Service Differentiation Strategy and Organizational Performance of Nigerian Small and Medium Enterprises in Lagos State

Organization differentiate is service to achieve competitive advantage by providing a service that consumers perceived to be useful, unique and generally superior. Many organizations use service differentiation strategy to be profitable, competitive and to survive but many others neglect this strategy hence their low performance. This study empirically explored the relationship between service differentiation strategy (SDS) and organizational performance of Nigerian small and medium enterprises (SMEs) in Lagos State. A survey of 249 registered SMEs with Lagos State ministry of commerce and industry across the six small scale industrial zones of the state were undertaken, while both Yamani (1967) sample size scientific formula and Sekaran (2003) population to sample size table was used to determined sample size of 152. Meanwhile, questionnaires were distributed to two executives that is owner and manager from each of the selected 152 SMEs which makes the numbers of distributed questionnaire equal to 304. Three hypotheses were tested to determine whether: channel of distribution improve customer satisfaction; a superior and more reliable aftersales service increase market share & a quality service increase organizational profitability. Questions were formulated based on the hypotheses and 304 questionnaires were distributed to two executives from each of the selected SMEs, out of which 280 of the respondents which is 92% returned duly completed and properly filled questionnaires. The research findings show that SMEs that used SDS recorded substantial progress, while those that did not had low performance and market share. The implication of the study is the need for SMEs to adapt SDS for superior results. The study recommends that SDS should be used by SMEs for improved performance, customer’s satisfaction, loyalty and retention. Further, SMEs managers, owners and executives should engage in SDS to enable their enterprises have an edge over their competitors in dynamic, turbulent and highly competitive Nigeria business environment. Key words: Service Differentiation Strategy; Organizational Performance; Nigerian Small and Medium Enterprises; Lagos State, Nigeria.