Oscar Project Final

EFFECT OF ONLINE MARKETING ON THE FINANCIAL PERFORMANCE OF
SMES IN NAIROBI COUNTY.
BY OSCAR KIROP CHELANGA
BAF-05-0110/2020
ZETECH UNIVERSITY
A RESEARCH STUDY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE AWARD OF THE DEGREE OF BACHELOR IN ACCOUNTING AND FINANCE,
SCHOOL OF BUSINESS AND ECONOMICS
©️2023
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DECLARATION
This research project is my original work and has not been presented to any other university for
an award of a degree.
Signature------------------------------------------- Date. ………………………………
OSCAR KIROP CHELANGA
BAF-05-0110/2020
This research project has been submitted for examination with my approval as the university
supervisor.
Signature------------------------------------------- Date. ………………………………
Mr. SAMUEL KARIUKI
Lecturer
Department of Business and Economics
Zetech University
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ACKNOWLEDGEMENT
Acknowledgment is made courtesy of all who have contributed to the success of this research
project. I acknowledge my supervisor Mr Samuel Kariuki for his guidance and dedication to
seeing my success on this research project. I also thank Zetech University for the opportunity and
the respondents of the SMEs for the information provided for the research.
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TABLE OF CONTENTS
DECLARATION.............................................................................................................................ii
ACKNOWLEDGEMENT..............................................................................................................iii
TABLE OF CONTENTS............................................................................................................... iv
LIST OF TABLES....................................................................................................................... vii
LIST OF FIGURES ..................................................................................................................... vii
ABSTRACT ............................................................................................................................... viii
DEFINITIONS OF TERMS ....................................................................................................... ix
CHAPTER ONE: INTRODUCTION ............................................................................................ 1
1.1 Introduction .............................................................................................................................. 1
1.2 Background of the Study ……................................................................................................. 2
1.3 Statement of the Problem…………………………. ................................................................3
1.4 Objectives of the Study... ......................................................................................................... 5
1.4.1 General Objective ................................................................................................................. 5
1.4.2 Specific Objectives ............................................................................................................... 5
1.5 Research Questions……………………………………………………………………………5
1.6 Justification of the Study……………………………………………...………………………6
1.7 Significance of the Study……………………………………………………………………...7
1.8 Scope of the Study…………………………………………………………………………….7
1.9 Limitation of The Study……………………………………………………………………….7
CHAPTER TWO: LITERATURE REVIEW ................................................................................ 8
2.1 Introduction .............................................................................................................................. 8
2.2 Theoretical Framework ............................................................................................................ 8
2.2.1 Technology Acceptance Model .............................................................................................8
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2.2.2 Diffusion of Innovation Theory..............................................................................................9
2.2.3 Social Penetration Theory ................................................................................................... 10
2.2.4 Resource-Based Theory....................................................................................................... 11
2.3 Empirical Literature Review................................................................................................... 11
2.4 Research Gap……………. .................................................................................................... 13
2.5 Chapter Summary…………................................................................................................... 14
2.6 Conceptual Framework .......................................................................................................... 14
CHAPTER THREE: RESEARCH METHODOLOGY............................................................... 16
3.1 Introduction ............................................................................................................................ 16
3.2 Research Design ..................................................................................................................... 16
3.3 Target Population ................................................................................................................... 16
3.4 Sampling Technique .............................................................................................................. 17
3.5 Data Collection Instruments .................................................................................................. 17
3.6 Data Collection Procedure…………………………………………………………………...17
3.7 Data Analysis ..........................................................................................................................18
3.8 Chapter Summary…………………………………………………………………………...19
CHAPTER FOUR: DATA ANALYSIS RESULTS AND DISCUSSION ................................. 20
4.1 Introduction ............................................................................................................................ 20
4.2. Demographic Factors of the Respondent .............................................................................. 20
4.2.1 Gender of the respondent .................................................................................................... 20
4.2.2 Age of the respondent ......................................................................................................... 21
4.2.3 Level of Education of the respondent ................................................................................. 21
4.2.4 Position of the respondent in the SME ............................................................................... 22
4.3. Demographic Factors of the Firm ......................................................................................... 23
4.4 Forms of Online Marketing .................................................................................................. 24

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4.5 Applications of Online Marketing ........................................................................................ 25
4.6. Challenges in Online Marketing Application ...................................................................... 27
4.6.1 Means and Standard Deviations-Challenges of Internet Marketing Application................ 27
4.6.2 Factor Analysis (Communalities) ....................................................................................... 28
4.6.3 Factor Extraction ................................................................................................................. 29
4.6.4 Component Matrix .............................................................................................................. 31
4.6.5 Rotated Component Matrix ................................................................................................. 33
4.6.6 Factor Isolation ....................................................................................................................34
4.7. Online Marketing and Financial Performance ...................................................................... 35
4.7.1 Means and Standard Deviations-Online Marketing and Financial Performance ............. 35
4.7.2 Correlation Analysis ........................................................................................................... 36
4.7.3 Model Summary .................................................................................................................. 38
4.7.4 Analysis of Variance……………………………………………………………………….39
4.7.5 Regression Coefficients ...................................................................................................... 40
4.8 Research Findings……………………………………………………………………………41
4.9 Summary and Interpretation of the Findings ......................................................................... 42
CHAPTER FIVE: SUMMARY CONCLUSION AND RECOMMENDATION ....................... 43
5.1 Introduction ............................................................................................................................ 43

5.2 Summary ................................................................................................................................ 43
5.3 Conclusion ............................................................................................................................. 44
5.4 Recommendation ................................................................................................................... 44
5.5 Suggestions for Further Study................................................................................................ 45
6 REFERENCES ......................................................................................................................... 45
7 APPENDICES .......................................................................................................................... 48
APPENDIX 1:QUESTIONAIRE ............................................................................................. 48
APPENDIX 2:SME DESCRIPTIONS ......................................................................................
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LIST OF TABLES
Table 4.2.1.1 Gender of the respondent ................................................................................... 20
Table 4.2.2.1 Age of the respondent ........................................................................................ 21
Table 4.2.3.1 Level of Education of the respondent ................................................................ 21
Table 4.2.4.1 Position of the respondent in the SME................................................................ 22
Table 4.3.1 Demographic factors of the Firm .......................................................................... 23
Table 4.4.1 Demographic factors of the Firm ..........................................................................24
Table 4.5.1 Internet Marketing applications ............................................................................ 25
Table 4.6.1.1 Challenges of Online Marketing application .................................................... 26
Table 4.6.2.1 Factor Analysis (Communalities) ....................................................................... 28
Table 4.6.3.1: Factor Extraction (Total Variance) ................................................................... 29
Table 4.6.4.1 Component Matrix ............................................................................................. 31
Table 4.6.5.1: Rotated Component Matrix ............................................................................... 33
Table 4.6.6.1: Factor Isolation .................................................................................................. 34
Table 4.7.1.1 Online Marketing and Financial Performance ................................................... 35
Table 4.7.2.1 Correlation Matrix .............................................................................................. 36
Table 4.7.3.1 Model Summary.................................................................................................. 38
Table 4.7.4.1 ANOVA (Analysis of Variance) ........................................................................ 39
Table 4.7.5.1: Regression Coefficients results ......................................................................... 40
LIST OF FIGURES
Figure 4.6.3.1 Scree Plot .............................................................................................................. 30
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ABSTRACT
The growth and spread of internet with an extraordinary pace over the last few decades has
resulted in its increased use for marketing purpose; this is internet marketing. Internet as a
marketing tool provides significant opportunities for companies to seek and adopt innovative
practices in order to address the increasing demands of consumers. This study focused on Online
marketing and financial performance of small and medium enterprises in Nairobi County. The
study objectives were to establish the extent of internet marketing application by SMEs in
Nairobi County, to determine the challenges faced in implementation of Online marketing by

