is the effect of content marketing on customer retention?
2. Is there a significant relationship between influencer marketing on customer commitment?
3. What is the significant effect of social media interaction on customer satisfaction?
4. What is the significant effect of referral marketing on brand trust?

Research Hypothesis

The following hypotheses are formulated for testing:

H₀₍₁₎: There is no significant effect of content marketing on customer retention.  

H₀₍₂₎: There is no significant relationship between influencer marketing on customer commitment.  

H₀₍₃₎: There is no effect of social media interaction on customer satisfaction.

H₀₍₄₎: There is no significant effect of referral marketing on brand trust.

Scope of the Study

The study will focus on the effect of social media marketing strategies on customer loyalty of MSMEs in Lagos state. The target population is the marketing executives of 5 SMEs in Lagos. The study will adopt the simple random sampling technique while data will be analysed using the regression analysis. The geographical location of the study will be Lagos state Nigeria. Finally, the study would be carried out between September 2018 and April 2019 (8 months).

Operationalization of Variables

The dependent variable is customer loyalty, represented by customer satisfaction, customer retention, customer commitment, brand trust. On the other hand, social media marketing strategies, being the independent variable, is proxied by content marketing, influencer marketing, social media interaction, referral marketing.

Y= f (y₁, y₂, y₃, y₄)

Y=       Customer Loyalty.

y₁=      Customer satisfaction.

y₂=      Customer retention.

y₃=      Customer commitment.

y₄=      Brand trust.

X= f ( x₁, x₂, x₃, x₄)

X=       Social Media Marketing Strategies.

x₁=      Content marketing.

x₂=      Influencer marketing.

x₃=      Social media interaction.

X₄=      Referral marketing.

The four specific objectives are operationally expressed as:

Content Marketing and Customer Satisfaction

y₁= f (x₁)

y₁= b₀ + b₁x₁ + u

Influencer Marketing and Customer Satisfaction

y₂= f (x₂)

y₂= b₀ + b₁x₂ + u

Social Media Interaction and Customer Commitment

y₃= f (x₃)

y₃= b₀ + b₁x₃ + u

Referral Marketing and Brand Trust

Y₄= f (x₄)

Y₄= b₀ + b₁x₄ + u

Significance of the Study

The study will be significant to Management and Owners of MSMEs in showing the importance of a veritable social media presence aimed at convincing consumers about their product quality.

The study will be significant to Industries by allowing them understand the importance of marketing through social media sites and building consumer trust therein which instigates their preference before buying products. This in turn would increase brand loyalty as well as increase profitability.

The study will be beneficial to society as it will educate consumers on the indicators that affect their choices especially the mediums to use and the impact of the clout of online followers on their tastes and preferences when buying products. This research will also help consumers understand the need to consider usefulness and needs in relation to their satisfaction before buying products.

Definition of Operational Terms

Consumers: Consumers are people who buy products and services provided by the producers. (Hershey & Blanchard, 2017)

Consumer Behaviour

Consumer behavior is the study of the process involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires (Solomon & Bamossy, 2006)

Consumer Buying Behavior

This refers to buying behavior of final consumers, both individuals and households, who buy goods and services for personal consumption (Ananda Kumar, 2010)

Consumer Decision Making

A consumer decision making process includes 5 stages to acquire a product or services. From the very beginning stage consumer recognize the need, gather the information and sources, evaluate alternatives and make the decision.(Kotler & Armstrong 2005)

Social Media

Social media is a group of internet-based applications that build on the ideological and technological foundations of web 2.0 that allow the creation and exchange of User Generated Content (Kaplan & Haenlein 2010).

Economic Factors

The set of fundamental information that affects a business or an investment’s value. (Business Dictionary, 2017).

Socio Cultural Factors

Are customs, lifestyles and values that characterize a society (Judith Kozenkow, 2017)

Historical Perspective of the Research Context

Micro Small and Medium Enterprises were chosen for the study due to the fact they have struggled with their marketing efforts to increase their brand awareness and improve customer loyalty.

In Nigeria, the National Council of Industries refers to MSMEs as business enterprises whose total costs, excluding land, are not more than two hundred million naira (₦200, 000,000.00) (Onugu, 2005). However, the Small and Medium Sized Development Agency of Nigeria (SMEDAN) defines SMEs based on the following criteria: a micro enterprise as a business with less than 10 people with an annual turnover of less than ₦5,000,000.00, a small enterprise as a business with 10-49 people with an annual turnover of ₦5 to 49,000.000.00; and a medium enterprise as a business with 50-199 people with an annual turnover of ₦50 to 499,000.000.00.

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