Effect of Customer Behaviour Characteristics on Sales Performance in Selected FMCGs in Nigeria (Case Study: a Case Study of United African Company of Nigeria)
Abstract
This study investigated the relationship between consumer behaviour and sales performance in the Fast-Moving Consumer Goods (FMCG) sector in Nigeria. A quantitative survey research design was adopted, and a structured questionnaire was designed to collect data from a sample of 120 respondents. The questionnaire included items related to consumer patronage, purchase decision-making, consumer loyalty, and sales performance indicators. The data collected were analyzed using SPSS27 software, employing descriptive and inferential statistical techniques. Hypotheses were formulated based on existing theories and empirical evidence, and F-statistics were used to test these hypotheses. The findings revealed significant positive relationships between consumer behaviour characteristics, including consumer patronage, purchase decision-making, and consumer loyalty, and sales performance indicators such as total revenue, customer retention rate, and market penetrative rate. Based on the results, it can be concluded that consumer behaviour played a crucial role in influencing sales performance in the FMCG sector. Recommendations were provided for FMCG companies to enhance customer engagement, improve purchase decision-making processes, and foster consumer loyalty to drive sales growth. In conclusion, this study contributed to the existing body of knowledge by providing empirical evidence of the linkages between consumer behaviour and sales performance in the FMCG industry. The findings offered valuable insights for practitioners, policymakers, and researchers seeking to understand and optimize sales strategies in competitive market environments. Further research is recommended to explore the moderating effects of contextual factors and the effectiveness of specific marketing interventions in shaping consumer behaviour and driving sales outcomes within the FMCG sector.
CHAPTER ONE
INTRODUCTION
Background to the StudyIn the dynamic landscape of the Fast-Moving Consumer Goods (FMCG) industry in Nigeria, understanding the intricate relationship between customer behaviour characteristics and sales performance has become imperative. The United African Company of Nigeria (UACN) stands as a prominent player in this sector, making it an ideal case study to explore the multifaceted impact of consumer behaviour on sales outcomes (Abdel-Gadir & Alfarsi, 2020; Agwu et al., 2022).
As consumer behaviour continues to evolve, influenced by various socio-economic factors and technological advancements, businesses must adapt their strategies to meet the shifting demands of their target market (Alalwan et al., 2021). The FMCG sector, being highly competitive, demands a comprehensive understanding of customer behaviour characteristics to ensure sustained success and growth (Awoniyi et al., 2022). In this context, the sub-variables of consumer patronage, purchase decision, and consumer loyalty/retention come to the forefront. These sub-variables collectively contribute to shaping the broader construct of customer behaviour, exerting a significant influence on the overall sales performance of FMCGs.
Consumer patronage, as a sub-variable, reflects the frequency and consistency with which customers choose products from a particular FMCG company over its competitors (Dinu & Dinu, 2022). The degree of patronage is often indicative of the brand’s resonance with the consumer base. For instance, studies by Chukwu et al. (2019) emphasize the impact of advertising on consumer buying behaviour, suggesting that effective advertising strategies can contribute to increased consumer patronage. In the context of the UACN, understanding the factors that drive consumer patronage can provide critical insights into enhancing sales performance.
The second sub-variable, purchase decision, plays a pivotal role in the customer’s journey from consideration to acquisition (Afzal & Khan, 2015). Consumer decisions are influenced by various factors such as product quality, brand image, and social influences (Dulin, 2020; Diputra & Yasa, 2021). The FMCG sector, characterized by products with relatively low involvement and frequent purchases, places a premium on understanding the triggers that lead to favourable purchase decisions (Arshul et al., 2022). Therefore, exploring the nuances of purchase decision-making in the Nigerian context, specifically within the UACN, can unravel key determinants affecting sales performance.
The third sub-variable, consumer loyalty or retention, extends beyond the initial purchase to encompass the customer’s inclination to stick with a particular brand over time (Gbolagade & Abubakar, 2018). Building and sustaining consumer loyalty is crucial for the long-term success of FMCG companies, as it directly impacts customer retention rates and, consequently, sales performance (Falebita et al., 2020). Awan et al. (2022) highlight the effects of advertising on consumer buying behaviour, emphasizing its role in fostering brand loyalty. Investigating the factors that contribute to consumer loyalty within the UACN can shed light on strategies to enhance sales performance through the retention of a loyal customer base.
