Customer Profiling Practices and Growth of Retail, Small and Medium Enterprises in Nairobi County, Kenya

Abstract

Small and medium-sized enterprises (SMEs) are widely recognised 
for their contribution to employment, innovation, and sustainable 
growth. However, their growth remains a significant challenge, 
since the majority of them fail within their first few years of 
operation. This study examined the relationship between customer 
profiling practices and the growth of retail Small and Medium 
Enterprises (SMEs) in Nairobi County, Kenya. The study adopted 
a positivist research philosophy and a descriptive correlational 
design. The study population included 199,600 registered retail 
SMEs in Nairobi County. A sample of 439 SMEs was determined 
using Yamane’s sample size determination formula and selected 
through stratified and simple random sampling techniques, with 
data gathered using structured questionnaires between July and 
September 2025. Data analysis employed descriptive statistics 
including frequency, mean, and standard deviation, and inferential 
statistics including Pearson correlation and simple linear 
regression, and was analysed using SPSS Version 30.  Findings 
revealed that customer profiling practices have a strong positive 
correlation (r = 0.777) with SME growth, explaining 60.4% of 
growth variation. That is, SMEs that effectively implement 
customer profiling practices tend to experience higher levels of 
growth. The study concludes that customer profiling practices 
significantly enhance the growth of retail SMEs in Nairobi County 
by improving marketing effectiveness, operational efficiency, and 
competitiveness. It recommends formalising data-driven profiling 
systems, investing in affordable analytics tools, strengthening staff 
capacity, and promoting supportive policies for SME digital 
transformation and resource access.