SMEs in Nairobi County, To assess the strategy used by online marketing and how it affects the
financial performance of SMEs in Nairobi County and to assess the relationship between online
marketing and the financial performance of SMEs in Nairobi County. The research was a
descriptive survey and used a sample size of 90 SMEs. Primary data was collected using
questionnaires from the top management of the SMEs. The collected data was analyzed using
frequencies, percentages, means and standard deviation as well as factor and regression analysis.
The study established that online marketing was used at a moderate extent, and that certain
challenges affected the SMEs ability to apply online marketing. Most SMEs agreed that the
greatest challenge in application of online marketing was the fear of losing their current
customers who were not able to access internet. The lack of finances to invest in internet
marketing integration as well as lack of skilled IT personnel topped the challenges highlighted in
the study. Online marketing had a positive impact on the financial performance of SMEs.
Facebook marketplaec and Jumia were the most applied forms of online marketing. There was
increase in profitability, increased market share and an ability to expand their market growth.
The firm’s image was enhanced, an increased competitive advantage as well as more loyalty and
access to new markets as impacts of using internet marketing by these SMEs.
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DEFINITION OF TERMS
GDP-Growth Domestic Product
GOK-Government of Kenya
ICPAK-Institute of Certified Public Accountants
ICT-Information and Communications Technology
OM-Online Marketing
IT-Information Technology
SEO- Search engine optimization
SMEs –Small and Medium Enterprises
SMS-Short Messages
ANOVA- Analysis of Variance
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CHAPTER ONE
1.1 INTRODUCTION
There is currently no available data on the performance of small and medium enterprises in
Nairobi County in comparison to online marketing. However, given the growing popularity of
online marketing in Kenya, it is likely that small and medium enterprises in Nairobi County are
underperforming in comparison to their counterparts in other parts of the country. Thus, this
study aims to determine the effect of online marketing on the financial performance and growth
of SMEs in Nairobi County.
Chapter one is a combination of the background of the study, statement of the problem, objective
of the study, research questions, significance of the study, limitations of the s, study and the
scope of the study.
1.2 BACKGROUND OF THE STUDY
A recent business trend is online marketing, also known as e-commerce. Small and medium-
sized businesses, or SMEs, are the current business landscape in Kenya today. The digitization of
business and business processes is a result of technological progress. Huge organizations and
organizations have taken on Internet business, accordingly, improving their administrations and
promptly accessible for their customers. Small businesses are unable to compete with the big
businesses that are entering the market, making the business environment even more challenging.
Many aspects of business and social life are being reshaped by electronic commerce.
According to Chong (2008), e-commerce is a novel method of conducting business, and its
influence is growing annually. E-commerce not only gives businesses access to a lot of data, but
it also speeds up transactions, lowers costs, and changes how businesses market themselves and
their products. Depending on the company, e-commerce may be implemented for a variety of
reasons. According to Xu and Quaddus (2009), while competitiveness is a primary concern for
small businesses, efficiency enhancement is a top priority for large businesses. According to
Abid et al., managers in small businesses must overcome obstacles and recognize the advantages
of e-commerce to avoid losing out to competitors.2011; Standing and Stockdale, 2004).
The rapid development of technology has made it possible to create the internet, which has been
designed to make its users' lives easier. In organizations all over the world, the use of the Internet
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is becoming increasingly common; As a result, relationship marketing has given rise to a novel
idea known as online marketing. According to Procter et al. (2013), this is based on the tenet of
providing individuals with the needs of customers, generating value for customers, and
establishing a communications network between businesses and individuals.
Burges and Bothma (2007) define an online marketplace as a commercial endeavor to educate,
communicate, advertise and sell goods and services online. Online marketing, according to
Thersthol and Lövgren (2007), is a strategy for using the internet to connect with as many
present and potential clients as you can. However, Maguire and Marys (2007) observed that it
requires choosing the best combination of internet marketing tactics that would appeal to your
target audience and generate sales. The science of internet marketing consists of the research and
analysis used to choose the best techniques for online markets and assess their effectiveness.
According to Mcintyre (2002), organizations' use of the internet has resulted in less expensive
product marketing, a larger customer base, and increased personal interaction with customers.
This has made it easier and less expensive to study customer requirements and meet those
requirements. Better supply chain systems have emerged as a result of the growth of online
marketplaces, facilitating the convenient delivery of online goods to customers and guaranteeing
sales for businesses. In comparison to conventional selling, accountability has been more
successful thanks to this system.
Companies that have adopted the use of online marketplaces benefit from the ease with which
they can connect and communicate with customers and stakeholders for mutual benefit.
According to Chaffey and Smith (2005), businesses using online marketing have been able to
increase their market share, profitability, and sales turnover; this is because of the
straightforward entry to data, diminished cost of financial associations, and further developed
correspondence with clients. He said that activities that make it easier to exchange ideas, goods,
and services to achieve both parties' marketing goals have made customer relations easier on
online marketplaces.
According to Tiessen and Wright (2001), online marketing has reduced barriers to international
entry by providing businesses with access to new market niches and increased opportunities
beyond geographic boundaries. According to Sparkes and Thomas (2001), early adopters of
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online marketing have established customer loyalty programs that have enabled them to retain
and acquire new customers as well as gain a competitive advantage.
According to Kaye and Medoff (2001), companies that have realized the advantages of having an
online presence have created company websites and participated in social media interactions for
company growth and development. Online marketing is also frequently obtained through email
marketing; According to Shemi and Magambe (2002), it is occasionally carried out by
businesspeople sending messages to the target population at random to their email or phone
numbers.
1.3 STATEMENT OF THE PROBLEM
SMEs are believed to adopt the online market at a gradual pace, even though multinational
corporations like Coca-Cola and Safaricom have expanded their reach globally through the use
of globalization in communication and have found the online market to be advantageous. SMEs
can acquire these benefits and raise their financial state by embracing online marketing; Apple
and Dell rate highly among those who have benefited from them since they have seen a rise in
revenue per year, thus SMEs can also follow their steps to prosper.
Online markets are crucial to SMEs' survival, according to studies from Singapore and Taiwan.
However, it was noticed that the SMEs were unaware of these advantages, which accounts for
the low adoption rates (Kendell et al, 2001). Researchers in South Africa have examined the
economic contribution that SMEs make to the nation, which can reach about 17% of the GDP
(Burgess and Bothma, 2007). Some of the difficulties with online marketing are highlighted by
studies from South Africa and Botswana, where impoverished countries are thought to be
adopting the technology more slowly because of capacity and budgetary constraints. The
development of ICT as a part of the internet economy was advocated by state governments. The
Kenyan government has devised strategies to support IT development in Kenya Vision 2030.
In Kenya, research has been done on the influence of social media on customer service as well as
its use as a marketing technique to draw in new clients(Mwangi, 2012). Other research shows
that SMEs naturally struggled to adopt technological advancements due to environmental
constraints, which made them less competitive than large institutions(Wamaitha, 2012). Other
studies have looked at how large businesses like Safaricom and large supermarkets function, and
the results point to the enhancement of customer relations, sales, and turnover rates that these
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online marketing bring about (Ruth, 2012) The significance of Internet marketing on the
performance of SMEs hasn't, however, been properly investigated.
The main aim of this research is to identify and explain the impacts of online marketing on the
financial performance of SMEs and possible remedies for the negative impacts on SMEs. E-
commerce is an important aspect of the business. It may affect small enterprises both positively
and negatively. This means that eCommerce can help SMEs expand their business operations or
in turn cripple them.
An example of a negative impact is when a website collapses, no one can conduct any online
commerce, for example. This is the worst drawback since when a website crashes, no one can
make transactions from them. Because of this, it's crucial to make sure the website is hosted on
the appropriate system. Customers cannot test things before buying them, which results in losses,
especially when the wrong product is bought. Due to the fierce competition among websites for
the same customers, e-commerce is extremely competitive. This could result in deceptive
advertising, which would mislead consumers. It may take a while for the purchased goods to
arrive. When a buyer purchases anything in person, they can take it out immediately away.
However, with internet purchasing, the majority of buyers get their purchases in a week.
In as much as E-commerce has negative impacts, it also has positive impacts. They include; E-
commerce has helped businesses reach domestic and international markets with minimum costs
to find the best and most efficient suppliers, expand the business, attract more customers and find
the best suitable partners for the business. Regular fees like electricity bills, internal costs, and so
on are decreased. Everything is done for you. Since the design website is accessible from
everywhere in the world, one does not need to travel anywhere in particular to advertise their
business. E-commerce fosters better customer relationships because it offers consumers a more
personalized shopping and service experience. Government licenses are not necessary for e-
commerce, thus there is no need to register or pay website license fees.
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1.4 OBJECTIVES OF THE STUDY.
An objective is a goal, a goal that should not be biased. In the case of this study, there are general
and specific objectives.
1.4.1 General Objective.
The major objective of this study is to examine the effect of online marketing on the financial
performance of small and medium enterprises in Nairobi county.
1.4.2 Specific Objectives.
The specific objectives of this study include;
i) To assess the relationship between online marketing and the financial performance of
SMEs in Nairobi County.
ii) To establish the challenges facing online marketing and how it affects the financial
performance of SMEs in Nairobi County.
iii) To assess the strategy used by online marketing and how it affects the financial
performance of SMEs in Nairobi County.
1.5 RESEARCH QUESTIONS.
These are questions that a research project sets out to answer.
In the case of this study, these questions include;
i) What is the relationship between online marketing and the financial performance of
SMEs in Nairobi County?
ii) What are the challenges facing online marketing and how does it affects the financial
performance of SMEs in Nairobi County?
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iii) What is the strategy used by online marketing and how does it affect the financial
performance of SMEs in Nairobi County?
1.6 JUSTIFICATION OF THE STUDY
This research aims to determine the effects of online marketing on the financial performance of
small to medium enterprises (SMEs). To start with, while many SMEs have struggled to stay
afloat during the period of coronavirus pandemic, those working with online shopping were not
only surviving but also thriving, despite the success of these online businesses and it’s offering
of a safer venue for shoppers to buy essential goods during the pandemic, some group of people
remains wary of its dominance. In particular, people believe that online marketplace success is
causing more harm to SMEs.
The capacity to embrace and use this technology closes the gap between those who use them and
their counterparts who have not chosen it. Technology has brought about change that allows
States Institutions and also Persons to achieve benefits. The use of the internet for external
communication gives using businesses a competitive advantage, which affects their total growth.
Small and medium-sized enterprises (SMEs) now have more access to unexplored markets
thanks to online marketplaces, which has improved their prospects for industry survival and
expansion.
This study is significant since it is released at a time when both developed and emerging nations
are concerned about the performance of SMEs. To determine the attention paid to the efficacy
and efficiency of SMEs, a study of the existing methods of SME performance is required. SME
performance must receive adequate attention if SMEs are to provide the public with the services
and goods they were meant to provide. Through the formation and modification of policies
relating to the online market and its impact on SME financial performance, the study seeks to
assist policymakers at the national and institutional levels.
By raising factual awareness of the advantages of the correct use of online marketplaces on
SMEs, the study aids in the development of small enterprises. The study's findings will also
serve as the foundation for additional research on SME performance by other academics. It is
envisaged that the study will add to the body of knowledge already available on online marketing
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and its effects on the performance of SMEs. The goal of the study is to highlight these
advantages and demonstrate how they might increase the odds of SMEs surviving in Nairobi,
Kenya. The potential obstacles to its implementation should be noted and recognized in the
review so that SMEs can prepare and steer clear of them.
1.7 SIGNIFICANCE OF THE STUDY
This is a justification for the importance of this study. The significance of this study is to help
both upcoming and existing businesses either big or small enterprises to understand how E-
commerce as a current trend in the business will be able to impact their businesses for the better.
The study will also assist small firms in embracing the new trend and using it to expand their
enterprises. The study will also assist SME staff who are starting up new businesses in learning
how to market and promote their enterprises online. It will offer information on how small and
medium-sized businesses can use internet marketing to obtain a competitive edge in the global
market. Additionally, the study will also shed light on the potential barriers and challenges that
small enterprise enterprises when using online marketplaces.
1.8 SCOPE OF THE STUDY
There is the parameter and boundaries in which the study will be operating in. The study will
focus on online marketplaces and how it affects the financial performance or growth of SMEs in
Nairobi City County. The study targeted approximately 510 respondents. Data will be collected
and analyzed within a two-month period between January and February 2023 after the
questionnaires would have been administered and responded to by the targeted respondents.
1.9 LIMITATIONS OF THE STUDY
There are several limitations shouldered when interpreting the findings of this study. They
include;
The study will rely on self-reported data from SME owners, which may be subject to recall bias.
The study will be conducted only in Nairobi County, which may not be representative of the
entire country. Finally, the study will not include a control group, which may limit the ability to
determine causality.
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CHAPTER TWO ; LITERATURE REVIEW
2.1 INTRODUCTION
This chapter deals with a review of the literature on online marketplaces and the performance of
SMEs. It examines what others have written related to this research topic. This chapter includes
the theoretical framework, conceptual review, and empirical review.
2.2 THEORETICAL FRAMEWORK

