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 agroprocessing 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.