The Influence of Customer Retention Practices on Performance of Micro and Small Agro-processing Enterprises in Tanzania

Abstract

Customer retention practices are considered as derivers to accelerate firm
performance in highly competitive business environment. However, scanty
literature exists on agro-processing MSEs in developing economies. This study was
carried out in Dar es Salaam, Arusha and Morogoro regions to examine the
relationship between customer retention practices and performance of agro
processing micro and small enterprises (MSEs). The study employed quantitative
research approach and a cross-sectional research design. Proportionate stratified
sampling was used to select a sample of 302 MSEs. A self-administered
questionnaire was used to collect data from these firms. Structural Equation
Modelling (SEM) was used to analyse the relationship between customer retention
practices and firm performance. Firm performance was found to be positive and
significantly influenced by assessment to customers, analysis of competitors,
response to customer needs, inter-functional coordination practices and employees
behavioural practices. Business-supplier relational practices posited positive
relationship with the firm performance. The findings suggest that customer
retention practices are influential determinants of the performance. This implies
that owner-managers of agro-processing MSEs who wish to improve the
performance of their firms should put emphasis on understanding the needs of their
customers, analyse the actions and behaviours of competitors, appropriately
coordinate internal functions of their firms and manage employees behaviours
towards customers to ensure sufficient response to needs of the customers, and they
should maintain positive relationship with the suppliers of raw materials. Likewise,
practitioners and policy makers should appreciate the role of customer retention
practices when designing policies, trainings and support services for MSEs.