The study found theories that either contradict or support the research purpose. These ideas
describe the acceptance of cutting-edge technologies, such as online markets, as well as their
significance and usability for SMEs. They examine factors that are taken into account in their
adoption based on the SME's capacity to pay for and implement them. As an aspect of the
internet, these theories help us comprehend internet marketing. For SMEs to make these
judgments, it can be helpful to understand the options presented by companies before they
adopted the online marketplace. These theories include;
2.2.1 TECHNOLOGY ACCEPTANCE THEORY
According to Davis's (1989) Technology Acceptance Theory (TAT), the following criteria affect
whether potential users of a computer system will embrace it: (1) Perceived utility; and (2)
Perceived usability The theory's emphasis on the perceptions of the potential user is its defining
characteristic. Perceived utility and perceived ease of use are two cognitions that are designed to
explain why people use computers, according to Elliot and Boshoff (2007). The degree to which
a person thinks utilizing a certain technology would improve his or her ability to perform a job is
known as perceived usefulness. According to studies, the functionalities and ease of use of a
technology are what largely motivate users to adopt it. Like other businesses, The use of online
marketplaces is expected to be advantageous for SMEs because it enhances their performance at
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a cheaper cost. The SME sector has profited when this has been realized (Sharma and Aragón-
Correa, 2005).
This theory is relevant to the study since it is possible that SMEs should be aware of the value of
the online marketplace but are restricted by their incapacity to use this technology. Both a dearth
of IT expertise and skilled IT staff have contributed to this. The perceived usability of the
technology has an impact on how quickly businesses embrace it, especially SMEs. Technology
should be simple to learn and simple to use, according to Etemad and Wright (2004); this
suggests that perceived simplicity of use is anticipated to positively influence the choice of
credibility and desire to utilize the online marketplace. The perception of one party that the other
has the knowledge and experience necessary to operate effectively and consistently is known as
perceived credibility. SMEs rely on the reputation of an online marketplace for their performance
and adoption to be successful. Before making an investment in technology like online markets,
business owners evaluate these factors for their utility, legitimacy, and usability.
2.2.2 DIFFUSION OF INNOVATION THEORY
Diffusion of Innovation (DOI)Theory, developed by E.M. Rogers in 1962. It first appeared in

communication to describe how an idea or product gathers steam and diffuses (or spreads)
within a particular population or social system over time. People eventually adopt a new idea,
habit, or product as a part of a social system as a result of this dissemination. When someone
adopts, they do something different from what they previously did (i.e., purchase or use a new
product, acquire and perform a new behavior, etc.). Adoption depends on a person's ability to
see an idea, behavior, or product as novel or inventive. This makes it possible for diffusion.
Understanding the dynamics under which SMEs adopt the usage of the online market requires
an understanding of the diffusion of innovation theory, which is crucial to our study. According
to the theory, businesses decide when to adopt innovations and how to make them work best for
their business after understanding the benefits and risks of doing so. SMEs primarily use
interpersonal or inter-firm networks for diffusion. According to Singh (2002 ), In comparison to
the telephone and television, the internet has gained popularity more quickly, achieving 25%
adaptation in only 7 years as opposed to those media's combined 35 and 26 years, respectively.
Online marketplaces' efficiency and cost-effectiveness have provided a platform for SMEs
worldwide to advertise their goods and reach more customers for less expense (Ashworth et al,
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2006). SMEs should therefore be aware that its rapid popularity is a result of its significance to
their competitors and the wider globe; as a result, a quick adaption is required for early benefits.
2.2.3 SOCIAL PENETRATION THEORY
Social penetration theory by Altman and Taylor (1973) describes how interpersonal interactions
create relationships with a focus on personal impacts for social media sharing. It argues that
people using these platforms are forced to reveal personal information during conversations,
which makes it necessary to secure specific information that they consider private. At a deeper
level, one will reveal objectives, ambitions, and ideals as the relationship progresses and one
progressively starts to express feelings. It Starts with information that is readily available,
obvious, and superficial, such as gender, preferred attire, and race. (Altman, Vinsel, and Brown,
1981).
We might be able to segregate these many levels of information in the social networks we create
for the online social realm. By default, some information will be made available to the public,
whereas secret information may apply to private and semi-private information. Through social
networking sites, it is simple to record the kind and frequency of conversations, which could be
used as a tool for determining the intensity of a connection. The significance of adhering to the
layered intimacy degrees of social penetration when exposing one's information was recently
brought up in a privacy case against Facebook (Gaudin, 2010).
Social penetration theory is important to our study as SMEs must uphold these standards to
assure their customers provide reliable feedback, which enables effective contact with the
outside world. By putting the social penetration theory into practice, SMEs can discover specific
characteristics that will help them better meet their unique demands and perform as a result.
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2.2.4 RESOURCE-BASED THEORY
Resource-based theory by Duhan et al, (2010) emphasizes the internal resources of the firm as
the source of performance and competitive advantage, rather than the external environment.
According to resource-based theory, an organization has a fantastic opportunity to gain a
competitive edge over its competitors when it has access to key resources. These competitive
advantages might also help the company generate substantial revenues (Barney, 1991;
Wernerfelt, 1981).
However, some studies demonstrate that both internal and external factors have an impact on a
firm's performance. ICT can therefore be seen as a significant external influence on the
development and success of businesses. SMEs should make use of their resources to take
advantage of chances that are based outside of their borders as well as to reduce external risks.
This theory is related to the study as the capacity of SMEs to adapt to the usage of online
markets is determined by the availability of their internal resources, such as funds. Business
leaders prioritize decisions for the growth of their companies based on their resources (Elliot
and Boshoff, 2007).
2.3 EMPIRICAL LITERATURE REVIEW
An empirical framework, or more accurately empirical analysis, is a method for studying and
interpreting data that is supported by evidence. Instead of conceptions or theories, it typically
depends on a statistical analysis of real-world data and actual results. As a result, it is
fundamental research that largely makes use of questionnaires and data from experiments, or in
this case, observations.
The multiple definitions of small and medium firms in the city of Nairobi are based on the
number of employees, which includes both paid and unpaid workers. The unambiguous
definition of a micro-business is one with less than 10 employees, whereas a small enterprise is
one with between 11 and 50 employees and a medium enterprise has more than 50 people (CBS
1999). Therefore, the term "medium enterprises" refers to a range of business types. Including
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unofficial economic activities, which often involve one or more people, up to businesses with
up to fifty employees. This will make it easier to assess the connection between SMEs'
performance and online marketplaces.
The emergence of the online economy presents SMEs with new opportunities and difficulties.
To develop strategies and plans to draw customers to their goods and services and increase their
visibility in the global industrial market, SMEs must grasp the factors that affect the adoption of
online marketplaces (Ghobakhloo et al., 2011). Therefore, the online marketplace gives SMEs a
chance to succeed when using both local and online marketplaces; yet, the majority of SMEs
experience obstacles when trying to utilize the online marketplace.
According to its marketing strategy, online marketing offers important chances for businesses to
look for and apply cutting-edge techniques to meet the rising expectations of consumers
(Sharma & Aragón-Correa, 2005). It has proven possible to improve supply chain management
and lower transaction costs. Less data entry errors are possible thanks to the website, which
saves time and money on personnel. For SMEs with few staff, this is a practical answer.
The relationship between online marketing and SMEs is that online marketing's primary utility
is its capacity to help SMEs connect with and communicate with both their present and potential
customers. Online marketing does not have to be expensive to be successful. Additionally, they
can use the comments to improve their goods and services. Today, SMEs' effectiveness is
crucial to their success. A company's success is determined by its ability to grow sales and take
market share away from other companies. Online marketing enables SMEs to develop plans that
will help them improve their financial performance.
The challenges faced by online marketing, It is uncommon because all decisions regarding
internet research and purchases are done solely based on trust, branding is vital in the adoption
of the online for marketing reasons as well as the presence of sufficient security methods on
one's site. Internet adoption is hindered by the lack of proper security measures, knowledge, and
resources to prevent unauthorized access to personal information by employees, outsiders, and
from hackers(Khan,2007)
The ability to generate statistics about the viewing of the uploaded advertisements on a daily
and hourly basis made it possible for businesses to have better control every day in addition to
regular comments from their input (Porter, 2001). It allows one to examine the effectiveness of
12
an advertisement by viewing the client’s awareness length. Today's marketers can track website
visits via email, online surveys, and chat rooms to determine consumer needs and preferences
and meet them. Through marketing surveys and polls were done online or via email, the online
marketplace gives SMEs the chance to acquire prompt and spontaneous consumer feedback.
According to Hamill (1997), the internet is a useful tool for SMEs since it lowers entrance
barriers that limit internalization. SMEs might get around a lot of paperwork and export
documentation-related operational obstacles. SMEs can extend into new markets as a result of
the economies' globalization, which has been fueled by online marketplace techniques. It has
aided in reducing the bureaucracy associated with the idea of conducting business abroad by
bypassing the rules and limitations that businesses with a physical presence in other nations are
subject to. This is especially advantageous for SMEs who are financially constrained to expand
overseas because it gives them access to these markets at a low cost (Hamill, 1997).
In this study, judgemental sampling, a non-profitability-restricted sampling method, will be