Transitioning to the dependent variable, sales performance in the FMCG sector is a composite metric comprising total revenue, customer retention rate, and market penetrative rate (Cooray et al., 2018; Engidaw, 2020). Total revenue serves as a fundamental indicator of a company’s financial health, directly influenced by consumer behaviour characteristics (David et al., 2021). For instance, Bansal and Gupta (2022) examine the impact of newspaper advertisements on consumer behaviour, emphasizing their relevance to overall sales figures. Understanding how consumer behaviour characteristics contribute to the generation of total revenue is essential for optimizing sales strategies within the UACN.
Customer retention rate, as a component of sales performance, gauges the ability of an FMCG company to retain its existing customer base over a specified period (Gde Satia Utama et al., 2021). Strategies aimed at enhancing customer loyalty and satisfaction play a critical role in influencing retention rates (Awoniyi et al., 2022). Furthermore, factors like product packaging, as explored by Awoniyi et al. (2022), can impact consumer patronage and, consequently, customer retention. Investigating the dynamics of customer retention within the UACN can provide insights into crafting effective strategies to boost sales performance.
Market penetrative rate is a measure of how well an FMCG company captures and expands its market share, reflecting its competitiveness within the industry (Dinu & Dinu, 2022; Gbolagade & Abubakar, 2018). The influence of advertising on consumer behaviour, as noted by Arnold and Thompson (2021), is particularly relevant in shaping market penetrative rates. Analyzing the impact of consumer behaviour characteristics on market penetrative rates within the UACN can unveil strategies to enhance the company’s position within the highly competitive FMCG landscape in Nigeria.
Statement of Problem
The Fast-Moving Consumer Goods (FMCG) industry in Nigeria, characterized by intense competition and rapidly evolving consumer behaviour, presents a complex landscape for businesses, including the United African Company of Nigeria (UACN). Despite the acknowledged significance of understanding the relationship between customer behaviour characteristics and sales performance, there exists a notable gap in the literature that warrants further exploration.
One crucial aspect requiring attention is the nuanced understanding of consumer patronage within the Nigerian FMCG context. While studies emphasize the impact of advertising on consumer buying behaviour (Chukwu et al., 2019), there is limited research specifically delving into the factors influencing consumer patronage within the UACN. Identifying and addressing these factors is essential for optimizing marketing strategies and enhancing customer loyalty, thereby contributing to improved sales performance.
Furthermore, the literature emphasizes the importance of purchase decision-making in influencing consumer behaviour (Afzal & Khan, 2015). However, there is a dearth of research investigating the specific determinants of purchase decisions within the UACN and how these factors contribute to overall sales outcomes. Understanding the intricacies of purchase decision dynamics is crucial for tailoring marketing efforts to align with consumer preferences and maximizing sales performance.
The aspect of consumer loyalty and retention, acknowledged as integral to sustained success in the FMCG sector (Falebita et al., 2020), remains underexplored within the context of the UACN. Limited studies have investigated the factors contributing to consumer loyalty within this specific company, hindering the development of targeted strategies to foster long-term customer relationships and boost sales performance.
On the side of sales performance metrics, existing literature highlights the significance of total revenue, customer retention rate, and market penetrative rate (Cooray et al., 2018). However, there is a lack of in-depth analysis concerning how these metrics are specifically influenced by consumer behaviour characteristics within the UACN. Filling this gap is essential for developing precise strategies to optimize revenue generation, retain a loyal customer base, and enhance market share in the highly competitive Nigerian FMCG landscape.
Objectives of the Study
The study aims to achieve three specific objectives, each contributing to a holistic understanding of the relationship between customer behaviour characteristics and sales performance in the selected FMCGs in Nigeria:
- To assess the impact of consumer patronage on sales performance in the FMCG sector.
- To analyze the influence of purchase decision-making on sales outcomes in the selected FMCGs.
- To examine the correlation between consumer loyalty and sales performance in the FMCG industry.
Research Questions
To guide the research process, the study poses the following research questions:
- How does consumer patronage contribute to sales performance in selected FMCGs in Nigeria?
- What is the influence of purchase decision-making on sales outcomes in the FMCG sector?
- How is consumer loyalty correlated with sales performance in the FMCG industry?
Research Hypotheses
Based on the research questions, the following hypotheses are tested:
Null Hypotheses(H0):
- There is no significant positive relationship between consumer patronage and sales performance in the FMCG sector.
- Purchase decision-making does not significantly influence sales outcomes in the selected FMCGs in Nigeria.
- Consumer loyalty has a negative and significant correlation with sales performance in the FMCG industry.
Alternative Hypotheses(H1):
- There is a significant positive relationship between consumer patronage and sales performance in the FMCG sector.
- Purchase decision-making significantly influences sales outcomes in the selected FMCGs in Nigeria.
- Consumer loyalty has a positive and significant correlation with sales performance in the FMCG industry.
