Value Proposition Practices and Growth of Retail Small and Medium Enterprises in Nairobi County, Kenya

Abstract

Small and Medium-Sized Enterprises (SMEs) are vital to the global economies as they are the backbone driving employment, innovation, and sustainable growth. Despite playing a critical and unique role, their growth remains a significant challenge, since the majority of them fail within their first few years of operation. This study examined the influence of value proposition practices on the growth of retail 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. Using Yamane’s (1967) formula with a 5% margin of error and a 10% adjustment for non-response, a sample size of 439 SMEs was determined. Stratified random sampling and simple random sampling techniques were used to select respondents across the ten sub-counties of Nairobi County. Data was collected through structured questionnaires administered to owners, directors, and senior managers between July and September 2025, with 341questionnaires being fully completed and returned, yielding a response rate of 77.7%. Data analysis employed descriptive statistics including frequency, mean, and standard deviation, and inferential statistics including Pearson correlation, ANOVA, simple linear regression, and regression coefficient analysis.  Quantitative data was analysed using SPSS Version 30. Value proposition practices, particularly customer perceived value and customer satisfaction, showed a significant impact (r = 0.666), contributing to 44.3% growth variance (R² = 0.443). The study concludes that by creating and delivering value that aligns with customer needs and expectations, SMEs are able to strengthen their market position, attract and retain customers, and enhance overall business performance.  The study recommends continuous refinement of value propositions, alignment with customer needs, innovation, and digital adoption by SMEs, alongside improved customer experience, satisfaction, and loyalty strategies. Policymakers should support SMEs through capacity-building in branding, digital marketing, and customer engagement to enhance competitiveness and sustain long-term retail SME growth in Nairobi.