used. According to Cooper and Schindler (2001), judgment sampling is the process through
which a researcher chooses sample participants based on a predetermined standard. The sample
had to be made up of retail SMEs with between one and one hundred employees that were
active in Nairobi County according to the criteria we as the researchers used.
Questionnaires that were designed and organized by the research goals will be used to collect
the primary data. It was separated into sections that contained general information, variables
affecting the usage of e-commerce that is focused on the benefits obtained from e-commerce,
skills, and training, and the cost of implementing e-commerce. It also included open-ended and
closed-ended questions. To ensure that we, the researchers, gathered nominal and interval data
that was valuable in the empirical analysis and the techniques utilized, the questionnaire will
include a question with a five-point Likert scale.
2.4 RESEARCH GAP
The research study will need to fill in this gap. Online marketplaces have an impact on SMEs'
performance that is both beneficial and negative. Therefore, the study will assess this effect and
assist SMEs in understanding the beneficial effects and utilizing them to improve their
13
performance. The performance of SMEs is the most significant construct in this study. Some
SMEs lack knowledge about the online market and how it might boost their productivity; as a
result, this research study will be crucial in teaching these types of SME owners. The majority
of earlier studies have mostly focused on larger businesses while excluding SMEs, making this
research study useful to do.
2.5 CHAPTER SUMMARY
Given the possible advantages that SMEs in Nairobi County could experience from using online
marketplaces, all stakeholders ought to address the problems and find solutions. According to
Parker (2009), Prioritization should be given to developing new policies, adjusting existing
ones, and advancing the advancement of regional technologies. Due to their size and resource
constraints, SMEs face challenges. As a stepping stone to expanding into more complicated
systems, SMEs' potential to launch minor technological improvements to suit their conditions
should be supported. This chapter reviewed various sources of literature behind the need for
implementing an online marketplace within SMEs, the challenges, and the risks faced. The
numerous factors and their interactions as claimed by various theories were also discussed and
clarified in the chapter.
2.6 CONCEPTUAL FRAMEWORK
The model shows the impact of online marketplaces on the performance of SMEs.It consists of
dependent and independent variables. The independent variables are; competitiveness, customer
relations, sales track down, and firm visibility for the relationship between online marketplaces
and SMEs. Lack of payment options, Lack of understanding and awareness, and Lack of trust and
confidence are the variables for challenges facing online marketplaces. And lastly, the variables
for the strategies used by online marketplaces are ; discounts, user-friendly platforms, and
Deliveries. The dependent variables are on the performance of SMEs they include; Increased
profitability, Improved customer loyalty, and access to new market niches.
Below is a diagram illustration of the dependent and independent variables;
14
Online Marketplace Application SMEs Performance
Relationship
- Sales track down
-Pricing
Challenges
-Inconsistent cash flow Performance
-Not using budgets or
-Increased profitability
poor budgeting.
-Increased sales revenue
-Increase in the average size of
transactions
Strategy
-Discounts
-Boost conversion rate
15
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 INTRODUCTION
This section is about the techniques that were used in the data collection process and data
analysis. This involved research design, target population, sampling techniques, data collection
procedure, and analysis of data.
3.2 RESEARCH DESIGN
There was a requirement to choose a design that is acceptable for this type of study since there
are some unique characteristics that are taken into account while choosing the research design.
A descriptive research design was chosen. It is further demonstrated by Orochi and Kombo that
the design is concerned with addressing questions like what, who, how, which, when, and how
much to obtain data that most accurately describes the situation being studied in particular.
Descriptive research design, as explained by Orochi and Kombo, entails the collection of
numerous statistical techniques that are used in developing a research study.
According to Emory (1985), the goal of the descriptive research design, which I shall employ in
this study, is to describe the features of a phenomenon, circumstance, community, or
population. According to Cooper and Schindler (2003), some research focuses on queries that
call for explanations of individuals, events, and circumstances. This design strategy, which
describes how online markets affect SMEs, neatly matches the topic at hand. The primary goal
of the descriptive design process is to describe the current condition(Chandran, 2004). In the
instance of this study, it was to make it easier to grasp how online marketplaces affect SMEs.
3.3 TARGET POPULATION

The research study targets the entrepreneurs working in Nairobi County and also small
companies that do part of their businesses online specifically the employees that work in the
sales and marketing department so that they could shade more insights on the effects of online
shopping on their various businesses. The study will focus on online marketplaces and SMEs in
Nairobi County. According to Statista(2022), the number of online marketplaces is Five ( Jumia,
Alibaba, Kilimall, OLX, and Facebook marketplace). And according to BR’s
statistics(2019/2020), there are approximately 118609 in Nairobi County.
16
3.4 SAMPLING TECHNIQUE
Sampling is the process of choosing several people for research in a way that adequately
represents the wider population from which they were drawn (Mugenda & Mugenda, 2003). For
the current investigation, non-probability purposive sampling will be used. Using this technique,
cases can be arbitrarily chosen to be included in the sample. According to Chandran (2004),
Due to the deliberate selection of the units making up the sample, this strategy best meets the
goals established. Purposive sampling excluded respondents, such as SMEs with little
engagement with online marketplaces, who were outside the desired area of interest. The sample
size under consideration was 1186 respondents, which is in line with 1% of the accessible
population of 118609 SMEs as per BR’s statistics(2019/2020) (Mugenda & Mugenda, 2003).
3.5 DATA COLLECTION INSTRUMENTS
The major data for this research study will be gathered from primary data using questionnaires.
The respondents will receive the questionnaire, which is designed to elicit responses in terms of
empirical data required for analysis. Questions will be created based on the research goals. I'll
use the "drop and choose later" strategy with these SMEs' top management as my target. Four
categories that fit the study's goals will be applied to the questionnaire. The respondent's and the
firm's demographics will be the main topic of the first part. The second half will concentrate on
the functions and formats of online marketplaces, the third section will concentrate on the
difficulties in implementing online marketplaces, and the last section will concentrate on how its
adoption will affect the performance of SMEs.
3.6 DATA COLLECTION PROCEDURE
I'll get the questionnaires ready to hand out to the respondents. Then I will send the
questionnaires to the respondents via electronic means using Google Forms. 10% of the
respondents from the targeted population will take the questionnaire as a pretest. This will be
done to evaluate the validity of the questionnaire's questions. The Cronbach Alpha of the data
gathering tool must be more than 0.7 to be considered reliable. I will make the necessary
adjustments to the tool after the pretest, notably to the tool whose Cronbach Alpha will be less
than 0.7. I will then make sure that all of the responders who were targeted received the
questionnaires that they would subsequently fill out. I will get the responses from the
17
respondents after they have completed the questionnaires, enter them into an Excel sheet, and
code them. Following that, these data will be examined using the Statistical Package for Social
Sciences (SPSS).
3.7 DATA ANALYSIS
The completeness of the field-collected questionnaires will be examined. After that, the data
will be analyzed with the help of the Windows version of the Statistical Package for Social
Sciences (SPSS). Utilizing frequencies and percentages, data gathered on the relationship
between online marketing and the financial performance of SMEs will be examined. Utilizing
mean and standard deviation analysis, information gathered on challenges facing online
marketplaces and their effect on the financial performance of SMEs will be evaluated.
Regression analysis will be used to examine the data collected on the strategies employed by
online marketing, while mean and standard deviation analysis and factor analysis will be
utilized to study the data collected on the implementation issues of online marketing adoption.
Regression Model
Y = a + b1X1 + b2X2 + b3X3 + b4X4 + b5X5+ b6X6+ b7X7+ b8X8 +b9X9+ b10X10+ b11X11+ϵ
18
Where:-
Y– Performance of SMEs
X1 – Communication of Products
X2 – Customer relations
X3 – Advertisement of Products
X4 – Expansion to new markets
X5 – Sales track down
X6 – Feedback-driven change
X7 – Communication with stakeholders
X8Monitoring and Measuring results
X9Turnaround time of operations
X10Firm visibility
X11Focus on clientele needs a – is the constant
ϵ- Error term
3.8 CHAPTER SUMMARY
This chapter focused on the research methodology that was used in the study. It discussed the
research design, population and sampling design, data collection methods, research procedures,
and data analysis. The next chapter presents the results and findings that arose from the study
while chapter five will present a summary, discussions, conclusion, and recommendations.
19
CHAPTER FOUR: DATA ANALYSIS RESULTS AND DISCUSSION
4.1 INTRODUCTION
This chapter presents the results found from the data analysis. It, therefore, consists of the data
analysis presentation and interpretation of findings. The objectives of this study were to
determine how the financial performance of SMEs in Nairobi County is affected by the use of
online marketing in their businesses, the challenges encountered in their implementation of
online marketing, and the impact of online Marketing on the financial performance of SMEs in
Nairobi County. Primary data was used and was collected using questionnaires which were
designed based on the variables of the study.
4.2 DEMOGRAPHIC FACTORS OF THE RESPONDENTS
From the data collected, out of the 90 questionnaires administered, 80 were filled and returned.
This represents a response rate of 88.89%. This response rate is considered satisfactory to make
conclusions for the study. Several demographic factors were considered which were important in
the interpretation of the responses given. The factors included the age and sex of the respondent,
their highest level of education as well as their position in these SMEs.
4.2.1 Gender of the respondent
Data was collected on the gender of the respondents. Analysis was done and the results shown in
Table 4.2.1.1.
Table 4.2.1.1 Gender of the Respondent

Gender of Respondent
Frequency Percent Valid Percent Cumulative Percent
Female 46 57.5 57.5 57.5
Male 34 42.5 42.5 100.0
Valid Total 80 100.0 100.0
From the data collected, 46 (57.5%) were female while 34 (42.5%) were male
20
4.2.2 Age of the respondent
Respondents were asked on their age bracket and responses were as shown in Table 4.2.2.1.
Table 4.2.2.1 Age of the Respondent
Age Bracket
Age
Bracket Frequency Percent Valid Percent Cumulative Percent
18-25 5 6.3 6.3 6.3
26-30 30 37.5 37.5 43.8
75.0
31-35 25 31.3 31.3
93.8
36-40 15 18.8 18.8
100.0
Over 45 5 6.3 6.3
Valid Total 80 100.0 100.0
Most respondents had an age ranging from 26-30 years (37.5%); other respondents (31.25%) had
ages between 31-35, Those in age between 36-40 years (18.75%) the rest between 18-25 years
and over 45 years represented (6.3%) each.
4.2.3 Level of education of the respondent
The research further sought the education level of the respondents. The Analysis is shown in
Table 4.2.3.1.
Table 4.2.3.1 Level of Education of the respondent
Level Education
21
Valid
Frequency Percent Percent Cumulative Percent
Masters Graduate 5 6.3 6.3 6.3
Degree Graduate 25 31.3 31.3 37.5
Diploma 27 33.8 33.8 71.3
Graduate 4 5.0 5.0 76.3
High School 19 23.8 23.8 100.0
Any Other
Valid Total 80 100.0 100.0
27 (33.75%) respondents were diploma graduates, 25 (31.25%) respondents were degree

graduates while 5 (6.25%) were Masters Graduates and 4 (5%) were high school graduates. 12
(15%) respondents had a higher diploma while 7 (8.75%) were certificate holders. Of these 30
(37.5%) respondents were business owners, 25 (31.25%) the respondents were from middle
management while 10 (12.5%) were in top management. 15 (18.75%) of the respondents were
employees not in management positions.
4.2.4 Position of the respondent in the SME
The study focused on top management from the SMEs the responses were categorized as shown
in Table 4.2.4.1.
Table 4.2.4.1 Position of the Respondent in the SME
Position in the SME
22
Frequency Percent Valid Percent Cumulative Percent
Business Owner 30 37.5 37.5 37.5
Top Management 10 12.5 12.5 50.0
Middle Management 25 31.3 31.3 81.3
15 18.8 18.8 100.0

