Social Media Marketing, Challenges and Performance of Startup Companies in Nairobi

Abstract

This study sought to establish the influence of social media marketing on the performance of startup companies in Nairobi, Kenya. The main objectives were: to determine the most widely used social media tools by Startup companies in Nairobi; to establish the influence of social media marketing on the performance of Startup companies in Nairobi and to determine the challenges arising from the use of social media marketing for the Start-up companies in Nairobi. This study used a descriptive cross sectional research design and a study population of 231 startup companies. The primary data was collected using semi-structured questionnaires through the drop and pick method within the respective startup companies. Secondary data was collected from scholarly articles such as research reports and books. Regression analysis using Ordinary Least Squares (OLS) method was used to evaluate whether sales revenues by start-up firms can be explained by a vector of variables that measure use of social media by those firms. Adjusted R-squared was used to assess the explanatory power of the model. In other words, the extent to which the engagement in social media and the control variables explain performance of start-ups. The individual co-efficient for the different independent variables were evaluated for statistical significance using t-test for regression co-efficients at 5% significance level (95% confidence level). The statistical significance of the entire model was also assessed at 5% significance level. The study found that most startups are using social media particularly Facebook and WhatsApp. However, very few firms use LinkedIn and twitter. Although most of the startups do not have a social media department, they acknowledge the role of social media in influencing their performance both positively if used properly and negatively if it is not managed properly. Therefore, they closely monitor their social media accounts. A regression analysis shows that there is a positive relationship between the number of followers on social media and sales revenue of startup firms. This study explained performance of starts ups as a function of the number of followers on social media, the sales volume (in units), the legal status of the startup and its location. Therefore, there were four independent variables. Performance of startups was measured using the annual sales revenue in Kenyan shillings. The four independent variables explain 48% of the performance in Start-ups firms whereas 52% of their performance is explained by other factors that are outside the model. . Holding all the factors that are in the model constant, a start up will report sales revenues of Ksh. 102,000. Each additional follower on social media increases sales revenues by Ksh. 5,000 on average. The coefficient is statistically significant at 5% (p.value=0.049 <p.critical= 0.05).Social media interaction offers a platform for marketing and sales of products, development of new product brands, access to real-time customer feedback to enhance banks’ understanding of the needs of their customers. This study recommends that startups firms in Nairobi need to further embrace social media networks by increasing their efforts to reach larger audiences through the platforms. Further research is necessary to assess whether the findings can be similar in other regions in Kenya. The government of Kenya needs to provide support to start ups through educational programs to train them on how they can optimize sales revenues that are realized through social media at the lowest cost possible. Training on how to mitigate risks associated with social media platforms is necessary so that startups can reduce their exposure to such risks.