Effect of digital marketing strategies on performance of Commercial banks in Kenya

Abstract

Due to the advancement in technology, the world is changing at full speed. Our life has majorly been changed by the digital space in the world, from physical interactions, as well as to connect each person through social media and provide utmost convenience through the various applications we use every day. Digital marketing is today the most common way of communicating and create awareness since the evolution of digital technology. World over, stiff completion has been witnessed in the financial sector. Kenya has not been spared. This sector has had several challenges over time that has affected the industry’s performance. The challenges include COVID-19 pandemic, increasing competition from fintech and other financial institutions locally and globally, shift in culture, change in models of business, higher expectations, retaining customers and breach of security, as well as regulatory compliance and outdated mobile experiences. This necessitated the need of this study to understand the effect of strategies that are used digitally market on how Kenyan commercial banks perform. The purpose of this study was to establish how strategies of digital marketing are related to commercial banks performance in Kenya. Porter’s Five Forces Theory, Kotler Marketing Theory and Innovation diffusion theory guided the study. The study adopted descriptive research design. This study’s target population was the 39 Kenyan commercial banks. This study adopted stratified sampling to select respondents from 80% of each of the 9 Tier 1, 8 Tier 2 and 21 Tier 3 strata of banks. The study used purposive sampling technique to allow the four heads of departments in each of the sampled commercial bank to respond. Therefore, the total sample size of this study was 120 respondents. Questionnaires were used for collecting data. Statistical Package for Social Sciences (SPSS), version 26 was used to analyse. Results show that commercial bank performance had a significant positive linear correlation with the following strategies: email marketing (r=0.432; p=0.010), social media marketing (r=0.470; p=0.000), website marketing (r=0.432; p=0.000) and mobile banking marketing (r=0.403; p=0.008). The regression model indicated an R value of 0.483, a squared R value of 0.233 and a modified R-squared value of 0.219. Therefore, email marketing, social media, website marketing and mobile banking marketing accounted for 23.3% of the variability in commercial bank performance. It further revealed that among the four independent variables, social media marketing strategy had the most significant influence on performance of commercial banks. Furthermore, the descriptive data suggested that most banks do not use website marketing strategy. Based on the findings, it is recommended that financial institutions should prioritize dedicating resources to social media marketing, as it had the most substantial effect on commercial bank performance. There is also need for the bank management to invest significant resources in utilization of website marketing. At the same time, commercial bank management should conduct their marketing strategies using the SWOT analysis so as to identify weak aspects of their respective strategies and make a deliberate investment in enhancing them. This study is significant to commercial banks and policy experts in that they can use the study findings to develop digital marketing strategies so as to enhance bank performance. Financial analysts and consultants can also gain knowledge that could help them to run their businesses. To the academia, this study contributes to the bulk of information that benefits researchers, scholars and students so as to stimulate additional research in marketing.