Any Other
Valid Total 80 100.0 100.0
Business owners were represented by 30 (37.5%) of the respondents, 25 (31.25%) of the

respondents were from middle management while 10 (12.5%) were in top management. 15
(18.75%) of the respondents were employees not in management positions.
4.3 DEMOGRAPHIC FACTORS OF THE FIRM
The study further sought to understand the demographic nature of the sample SMEs. The
analysis is shown in Table 4.3.1.
Table 4.3.1 Demographic Factors of the Firm
Demographic Factor Categories Frequency Percent Cumulative Percent
1-10 43 53.8 53.8
Employee Number 11-20 25 31.3 85.0
21-30 12 15.0 100.0
Small 43 53.8 53.8
Small or Medium enterprises Medium 37 46.3 100.0
Manufacturing 2 2.5 2.5
Trading 40 50.0 52.5
Service 28 35.0 87.5
23
Schools 10 12.5 100.0
Type of Business
0-2 25 31.3 31.3
3-5 43 53.8 85.0

Firm’s years of operation
6-10 12 15.0 100.0
Below 2,500,000 44 55.0 55.0
Turnover rate per annum 2,500,000- 36 45.0 100.0

5,000,000
N=80
The respondents were mostly from small enterprises with 43 (53.75%) and 37(46.25%) as
Medium enterprises. Of these 40 (50%) were trading enterprises while 28 (35%) were service
enterprises only 2 (2.5%) respondents were from the manufacturing industry while 10 (12.5%) of
the respondents were from schools within the sampled area. Most enterprises from the study have
been in operation for 3-5 years with 43 (53.75%) respondents and 25 (31.25%) respondents
being in operation for two years or less. Only 12 (15%) respondents have been in operation for 6-
10 years. Most firms in the study had less than 10 employees with 43 (53.75%) respondents, 25
(31.25%) respondents had 11-2- employees while 12 (15%) respondents had 21-30 employees
From the sample, 44 (55%) firms had an annual turnover rate of 2.5 Million and below, the other
36 (45%) had an annual turnover rate of between 2,500,001-5,000,000.
4.4 FORM OF ONLINE MARKETING
The respondents were asked on the different forms through which they applied in their firms.
Data analyzed and results are reported in Table 4.4.1.
Table 4.4.1 Demographic factors of the Firm
Form of Internet Marketing Categories Frequency Percent Cumulative Percent
Applied 61 76.3 76.3
24
Never applied 19 23.7 100.0
Facebook Marketplace
Applied 40 50.0 50.0
Jumia Never applied 40 50.0 100.0
Applied 14 17.5 17.5
Alibaba Never applied 66 82.5 100.0
Applied 26 32.5 32.5
Kilimall Never applied 54 67.5 100.0
Applied 34 42.5 42.5
OLX Never applied 46 57.5 100.0
N=80
Facebook was seen as the most used form of internet marketing with 76.3% of the
respondents.50%. respondents having jumia, 42.5% of respondents used OLX to market their
products while 32.5% used Kilimall, and only 17.5%respondents used Alibaba.
4.5 APPLICATION OF ONLINE MARKETING
I sought to find the extent of Online marketing applications by SMEs in Nairobi County. The
responses were on a 5-point Likert scale with 5-Very great extent, 4-Great Extent, 3Moderate, 2-
Little Extent, and 1-No extent. Table 4.5.1 shows the analysis of the applications of internet
marketing.
Table 4.5.1 Online Marketing Applications
Online Marketing No Little Moderate Great Very Great Mean Std Dev
Application
-Communication of Products - - 20 - 60 3.75 .436
25
-Customer relations 10 15 - 39 16 3.45 1.340
-Advertisement of Products 16 6 26 21 11 3.06 1.306
- Expansion to new markets 30 30 10 10 - 2.00 1.006
-Sales track down 10 36 23 7 4 2.49 .994
-Feedback-driven change - 14 16 41 9 3.56 .912
-Communication with - 21 27 32 - 3.14 .807

stakeholders
-Monitoring &Measuring 15 20 40 5 - 2.44 .869
results
-Turnaround time of operations - 23 23 34 - 3.14 .838
-Pricing - 10 10 16 44 4.18 1.077
-Focus on clientele needs - - 21 32 27 4.08 .776
N=80
Analysis from the study shows that most firms applied online marketing in increasing their
pricing(mean of 4.18), online marketing allowed firms to focus on their clientele needs this had a
mean of 4.08. Firms also applied internet marketing in the communication of their products with
a mean of 3.75 from the sampled firms. Another application of online marketing was in the
feedback-driven change where they improved their products and services (Mean of 3.56). Firms
with a mean of 3.45 said that they applied online marketing in their customer relations. Other
firms with a mean of 3.14 used online marketing in communication with other stakeholders as
well as in reducing the turnaround time of their operations. Firms with a mean of 3.06 used
online marketing in the advertisement of their products; those with a mean of 2.49 applied it in
tracking down sales and firms with a mean of 2.44 for monitoring and measuring their results.
Only firms with a mean of 2.00 applied online marketing in expanding to new markets.
4.6 CHALLENGES IN ONLINE MARKETING APPLICATIONS
26
I studied Challenges faced by SMEs as they applied Online marketing. The collected data were
subjected to means and standard deviations as well as factor analysis.
4.6.1 Means and Standard Deviations challenges of an online marketing application

The researcher sought to find the extent that different challenges affected the application of
internet marketing by SMEs in Nairobi County. The responses were on a 5-point Likert scale
with 5-Very great extent, 4-Great Extent, 3-Moderate, 2-Little Extent, and 1-No extent. Results
are shown in Table 4.6.1.1.
Table 4.6.1.1 Challenges of Internet Marketing Application
Challenges of IM No Little Moderate Great Very Great Mean Std Dev

application
- Inadequate Finances - - 15 40 25 4.13 .700
- Poor budgeting - 16 4 21 39 3.37 .891
- Integration with operations - 12 36 22 - 3.35 .765
- Building a quality Website - 14 24 42 - 4.04 1.163
- Limited Technological 12 - 27 33 8 3.31 1.154

Infrastructure
- Lack of Skilled ICT 10 15 - 26 29 3.61 1.454
Personnel
- Limited access to electricity 20 - 29 31 - 2.89 1.180
- In access by current - - 20 11 49 4.36 .860

customers
Growing an online audience 10 - 22 18 30 3.72 1.312
- Security and Privacy of firm 20 43 17 - - 1.96 .683
- Fear of change - 10 10 27 33 4.04 1.024
N=80
27
Most firms with a mean of 4.36 agreed that their greatest challenge was the fear of losing their
current customers who have in access by current customers; Inadequate Finances had a mean of
4.13, while poor budgeting and fear of change each had a mean of 4.04. The respondents ability
to grow an online audience faced a challenge with a mean of 3.72 The lack of Skilled ICT
Personnel gained a mean of 3.61, Integration with operations 3.37 while building a quality
Website 3.35. Another challenge was the limited technological infrastructure with a mean of 3.31
and the limited access to electricity 2.89with the Security and Privacy of firm at a mean of 1.96
4.6.2 Factor Analysis (Communalities)

Responses collected on the challenges in the implementation of Online Marketing were further
subjected to factor analysis. Factor analysis reduces data into key information by seeking
unobservable (latent) variables that are reflected in the observed variables (manifest variables).
Communality is the proportion of variance that each item has in common with other items. The
proportion of variance that is unique to each item is then the respective item’s total variance
minus the communality. The extraction method was the principle component analysis.
Communalities are shown in the Table 4.6.2.1.
Table 4.6.2.1 Factor Analysis (Communalities)
Communalities
Extractio
Initial n
Inadequate Finances 1.000 .785
Integration with 1.000 .807

operations
Building a quality 1.000 .781
Website
Poor budgeting 1.000 .825
Limited Technological
1.000 .696
28
Infrastructure
Lack of Skilled ICT
1.000 .830
Personnel
Limited access to
electricity 1.000 .829
In access by current
1.000 .763
customers
Growing an online 1.000 .873
audience
Security and Privacy of 1.000 .876
firm
Fear of change 1.000 .879
Extraction Method: Principal Component
Analysis.
4.6.3 Factor Extraction

In the case of the challenges of implementing online marketing, principle analysis component
was used to extract 11 factors. Eigen values indicate the relative importance of each factor
accounting for a particular set and hence those with small Eigen values were omitted. As
depicted on Table 4.6.3.1, only 3 factors were significant for the analysis. The table shows that
the significant variables are components 1, 2, and 3 as they have total Eigen values of value 1
and above with a variance percentage of 39.258%, 32.594% and 9.459% respectively.
Table 4.6.3.1 Factor Extraction (Total Variance)

Total Variance Explained
Componen Initial Eigen values Extraction Sums of
t Squared Rotation Sums of Squared
Loadings Loadings
Total % of Cumulativ Total % of Cumulativ Total % of Cumulativ
e
29
Varianc Varianc e Varianc e
e % e % e %
1 4.31 39.258 39.258 4.31 39.258 39.258 3.91 35.621 35.621
8 8 8
2 3.58 32.594 71.852 3.58 32.594 71.852 3.62 32.969 68.590
5 5 7
3 1.040 9.459 81.311 1.04 9.459 81.311 1.39 12.721 81.311
4 .547 4.977 86.288 0 9
5 .472 4.293 90.581
6 .332 3.018 93.599
7 .219 1.988 95.587
8 .187 1.703 97.290
9 .125 1.134 98.424
10 .112 1.017 99.441
11 .061 .559 100.000

Analysis.
Figure 4.6.3.1 Scree Plot
30
The scree plot shows that the curve begins to flatten between factors 3 and 4. However factor 4
has an equivalence of less than 1, therefore only 3 factors have been retained.
4.6.4 Component Matrix

The component matrix contains the relative Eigen values in respect of each factor. Each factor
belongs to one of the set of factors extracted and is determined by the Eigen values of the factors
relative to each set. Table 4.6.4.1 shows which set each factor falls into.
Table 4.6.4.1 Component Matrix
31
Component Matrixa
Component
1 2 3
Inadequate Finances .220 .854 -.087
Integration with .705 -.378 -.410

operations
Building a quality .480 .732 .117
Website
Poor budgeting .565 -.215 .678
Limited Technological .73
-.342 -.195
Infrastructure 5
Lack of Skilled ICT

.88 -.184 .105
Personnel 6
Limited access to
.30
electricity .844 -.161
1
.654 .459
customers .35
Growing an online 3 -.227 -.054

audience .872 -.302
.90
Security and Privacy of 5 -.169 -.107
firm
.15
Fear of change 9
.91
6
Analysis. a. 3 components extracted.
32
Table 4.6.4.1 presents the factor analysis on the first objective of determining the challenges of
online marketing implementation using the extraction method: principal component analysis with
3 components extracted. Each component represents the correlation between item and the un-
rotated factor (e.g. in the case of Limited technological infrastructure, the correlation between
growing an online audience factor 1 is 0.735). These correlations help formulate an interpretation
of the factors of components. This is done by looking for a common thread among the variables
that have large loadings for a particular factor or components. The table shows that majority of
the factors had high loadings.
4.6.5 Rotated Component Matrix

