A survey of the segmentation practices of Microfinance institutions in Nairobi
Abstract
Market segmentation is acclaimed as the heart and soul of marketing and unless a company spendstime on it, driven from the board downwards, it is virtually impossible for the company to be market driven. The study sought to establish the segmentation practices by microfinance institutions in.Nairobi. The specific objectives of the study were: to identify the segmentation criteria commonly used by Microfinance institutions in Kenya, to identify variables used by Microfinance institutions in segmentation process and to determine the stages in segmentation process used by Microfinance institutions in Kenya.
The study used primary data that was collected by use of a questionnaire and mode of collection was by personal interviews. The data was obtained from all the forty institutions forming the population of interest. It was then analyzed using descriptive statistics. Findings of the study reveal that Microfinance institutions have different segmentation practices, which are segmentationcriteria, requirements for effective segmentation, and the segmentation practices.
In view of the study's findings, the following recommendations have been made:
The Micro and small enterprise (MSE) sector is very important for the development of this country, currently, and thus a lot of effort should be put in assisting the owners of these businesses to acquire more of the working capital, investment capital and other tools for their business. They therefore require all the support they can get form the Microfinance institutions and other capital providers .. On the other hand, the Microfinance institutions are very important in assisting the MSEs. The use of market segmentation may help the Microfinance institutions to developproducts, which will satisfy their customers needs, and this will increase the productivity of the MSE'S. It is documented that the main constraint to MSE development is capital
accessibility. The micro finance institutions should therefore be at a position to have a deep understanding of the market, and have creative segmentation and selection criteria.
The micro finance advisors should train their clients on market segmentation practices. The variables commonly used by Microfinance institutions in the market segmentation were found to be: the nature of the industry, the location of the enterprise, cash-flow of the enterprise, client capability in terms of ability to repay the credit, the purpose which is either investment capital or working capital, size of the credit facility, the lender-borrower similarity, character of the proprietor, as well as material payment mode by the enterprise which could either be by cash or credit.
The commonly used criteria by the micro finance institutions is that: a good market segment is measurable, identifiable, actionable, responsive, substantive, stable, substantial, compatible and differentiable.
A market segmentation process should involve a clear identification of needs by the potential clients and should go through three main stages namely: survey stage, analysis stage and profiling stage.
Microfinance institutions that are contemplating market segmentation can benefit from these findings. Still, each firm should carefully analyze its individual objectives, constraints, strengths, weaknesses and resources to determine its segmentation strategy. Policy makers should focus on the commonly used segmentation variables, criteria and process in order to develop the Microfinance institutions and attain industrialization by the year 2020. The development of this sector is very important to the government. Scholars should put more
emphasis on the segmentation criteria, variables and process in the Microfinance institutions so as to add more to the existing knowledge.
The study was only done for the Microfinance institutions in Nairobi while we have other urban areas in Kenya. The results of these findings are therefore applicable to the Microfinance institutions in Nairobi only. Secondly, no secondary data could be found pertaining to the use of market segmentation in Microfinance institutions in Kenya.
This study mainly dwelt on the market segmentation in Microfinance institutions and was mainly interested in establishing the segmentation practices by Microfinance institutions in Kenya, with specific reference to Nairobi. Further studies can be done on Microfinance institutions in rural areas, to identify their market segmentation practices
Also, studies can be done to establish the performance of Microfinance institutions that segment their markets.
Citation
Master of Business and Administration (mba)Publisher
University of Nairobi Faculty of Commerce