IMPACT OF MARKETING SEGMENTATION ON PERFORMANCE OF SMALL AND MEDUIM SCALE ENTERPRISES (SMEs)

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Marketing has become an increasingly important activity within an organisation especially in recent time. This could be due to the realization on the part of management that the firms profits and its very survival are inevitably tied to the satisfaction of consumer wants and needs. It has been the belie f of most people that until the consumer derive s final utility, there are really no products, there are only raw materials. The marketing view looks at the business as directed towards the satisfaction of customer wants. Marketing is a desirable force that should surround the entire organisation. It should enter into the thinking and behaviour of al l decision makers regardless of their level within the organisation and their functional areas. When this thinking pervades the organisation, such organisation is said to be adopting the marketing cone en pt. The marketing concept as a philosophy adopts the view that the primary purpose of any organisation is to serve consumers at a profit. Even though non small and medium scale enterprises may not seek profit, they have goals by which they measure their success just as other organisations do in the other form. After the needs are determined, products or service s are designed to fulfill the needs of the target consumers. Marketers then proceed to formulate the various marketing strategies intended to appeal to the target consumers.

The division of a market into different homogenous groups of consumers is known as market segmentation. The marketing concept calls for understanding customers and satisfying their needs. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. One of the main reasons for engaging in market segmentation is to help the company understand the needs of the customer base. Often the task of segregating consumers by specific criteria will help the company identify other applications for their products that may or may not have been self evident before. Uncovering these other ideas for use of goods and services may help the company target a large audience in that same demographic classification and thus increase market share among a specific sub-market base. While there may be theoretically ‘ideal’ market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage, which is essential to its existence.

Marketing problems are simply those marketing factors that can impede, disrupt or hinder the growth, development and expansion of the firm in its effort to satisfy its target market and also create value for the organization. Small businesses face myriads of problems. Some of the problems which are relative to their size include epileptic power supply, lack of capital, inefficient management, difficulty in employing skilled manpower, fraud, inability to analyze market opportunities, advertising and marketing problems, research and production inefficiencies, problems of standardization, poor quality products, etc.

In particular, the basic marketing problems include inability to apply modern marketing techniques and strategies, difficulty in managing the firm’s advertising and other promotional tools, competition from large firms, lack of adequate research, poor and mundane production technology, lack of adequate financing of marketing activities, poor quality products and problems of standardization, warehousing, inventory control, and poor transportation facilities, branding/packaging, financing and credit facilities, risk bearing among others. Stull, Myers and Scott (2008) give these factors as marketing problems, namely: problem of standardization, competition from large scale businesses, poor sales promotion and poor bargaining power. Walt (2013) is of the opinion that lack of raw materials, scarcity of expertise labour, lack of finance and poor marketing strategies are the basic marketing problems of small scale businesses. He added that with these problems SMEs are placed at a disadvantaged position to face the onslaught of large scale enterprises in terms of quality, cost, research or assess marketing scenarios/changes which are taking place in the market in terms of taste, likes and dislikes, competition, technology etc. He concluded that SMEs do not possess the requisite expertise to adjust their operations to the changed situations. Poor advertising and non-utilization of other promotional tools may not attract the right caliber of customers to patronize the business. Specifically, Scott (2003) in Tom (2014) posits that as a result of the inability of small scale enterprises to advertise appropriately or effectively, they encounter the following problems

a) Difficulty in attracting customers

b) Difficulty in attracting quality employees

c) Difficulty to growth

d) Difficulty to compete with bigger companies, and

e) Difficulty to diversify

Tom (2014:6) also added that all these problems have led to under performance of small scale enterprises in Calabar and Nigeria at large. One major marketing problem facing small business enterprises in Nigeria is lack of understanding and application of marketing concept. Most Nigerian small business owners equate ‘marketing’ to ‘selling’ and this is reflected in their various dysfunctional business behaviour against customer satisfaction and good business and marketing orientation. They lack the knowledge and skills of basic marketing ingredientsmarketing research, market segmentation and marketing planning and control (Ayozie, Oboreh, Umukoro & Ayozie, 2013). They added that the outcome of this is poor quality products, unawareness of competition, poor promotion, poor distribution, poor pricing methods, and that SMEs are not marketing-oriented and market focused. Research on small businesses and their marketing activities have been largely limited to their explanation of certain types of behaviour observed in small businesses (Hannon & Artherton, 1998) or in the search for factors that are missing or present barriers in small businesses accounting for their apparent inability to use marketing ideas or concepts that were often developed for large businesses (Freel, 2000). Marketing theory development in SMEs has been somewhat limited and often relies on the application of classical marketing models to smaller businesses (Chaston & Mangle, 2002). The development of theories to explain the behaviour of SMEs towards marketing have generally been qualitative and descriptive (Carson, 1990) and few have been rigorously tested in practice.

STATEMENT OF THE GENERAL PROBLEM

The poor performance of small and medium scale enterprises in Nigeria has been a reoccurring problem as a lot has been said about the importance of small and medium scale enterprises to the economy of Nigeria. The poor performance of SMEs has resulted to a high rate of unemployment and ultimately has partly been responsible for the current economic challenges in Nigeria today. The rate of business failures in Nigeria has prompted the study on the impact of marketing segmentation on the performance of small and medium scale enterprises in Nigeria.

AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the impact of marketing segmentation on performance of small and medium scale enterprises in Nigeria. Other specific objectives of the study include;

1. To examine the impact of strategic marketing on small business performance.
2. To examine the level of marketing segmentation among small and medium scale enterprises in Nigeria
3. To assess the extent at which strategic marketing segmentation affects organizational sales.
4. To examine the relationship between marketing segmentation on performance of small and medium scale enterprises in Nigeria.
5. To recommend ways of improving performance of small and medium scale enterprises in Nigeria.

RESEARCH QUESTIONS

1. What is the impact of marketing segmentation on small business success in Nigeria?
2. What is the impact of strategic marketing on small business performance in Nigeria?
3. What is the level of marketing segmentation among small and medium scale enterprises in Nigeria?
4. What is the extent at which strategic marketing segmentation affects organizational sales?
5. What is the relationship between marketing segmentation on performance of small and medium scale enterprises in Nigeria?
6. What are the ways of improving performance of small and medium scale enterprises in Nigeria?

RESEARCH HHYPOTHESIS

H01: There is no significant impact of marketing segmentation on the performance of small and medium scale enterprises.

H02: There is no significant relationship between marketing segmentation and the performance of small and medium scale enterprises.

SINGIFICANCE OF THE STUDY

The study would be of immense importance towards the development of the small and medium scale enterprises in Nigeria which would by extension improve the economy. The study would also be beneficial to students, researchers and scholars who are interested in developing further studies on the subject matter through the provision of related literatures.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to the impact of marketing segmentation on performance of small and medium scale enterprises in Nigeria.

LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.