The rotated component matrix is used to reduce the number of factors on which the variables
under investigation have high loadings so as to make interpretation easier. From the results in
Table 4.6.4, the variables of fear of change, growing an audience and integration with operations
among others are highly correlated with this component 1.
Table 4.6.5.1 Rotated Component Matrix

Rotated Component Matrix
Compone nt
1 2 3
Inadequate Finances -.054 .884 -.012

Integration with operations .880 -.097 -.153
Building a quality Website .154 .828 .268
Poor budgeting .361 -.101 .828

.828 -.077 .061
Infrastructure
Lack of Skilled ICT .817 .087 .392
Personnel .045 .907 -.055
Limited access to electricity -.042 .679 .548
33
customers
Growing an online audience .898 .069 .249
Security and Privacy of firm -.047 .905 -.235
Fear of change .906 .133 .202

Analysis. Rotation Method: Varimax with
Kaiser Normalization. a. Rotation converged
in 4 iterations.
4.6.6 Factor Isolation

Factor Analysis involves isolating each of the variable factors and grouping them by the three
extracted factors based on their factor loading on each set. Table 4.6.5 shows the summary of the
factor isolation.
Table 4.6.6.1 Factor Isolation

Factor Isolation
Factor Group Variables
Factor 1 Integration with operations
Infrastructure
Lack of Skilled ICT Personnel
Growing an online audience
Fear of change
Factor 2 Inadequate Finances
Building a quality Website
Limited access to electricity
34
In access by current customers
Security and Privacy of firm

Factor 3 Poor budgeting
In access by current customers
4.7 Online Marketing and Financial performance
I sought to find the impact of online marketing on the financial performance of SMEs in Nairobi
County.
4.7.1 Means and Standard Deviations, Online Marketing and Financial Performance
The responses were on a 5 point Likert scale with 5-Very great extent, 4-Great
Extent, 3-Moderate, 2-Little Extent, and 1-No extent. Results were shown in Table 4.7.1.1.
Table 4.7.1.1 Online Marketing and Financial Performance
Internet Marketing and No Little Moderate Great Very Great Mean Std Dev
performance
- Increased Profitability 10 - 22 48 - 3.35 .995
- Market Share Expansion 20 18 32 10 - 2.40 1.001
- Access to new market 12 8 34 26 - 2.93 1.016
- Improved Customer Loyalty 5 15 19 41 - 3.20 .960
- Increase in the average size of - 22 12 36 10 3.42 1.028

transactions
- Increased competitive advantage 10 - 30 40 - 3.25 .974
- Increased sale revenue 10 18 - 26 26 3.50 1.458
35
N=80
Online Marketing allowed the respondents to Increased sale revenue with a mean of 3.50 as well
as an increase in the average of transactions (Mean of 3.42) and increased profitability with a
mean of 3.35. Firms with a mean of 3.25 explained that they gained a competitive advantage in
their industry from the application of internet marketing while those with a mean of 3.20 had an
improvement in their customer loyalty. Firms access to a new market mean of 2.93) and
expanded their market share (mean of 2.40) on the application of internet marketing.
4.7.2 Correlation Analysis

The correlation analysis was done for all the independent variables and the dependent variable in
the study. The dependent variable was the financial performance of SMEs while the independent
variables were sales trackdown , pricing, sales track down and feedback driven change.
Communication to stakeholders, monitoring &measuring of results, reduced turnaround time of
operations, firm visibility and focus on clientele needs
This analysis was carried out in order to determine whether there were serial correlations
between the independent variables. As serial correlations are a problem when performing
regression analysis, this preliminary test was carried out first.
Table 4.7.2.1 Correlation Matrix
Sales
trackdow
n
Pearson 1.00 -.22 -.01 -.23
Correlati Performance 0 -.049 6 9 .463 6 .726 .194 .584 .235 .838 .132
on Sales -.04 -.06 -.57 -.12 -.15 -.04

trackdown 9 1.000 .737 1 7 4 1 .135 2 .130 .094 .094
pricing -.22 .737 1.00 -.21 -.43 .042 -.12 .059 -.01 .057 -.21 .028
6 0 2 2 7 9 3
36
Advertiseme
nt of
Products or -.01 -.21 1.00 -.08 -.10 -.07 -.05 -.02 -.00 -.05
Services 9 -.061 2 0 7 2 2 6 4 .015 8 5
Expansion to -.43 -.08 1.00 -.06 -.12 -.12 -.09
new Market .463 -.577 2 7 0 3 .510 5 .260 0 .304 7
Tracking -.23 -.10 -.06 1.00 -.04 -.24 -.23 -.17 -.21
down sales 6 -.124 .042 2 3 0 1 2 .160 4 5 2
Improving
products or
Services from
client -.12 -.07 -.04 1.00
feedback .726 -.151 7 2 .510 1 0 .100 .564 .096 .775 .065
Improved
Communicati
on to other -.05 -.12 -.24 1.00 -.08
stakeholders .194 .135 .059 6 5 2 .100 0 7 .851 .161 .953
Monitoring
and
Measuring of -.01 -.02 -.08 1.00 -.08 -.14
results .584 -.042 9 4 .260 .160 .564 7 0 4 .526 3
Turnaround
time of
Operations -.12 -.23 -.08 1.00
reduced .235 .130 .057 .015 0 4 .096 .851 4 0 .155 .802
Gained better -.21 -.00 -.17 1.00
firm visibility .838 .094 3 8 .304 5 .775 .161 .526 .155 0 .105
Focusing on
target -.05 -.09 -.21 -.14 1.00
Customers .132 .094 .028 5 7 2 .065 .953 3 .802 .105 0
37
The table 4.7.2.1 shows that almost all the predictor variables were shown to have a positive
association between them at a significant level of 0.05 and hence included in the analysis. There
was strong positive relationship between Communication of Products or Service and Customer
relations (correlation coefficient 0.737), Customer relations and Communication of Products or
Service (correlation coefficient 0.737), Expansion to new Market and Improving products or
Services from client feedback (correlation coefficient 0.510), Improving products or Services
from client feedback and Performance (correlation coefficient 0.726) and Improving products or
Services from client feedback and Expansion to new Market (correlation coefficient 0.510),
Improving products or Services from client feedback and Monitoring and Measuring of results
(correlation coefficil.oent 0.564), Improving products or Services from client feedback and
Gained better firm visibility (correlation coefficient 0.775). Improved Communication to other
stakeholders and Turnaround time of Operations reduced (correlation coefficient 0.851),
Improved Communication to other stakeholders and Focusing on target Customers (correlation
coefficient 0.953). Monitoring and Measuring of results and performance (correlation coefficient
0.584), lastly between Monitoring and Measuring of results and Improved Communication to
other stakeholders (correlation coefficient 0.564). Monitoring and Measuring of results and
Gained better firm visibility (correlation coefficient 0.526), Turnaround time of Operations
reduced and Improved Communication to other stakeholders (correlation coefficient 0.851).
Turnaround time of Operations reduced and Focusing on target Customers (correlation

coefficient 0.802). Gained better firm visibility and Performance (correlation coefficient 0.851),
Gained better firm visibility and Improving products or Services from client feedback
(correlation coefficient 0.775). Gained better firm visibility and Monitoring and Measuring of
results (correlation coefficient 0.526), Focusing on target Customers and Improved
Communication to other stakeholders (correlation coefficient 0.953). lastly Focusing on target
Customers and Turnaround time of Operations reduced (correlation coefficient 0.802).
4.7.3 Model Summary

Analysis in table above shows that the coefficient of determination (the percentage variation in
the dependent variable being explained by the changes in the independent variables) R square
38
equals 0.813. The Analysis of Variance (ANOVA) was used to check how well the model fits the
data. The results are presented in Table 4.7.3.1.
Table 4.7.3.1 Model Summary

Model Summary
Model R R Square Std. Error of

Adjusted R the
Square Estimate
1 .902e .813 .801 .338
4.7.4 Analysis of Variance

The F statistic is the regression mean square (MSR) divided by the residual mean square (MSE).
Since the significance value of the F statistic is small (0.000 smaller than say 0.05) then the
predictors variables i.e. the relationship between Communication of Products, Customer
relations, Advertisement of Products, Expansion to new markets, Sales track down, Feedback
driven change, Communication to stakeholders, Monitoring &Measuring results, Turnaround
time of operations, Firm visibility and Focus on clientele needs explain the variation in the
dependent variable which is Performance. Consequently, we accept the Hypothesis that all the
population values for the regression coefficients are not 0. Contrary, if the significance value of F
was larger than 0.05 then the independent variables would not explain the variation in the
dependent variable, and the null hypothesis that all the population values for the regression
coefficients are 0 should have been accepted. The regression output of most interest is the
following table of coefficients and associated output: associated output:
Table 4.7.4.1 ANOVA (Analysis of Variance)

ANOVAa
Model Sum of df Mean F Sig.
Squares Square
1 Regression 36.748 5 7.350 64.508 .000f
Residual 8.431 74 .114
39
Total 45.180 79
4.7.5 Regression Coefficients