Operationalization of Research Variables
Consumer Behaviour Characteristics (X):
Sub-Variables:
Consumer Patronage (X1): The frequency and consistency with which consumers choose products from a specific company over its competitors.
Purchase Decision (X2): The factors influencing consumers’ decisions to purchase FMCG products.
Consumer Loyalty/Retention (X3): The degree to which consumers exhibit allegiance to a particular brand and continue purchasing its products over time.
Sales Performance (Y):
Sub-Variables:
Total Revenue (Y1): The overall income generated from the sale of products within a specified period.
Customer Retention Rate (Y2): The percentage of customers retained over a specified period.
Market Penetrative Rate (Y3): The extent to which a company’s products have captured a share of the overall market.
Regression Equations:
For Total Revenue (Y1):
Y1 = β0 + β1(X1) + β2(X2) + β3(X3) + ε
For Customer Retention Rate (Y2):
Y2 = β0 + β1(X1) + β2(X2) + β3(X3) + ε
For Market Penetrative Rate (Y3):
Y3 = β0 + β1(X1) + β2(X2) + β3(X3) + ε
In these equations:
Y represents the sales performance sub-variables (Total Revenue, Customer Retention Rate, Market Penetrative Rate).
X represents the customer behaviour characteristics and its sub-variables (Consumer Patronage, Purchase Decision, Consumer Loyalty/Retention).
β0 represents the intercept.
β1, β2 and β3 represent the regression coefficients for each corresponding independent variable.
ε represents the error term.
Scope of the Study
The study focuses on selected FMCGs in Nigeria, with the United African Company of Nigeria as the primary case study. The scope encompasses an in-depth analysis of customer behaviour characteristics, specifically consumer patronage, purchase decision-making, and consumer loyalty. The impact of these variables will be assessed against sales performance indicators, including total revenue, customer retention rate, and market penetrative rate.
Significance of the Study
Management: This study holds significant importance for management professionals within the FMCG sector, particularly executives and decision-makers at companies like the United African Company of Nigeria (UACN). By understanding the relationship between customer behaviour characteristics and sales performance, management can make informed strategic decisions. Insights gained from this study can guide resource allocation, marketing strategies, and product development efforts to enhance overall sales performance and competitiveness in the market.
Academics: Academically, this study contributes to the existing body of knowledge in the fields of marketing, consumer behaviour, and sales management. It provides empirical evidence and theoretical insights into the complex dynamics between customer behaviour and sales performance within the FMCG sector. Researchers and scholars can use the findings of this study to further explore related topics, develop new theories, and enrich academic literature in these areas.
Government: For government agencies and policymakers, this study offers valuable insights into the functioning and dynamics of the FMCG sector within Nigeria. Understanding how customer behaviour influences sales performance can inform policies related to consumer protection, market regulation, and economic development. By promoting an environment conducive to business growth and consumer satisfaction, policymakers can contribute to the overall prosperity of the FMCG industry and the economy at large.
Industry Regulators: Industry regulators play a crucial role in ensuring fair competition, consumer safety, and adherence to ethical standards within the FMCG sector. The findings of this study can help regulators gain a deeper understanding of the factors influencing sales performance and consumer behaviour. Armed with this knowledge, regulators can develop policies and regulations that foster transparency, accountability, and sustainability within the industry, benefiting both businesses and consumers.
1.8.5 Society: At the societal level, this study has implications for consumers, communities, and other stakeholders affected by the FMCG sector. By promoting a better understanding of consumer behaviour and its impact on sales performance, this study can empower consumers to make informed choices and advocate for their interests. Additionally, insights from this study can contribute to the development of more socially responsible business practices within the FMCG industry, leading to positive outcomes for society as a whole.
Operational Definition of Terms
To ensure clarity and precision in the study, the following terms are operationally defined:
Customer Behaviour Characteristics: The observable actions and decisions made by consumers, including patronage, purchase decision-making, and loyalty.
Consumer Patronage: The frequency and consistency with which a customer chooses a particular FMCG brand over others within a specified period.
Purchase Decision-making: The process through which consumers gather information, evaluate alternatives, and make choices when purchasing FMCG products.
Consumer Loyalty: The extent to which customers consistently choose and advocate for a particular FMCG brand over time.
Sales Performance: The overall effectiveness of an FMCG company in achieving its revenue and market share objectives.
Total Revenue: The cumulative income generated by an FMCG company from the sale of its products within a specific timeframe.
Customer Retention Rate: The percentage of customers who continue to purchase from a particular FMCG brand over an extended period.
Market Penetrative Rate: The proportion of the target market that a particular FMCG brand has successfully captured about the overall market size.
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