Dependent variable: Financial Performance
From the Regression results in the table below, the multiple linear regression model finally
appears as
Y=0.593x1+0.232x2+0.164x3+0.244x4+-
0.118x5+0.945x6+0.990x7+0.960x8+0.692x9+0.455x10+0.321x11
The multiple linear regression models indicate that all the independent variables have positive
coefficient. The regression results above reveal that there is a positive relationship between
dependent variable (Performance)and independent variables (Communication of Products,
Customer relations, Advertisement of Products, Expansion to new markets, Sales track down,
Feedback driven change, Communication to stakeholders, Monitoring &Measuring results,
Turnaround time of operations, Firm visibility and Focus on clientele needs).
Table 4.7.5.1 Regression Coefficients results
Model Unstandardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) .304 .255 1.193 .237
Gained better firm .417 .045 .593 9.194 .000
visibility
40
Expansion to new
Market .174 .041 .232 4.295 .000
Turnaround time of .148 .048 .164 3.072 .003
Operations reduced
Monitoring and .212 .055 .244 3.879 .000
Measuring of results
Tracking down sales -.090 .041 -.118 -2.167 .033
Communication of .005f .070 .945 .008 .572
Products or Service
pricing .001f .013 .990 .002 .776
Advertisement of -.003f -.051 .960 -.006 .980
Products or Services
Improving products or -.038f -.398 .692 -.047 .286
Services from client
feedback
Improved -.073f -.751 .455 -.088 .271
Communication to
other stakeholders
Focusing on target -.085f -.999 .321 -.116 .351
Customers
4.8 RESEARCH FINDINGS
From the findings, one unit change in the Communication of Products resultsa in 0.593 unit
increase in SME financial performance. One unit increase in Customer relations results in a
0.232 unit increase in SME financial performance. One unit change in the Advertisement of
Products results in a 0.164 increase in SME financial performance. One unit change in
41
Expansion to new markets results in 0.244 unit increases in SME financial performance. One
unit change in Sales tracks down results in a 0.118 units increase in SME financial performance.
One unit increase in Feedback driven change results in 0.945 unit increases in SME financial
performance. One unit change in the Communication to stakeholders results in a 0.990 increase
in SME financial performance. One unit change in Monitoring &Measuring of results leads to
0.960 units increase in SME financial performance. One unit increase in Turnaround time of
operations results in 0.692 units increases in SME financial performance. One unit change in the
Firm visibility in 0.455 increase in financial SME performance. One unit change in Focus on
clientele needs results in 0.321 unit increases in SME financial performance.
The statistics help in determining the relative importance of each variable in the model. As a
guide regarding useful predictors, we look for t values well below -0.5 or above +0.5. In this
case, the most important variable was Communication of Products, Customer Relations,
Advertisement of Products, Expansion to new markets, Sales track down, Feedback driven
change, Communication to stakeholders, Monitoring &Measuring results, Turnaround time of
operations, Firm visibility, and Focus on clientele needs.
4.9 SUMMARY AND INTERPRETATION OF FINDINGS
Online Marketing has a positive impact on the financial performance of SMEs. Most respondents
used social media as a form of Online marketing and had a website for their firm’s content,
advertisement, and communication which in turn leads to an increase in sales which translates to
increased sales revenue. I noted that respondents used Online marketing for several processes in
their operations as it provided an easier means of communication to their customers as well as
expanded new market niches and reduced cost since there is no need for many employees which
in turn leads to increased profitability. However, there were several challenges faced by SMEs in
their Online Marketing application like inadequate capital and these hindered the use of online
marketing by these firms. The results show that online marketing poses great benefits to SMEs,
however for its implementation, there needs to be a consideration in curbing the different
challenges presented in the findings like making sure someone makes a good budget of its
resources.
42
CHAPTER FIVE: SUMMARY, CONCLUSION, AND RECOMMENDATION
5.1 Introduction
The main objective of the study is to investigate the effects of Online marketing on the Financial
performance of SMEs in Nairobi County. This chapter presents the summary of findings,
conclusion, recommendations, and suggestions for further research.
5.2 SUMMARY
The study’s main objective was to determine the effect of Online marketing on the Financial
performance of SMEs in Nairobi County. The study tested the effect of Online marketing has on
several performance indicators. On the firm’s Profitability it was found that Online marketing
impacted to a great extent with 60% of the respondents agreeing to this. Other variables included
the firm’s ability to increase its market share with 40% of the respondents indicating that its
impact was moderate and 42.5% agreed that internet marketing increased their market growth
rate at a moderate extent. The research also tested its impact on improving customer loyalty and
51.3% of the respondents agreed that it impacted to a great extent. 45% agreed that internet
marketing played an impact on their firm’s image enhancement to a great extent while 50% on
their increase in competitive advantage on its industry. Online marketing allowed firms access to
new market niches with 65% of the respondents agreeing to this at a very great extent. The
research indicated that internet marketing had a moderate impact on the SMEs’ overall
performance.
The study tested the different forms of online marketing used by these SMEs and Facebook
marketplace was the most applied form of online marketing with 76.3%. 50% of the respondents
had a Jumia and 42.5% used OLX. 32.5% used Kilimall and only 17.5% used Alibaba.
Most firms with a mean of 4.36 agreed that their greatest challenge was the fear of losing their
current customers who have in access by current customers, Inadequate Finances had a mean of
43
4.13, while access to internet and fear of change each had a mean of 4.04.The respondents ability
to grow an online audience faced a challenge with a mean of 3.72 The lack of Skilled ICT
Personnel gained a mean of 3.61, Integration with operations 3.37 while building a quality
Website 3.35. Another challenge was the limited technological infrastructure with a mean of 3.31
and the limited access to electricity 2.89 with the Security and Privacy of firm at a mean of 1.96
The study identified that 75% of the respondents used online marketing to communicate their
products or services. Most respondents agreed that online marketing was applicable in improving
their firm’s visibility, it allowed them focus on specific needs of their target customers, helped
them gain more customer loyalty and enabled them improve their products or services from the
feedback. The use of online marketing moderately impacted on their ability to monitor and
measure results, there was better communication to other stakeholders and the turnaround time of
operations was reduced. Internet marketing had a great impact on the firm’s ability to advertise
their products and services and allowed them to expand to new market niches as well as their
ability to track down of sales.
5.3 CONCLUSION
The study found that the use of online marketing increased firms profitability which had a
positive impact on their financial performance. Firms were able to improve on their customer
relations through the use of online marketing as well as advertise their products and track down
their sales with better ease. The firm’s visibility increased, they were able to focus on client
needs as well as improve the products and services from the feedback given. Online marketing
allowed firms better communication to their stakeholders as well as ability to easily monitor and
measure their results. There was a reduced turnaround time in their operations and it allowed
them expand to new markets.
In the study, I found that online Marketing had a positive impact on the financial performance of
SMEs in Nairobi County. I, therefore, conclude that the adaptation of online marketing leads to
the improved financial performance of SMEs.
5.4 RECOMMENDATION
In the study, I identified benefits derived from SMEs and therefore recommends policies that
favor the growth of SMEs as they impact positively the economy. The creation of awareness is
44
recommended to SMEs and large enterprises on the use and impact of online marketing.
Therefore I recommend that support for online marketing initiatives be given by the state
government for them to reap the benefits and enhance the economy. Actions need to be done to
curb the challenges in online marketing application so as to enable as many SMEs opportunities
to implement it in their operations. Through the study I recommend that SMEs to integrate online
marketing in their operations for its positive impact on their financial performance.
5.5 SUGGESTIONS FOR FURTHER STUDIES

There is a need to focus on other benefits of online marketing on firms in future studies this is
due to the constant change which has seen improved technologies available for firms. Studies
could be carried out to find out whether SMEs have knowledge of online marketing and its uses.
Other studies could be done on ways to curb challenges that affect the SME’s ability to
implement online marketing. The study could also be replicated in other towns and also rural
areas in Kenya so as to test the impact of online marketing under different environmental
conditions. This study can also be replicated on large enterprises and outside Kenya to establish
whether these variables influence their performance too.
6 REFERENCE
Ashworth, C.J., Schmidt, R.A, Pioch, E.A., Hallsworth,A.(2006). An approach to sustainable
‘fashion’ e-retail; a five stage evolutionary strategy for ‘clicks and mortar’ and ‘pure-play’
enterprises Journal of Retailing and Consumer Services
Bing Pan and John C. Crotts (2011). Theoretical Models of Social Media. Marketing Implications, and
Future
Burgess, S. M. and Bothma, C. H. (2007) International Marketing Cape Town: Oxford University Press.
Burke, G. I. and Jarhatt, D. G. (2004) The influence of information and advice on competitive strategy
definition in enterprises: approaches and metrics. Internet Research: Electronic Networking
Applications and Policy
45
Business Daily (2011) SMEs Way to go in Creating Employment for Youth (Accessed on June 27th, 2014)
Caroline Muthoni Kibe (2011) Social Media as a strategy for enhancing competitiveness among
SMES IN Nairobi County; University of Nairobi School of Business Master’s Degree
Chaffey, D. and Smith, P. R (2005) E-marketing excellence; the heart of e-business.
Chapman P. James-Moore, M., Szczygiel, M, Thompson, D (2000) Building internet capabilities in SMEs,
Logistics Information Management
Cloete, E., Courtney, S., Fintz, J. (2002). Small Businesses Acceptance and Adoption of e-
Commerce in the Western-Cape Province of South-Africa; Electronic Journal of Information Systems
in Developing countries
Cooper, D.R., & Schindler, P.S. (2003). Business research methods. New Delhi: McGraw-Hill Irwin.
David Ong’olo and Samason Odhiambo (2013) SMEs development in the devolved Governance system
Policy options for institutional and regulatory reforms in Kenya
Duhan, S., Levy, M. and Powell, P.(2010). Exploring the Role of IS in Dynamic Capabilities
Dunning, J.H. (1977), “Trade, Localization of Economic Activity and the MNE: The Search for an Eclectic
Approach, London: Macmillan Publishing.
Elliot R and Boshoff C. (2007) The influence of the owner-manager of small tourism businesses on the
success of Internet Marketing, South Africa Small Business Journal
Etemad, H. and Wright, R. (2004) Internationalization of SMEs: management responses to a changing

environment. Journal of International markets
46
Evans, D. (2008). Social Media Marketing
Gachiri Kaari Mwarania (2012) Adoption of Internet as a growth strategy by SME Tour
Operators in Kenya; University of Nairobi School of Business Master’s Degree
Ghobakhloo, M., Arias-aranda, D. and Benitez-amado, J. (2011) Adoption of e-commerce applications in

SMEs; Journal of Industrial Management Data Systems
Hamill, J. and Gregory, K. (1997), Internet Marketing in the Internationalization of UK SMEs, Journal of
Marketing Management
Hofstede, G. (1984). Cultural Consequences: International Differences in Work Related Values Beverly
Hills, CA: Sage Publications.
Jackson M.L.P. (2004) Entrepreneurial support in South Africa: a case study of a small enterprise support
centre in Johannesburg. PhD. Thesis; Birmingham: University of Birmingham.
Johnstone DA and Wright L. (2004) The E-Business capability of small and medium sized firms in
international supply chains, Information Systems and E-Business Management . Journal of
Enterprise Information Management
Tiessen, J.H., Wright, R.W. and Turner, I. (2001), A Model of E-Commerce Use by Internationalizing
SMEs‟, Journal of International Management
Wright, R.W. and Etemad, H. (2001), SMEs and the global economy‟, Journal of International
Management
47
APPENDICES
APPENDIX 1: QUESTIONAIRE
Online Marketing and Financial Performance of SMEs
The questionnaire seeks to identify the impact of online marketing in SMEs financial
performance, The Questionnaire has been distributed by a Degree student from Zetech
University. The Questionnaire answers shall be treated with confidentiality and shall not be used
for other purpose apart from the research that is intended for.
INTRODUCTION
(Please provide the answers to all questions below. Tick (√) your appropriate answer inside the
brackets provided). The extent is rated as (1-No extent, 2-Little Extent, 3-Moderate, 4-Great
Extent, 5-Very great extent).
SECTION A.: DEMOGRAPHIC INFORMATION
Respondent Information
1. Please indicate your position in the SME
Business Owner……………..….. [ ]
Top Management……………….. [ ]
Middle Management……………..[ ]
Any Other Indicate
48
2. Gender of the respondent
Female…………………… [ ]
Male……………………….[ ]
3. Please indicate your age bracket
18 -25 years [ ] 26 -30 years [ ] 31-35 years [ ]
36 -40 years [ ] Over 45 years [ ]
4. Tick against your highest level of Education
Masters Graduate……………………….[ ]
Degree Graduate………………………..[ ]
High School ………...………………….[ ]
Primary School ………………………...[ ]
Any Other Indicate
Firm’s Information
5. Indicate the name of your firm (Optional)
6. Is your firm a Small or Medium Enterprise?
Small Enterprise…………………………[ ]
Medium Enterprise………………………[ ]
49
7. Indicate the type of business
Manufacturing…………………………...[ ]
Trading…………………………………..[ ]
Service………………………………….. [ ]
Any Other Indicate
8. Please indicate your firm’s years of operation
0 -2years [ ] 3 -5 years [ ] 6-10 years [ ]
11 -15years [ ] Over 15 Years [ ]
9. The Number of Employees in your firm
1 -10 [ ] 11 -20 [ ] 21-30 [ ]
31 -40 [ ] 41 -50 [ ] 51-60 [ ]
61-70 [ ] 71-80 [ ] Over 80 employees [ ]
10. Kindly indicate your turnover rate per annum in KShs
≥ 2, 500,000 [ ] 2,500,001-5,000,000 [ ]
5,000,001-7,500,000 [ ] 7,500,001-10,000,000 [ ]
10,000,000-12,500,000 [ ] 12,500,001-15,000,000 [ ]
Over 15,000,000 [ ]
SECTION 3: ONLINE MARKETING
11. Indicate the forms of Online Marketing applied in your firm (You may tick more than one)
50
Facebook Marketplace……………………………….[ ]
Jumia…………………………………....[ ]
Alibaba……………………...[ ]
Killimall……………………….[ ]
OLX ……………………………..[ ]
Any Other Indicate
12. Indicate the extent to which you have applied each of the following Internet Marketing in
your firm operations
Online Marketing Application No Extent Little Extent Moderate Great Very Great
Extent Extent
1. Communication of products
2. Customer Interaction and

feedback ( Customer relations)
3. Advertisement of products or
services
4. Expansion to new markets
5. Easy track down of sales of

individual employees
6. Improving products or
Services using client feedback
7. Improved Communication to
other Stake holders
8. Monitoring and Measuring of
results
51
9. Reducing the turnaround time of
operations
10. Gained better firm visibility
11. Focusing on target Customers
Other, Specify and Rate
13. Indicate the extent to which your organization has faced each of the following challenges in
the application of Online Marketing
Challenges of Online Marketing No Extent Little Extent Moderate Great Very Great
application Extent Extent
1. Inadequate finances
2. Integration with operations
3. Building a quality website
4. Lack of skilled ICT
personnel
5. Poor Budgeting
6. Inadequate online security
7. Lack of Internet
8. Limited technological
infrastructure
9. In access to current
customers
10 Growing an online audience
11 Other, Specify and Rate
SECTION C: INTERNET MARKETING AND PERFORMANCE
52
14. Indicate the extent to which your firm has performed as a result of Online marketing
adoption for each of the following financial performance indicators
Online Marketing and Financial No Extent Little Extent Moderate Great Very Great
performance Extent Extent
1. Increased Profitability
2. Market Share Expansion
3. Increased Market growth
4. Improved Customer Loyalty
5. Firm’s Image enhancement
6. Increased competitive advantage
7. Access to new market niches
Other, Specify and Rate
THANK YOU FOR YOUR PARTICIPATION!
APPENDIX 2: SME DESCRIPTIONS
SMEs descriptions in Nairobi County
No Business Codes Categories of business Count
1 100 General Trade, Wholesale, Retail, stores, Shops Personal 77,312

Services Such as Distributors, Wholesalers, Hypermarkets,
Supermarkets, Show Rooms, Boutiques, Retail Shops and
Stores, Chemists, Take away Butcheries, Personal Service
Providers, Kiosks
2 200 Informal sector Including: Hawkers, street vendors & small 18,599
53
traders and service providers operating on the street, veranda or
temporary building.
3 300 Transport, Storage and Communication Such as: Maritime & 11,322
Airlines, International Carriers, Transportation Cooperating
Taxis, Matatu, Buses, Lorries, Planes, Boats, Driving schools,
Tours/Safari Operators, Petrol Stations, Storage Facilities,
Publishing Co-Newspapers, Books, Texts, Telephone Co,
radio/TV Broadcaster internal Provider
4 400 Agriculture, Forestry & Natural Resource Extraction such as: 2566
Production of Coffee, Tea, Fruits, Flowers, Cereals, Vegetable
and Horticultural Products, Grain Storage and Processing Mills
and Posho Mills, Bakeries, Forestry and Timber Production,
Sawmills, Coal Production, Animal Breeding, Dairy Products
Processing, Slaughter Houses, Mining and Other Natural
Resource Extraction Activities
5 500 Accommodation & Catering Such as: International Hotels, 12,095
tourist Camps, Lodging Houses, Restaurants, Bars, Eating
Houses, Tea & Coffee Houses, Butcheries with Meat Roasting
&/or Soup Kitchen Facilities. Membership Clubs, Night Clubs
& Casinos
6 600 Professional & Technical Services Such as: Firm & Individual 17,302
offering services on legal issues. Financial, Management,
Engineering, Architecture, Valuing, Surveying, Accountancy,
Secretarial Support, Data Processing e.t.c. Stock & Insurance
Brokering, Security Protection, Customs Clearing. Forwarding
Goods, Book making, Kenya Sweepstake Charity Included.
Banks, Forex Bureaus, Money lenders, Hire Purchase company.
Insurance Companies, Real estate, Developing-Finance
Company.
7 700 Private Higher Education Institution Any type of Private 4,356
University, College or Higher Education Institution.
54
Private Health Clinics and Doctor’s Surgeries: Consulting
Offices of Doctors, Dentists, Physiotherapists, Psychologists
and other Health Professionals. Herbalists and Traditional
Medicine Practitioners., Funeral Homes., Entertainment
Facilities including Cinema Theatres, Video Show/Amusement
Arcade, Juke Box Arcade, Games Machines Arcade/Sports
Club, Gym
8 800 Industrial Plants, Factories, Workshops, Contractors Such as; 14,294
Manufacture, Process and Assembly of Products, Vehicles,
Machinery and Equipment and workshops Servicing and
repairing Products, Vehicles, Machinery and equipment. Also
including contractors of new buildings and old building
restoration and Service Repair
TOTAL 157,846
Source: Nairobi City Council Licensing Department (2011).
55

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EFFECT OF ONLINE MARKETING ON THE FINANCIAL PERFORMANCE OF

SMES IN NAIROBI COUNTY.

BY OSCAR KIROP CHELANGA

A RESEARCH STUDY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

Signature------------------------------------------- Date. ………………………………

OSCAR KIROP CHELANGA

Signature------------------------------------------- Date. ………………………………

Mr. SAMUEL KARIUKI

Department of Business and Economics

LIST OF TABLES....................................................................................................................... vii

LIST OF FIGURES ..................................................................................................................... vii

ABSTRACT ............................................................................................................................... viii

DEFINITIONS OF TERMS ....................................................................................................... ix

CHAPTER ONE: INTRODUCTION ............................................................................................ 1

1.1 Introduction .............................................................................................................................. 1

1.2 Background of the Study ……................................................................................................. 2

1.3 Statement of the Problem…………………………. ................................................................3

1.4 Objectives of the Study... ......................................................................................................... 5

1.4.1 General Objective ................................................................................................................. 5

1.4.2 Specific Objectives ............................................................................................................... 5

1.5 Research Questions……………………………………………………………………………5

1.6 Justification of the Study……………………………………………...………………………6

1.7 Significance of the Study……………………………………………………………………...7

1.8 Scope of the Study…………………………………………………………………………….7

1.9 Limitation of The Study……………………………………………………………………….7

CHAPTER TWO: LITERATURE REVIEW ................................................................................ 8

2.1 Introduction .............................................................................................................................. 8

2.2 Theoretical Framework ............................................................................................................ 8

2.2.1 Technology Acceptance Model .............................................................................................8

2.2.3 Social Penetration Theory ................................................................................................... 10

2.2.4 Resource-Based Theory....................................................................................................... 11

2.3 Empirical Literature Review................................................................................................... 11

2.4 Research Gap……………. .................................................................................................... 13

2.5 Chapter Summary…………................................................................................................... 14

2.6 Conceptual Framework .......................................................................................................... 14

CHAPTER THREE: RESEARCH METHODOLOGY............................................................... 16

3.1 Introduction ............................................................................................................................ 16

3.2 Research Design ..................................................................................................................... 16

3.3 Target Population ................................................................................................................... 16

3.4 Sampling Technique .............................................................................................................. 17

3.5 Data Collection Instruments .................................................................................................. 17

3.6 Data Collection Procedure…………………………………………………………………...17

3.7 Data Analysis ..........................................................................................................................18

3.8 Chapter Summary…………………………………………………………………………...19

CHAPTER FOUR: DATA ANALYSIS RESULTS AND DISCUSSION ................................. 20

4.1 Introduction ............................................................................................................................ 20

4.2. Demographic Factors of the Respondent .............................................................................. 20

4.2.1 Gender of the respondent .................................................................................................... 20

4.2.2 Age of the respondent ......................................................................................................... 21

4.2.3 Level of Education of the respondent ................................................................................. 21

4.2.4 Position of the respondent in the SME ............................................................................... 22

4.3. Demographic Factors of the Firm ......................................................................................... 23

4.4 Forms of Online Marketing .................................................................................................. 24

4.6. Challenges in Online Marketing Application ...................................................................... 27

4.6.1 Means and Standard Deviations-Challenges of Internet Marketing Application................ 27

4.6.2 Factor Analysis (Communalities) ....................................................................................... 28

4.6.3 Factor Extraction ................................................................................................................. 29

4.6.4 Component Matrix .............................................................................................................. 31