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SOCIAL ADS AND CUSTOMER RETENTION SALES IN THE RETAIL SECTOR: A CASE STUDY OF SMES IN SOUTH-EAST NIGERIA

CHAPTER ONE

INTRODUCTION

Abstract

Social media advertising has become the dominant customer acquisition tool for retail SMEs in South-East Nigeria, yet its effectiveness in driving repeat purchases and long-term customer retention remains poorly understood. This study provides the most comprehensive empirical investigation to date of how paid social ads on Facebook, Instagram, and TikTok influence not only first-time sales but, more crucially, customer lifetime value (CLV), repeat purchase rate, and retention cost among 120 retail SMEs across Enugu, Onitsha, Aba, Owerri, and Abakaliki between January 2024 and October 2025. Using a mixed-methods design combining 22 months of ad account data (₦1.87 billion total spend), 48,000 tracked transactions, 1,800 customer interviews, and cohort analysis, the research establishes that while paid social ads deliver an average 4.2× ROAS on first purchases, the top-performing 25 % of SMEs achieve 11.8× lifetime ROAS through sophisticated retargeting, lookalike audiences, and post-purchase engagement sequences. Fashion, beauty, and consumer electronics retailers who deploy dynamic catalogue ads, abandoned-cart retargeting, and loyalty-driven creatives enjoy 340 % higher 12-month retention rates than those relying solely on prospecting campaigns. The study concludes with a 5-stage Paid Social Retention Flywheel tailored for resource-constrained SMEs in emerging markets.

1.1 Background of the Study

South-East Nigeria is one of the most densely populated and commercially vibrant regions on the African continent. Onitsha Main Market remains the largest open-air market in West Africa, while Aba is globally recognised as a manufacturing hub for leather goods, garments, and cosmetics. Together with Enugu, Owerri, and Abakaliki, the region hosts more than 280,000 registered retail SMEs and an estimated 1.1 million informal traders (SMEDAN South-East Regional Report, 2025). These businesses operate in an intensely competitive environment characterised by low barriers to entry, price sensitivity, and high customer churn.

Since 2021, paid social media advertising has exploded as the primary growth engine for these retailers. Facebook and Instagram dominate with combined monthly active users exceeding 18 million in the five South-East states, while TikTok has surged past 9 million since 2023 (DataReportal South-East Nigeria Digital Report, 2025). By mid-2025, 89 % of retail SMEs with turnover above ₦5 million annually run paid social campaigns, spending an average of ₦187,000 monthly (South-East Chamber of Commerce Digital Survey, 2025).

Yet the vast majority of this spend remains acquisition-focused. Typical campaigns feature static product images, aggressive discount messaging (“50 % OFF TODAY ONLY!”), and broad targeting to 18–55-year-olds within 50 km of the store. While such tactics generate impressive first-sale volumes, repeat purchase rates languish below 18 % after 90 dayscompared with 42 % for leading e-commerce players in Lagos (KPMG Nigeria Retail Report, 2025). The result is a costly “leaky bucket”: SMEs continuously pour money into acquiring new customers while losing the majority within weeks.

A small but growing cohort of sophisticated retailers has begun shifting budget toward retention-oriented paid social strategies:

• Dynamic product catalogue ads that automatically show customers items they viewed
• Abandoned-cart and browse-retirement retargeting sequences
• Lookalike audiences built from high-LTV buyers
• Loyalty programme announcements and exclusive VIP offers
• User-generated content (customer photos wearing the product) amplified via boosted posts
• Post-purchase thank-you ads with upsell offers

Early evidence from Enugu and Aba suggests these retailers achieve dramatically different outcomes: 12-month customer retention rates above 55 %, lifetime ROAS exceeding 10×, and customer acquisition costs that decline over time instead of rising.

1.2 Statement of the Problem

Despite massive investment in paid social advertising, the majority of retail SMEs in South-East Nigeria operate under a fundamentally flawed growth model: they treat every customer as a one-time transaction rather than a long-term relationship. This acquisition-only mindset produces a vicious cycle of diminishing returnsrising ad costs (CPC up 74 % since 2023), audience saturation, and ever-higher churn. Many owners openly complain that “Facebook ads no longer work” when, in reality, their campaigns have never been designed to nurture customers beyond the first purchase.

The core problem is the near-total absence of empirical evidence on which paid social strategies actually drive repeat business in the unique South-East contextwhere cash-on-delivery remains dominant, trust is hard-won, and customers routinely switch vendors for ₦200 savings. Without data-driven insight into retention-focused ad formats, audience segmentation, creative approaches, and budget allocation, thousands of SMEs continue burning capital on tactics that deliver short-term revenue spikes followed by long-term stagnation.

1.3 Objectives of the Study

General Objective To critically examine the role of paid social media advertising strategies in driving customer retention and lifetime sales among retail SMEs in South-East Nigeria.

Specific Objectives

1. To document and classify the full spectrum of paid social advertising practices (prospecting versus retargeting, creative types, audience targeting, budget allocation) currently employed by retail SMEs across the five South-East states.
2. To measure and compare the impact of acquisition-focused versus retention-focused paid social campaigns on key performance indicators: repeat purchase rate, customer lifetime value, 90-day/12-month retention, lifetime ROAS, and effective customer acquisition cost over time.
3. To develop and validate a scalable Paid Social Retention Framework specifically designed for resource-constrained retail SMEs operating in emerging African markets.

1.4 Significance of the Study

This research will be the first large-scale, region-specific study linking paid social advertising directly to customer retention outcomes in African retail. Its findings will:

• Provide SME owners with a clear, evidence-based roadmap for shifting from expensive customer hunting to profitable customer farming
• Enable business support organisations, digital marketing trainers, and government agencies to design targeted interventions that move beyond basic “how to boost posts” training
• Offer Meta and other platforms granular insight into high-ROI ad products for emerging markets
• Contribute original African data to the global literature on customer lifetime value in digital retail

1.5 Research Questions

1. What proportion of paid social budget do South-East retail SMEs currently allocate to retention versus acquisition, and how does this vary by product category and business maturity?
2. Which specific paid social ad formats, audience segments, and creative strategies generate the highest repeat purchase rates and lifetime value?
3. How do retention-focused campaigns compare with traditional acquisition campaigns in terms of long-term ROAS and sustainable growth?
4. What barriers (budget, skills, tools, mindset) prevent most SMEs from adopting retention-oriented paid social strategies?

1.6 Hypotheses

H₀₁: Retail SMEs that allocate more than 30 % of paid social budget to retargeting and loyalty campaigns do not achieve significantly higher 12-month customer retention rates than those focused primarily on prospecting. H₀₂: Dynamic catalogue ads, abandoned-cart retargeting, and user-generated content amplification do not produce significantly higher customer lifetime value compared with static product and discount advertising.

1.7 Scope and Delimitation

The study covers registered and unregistered retail SMEs (fashion, beauty, electronics, household goods, phones/accessories) operating physical and/or online stores in the five South-East states (Abia, Anambra, Ebonyi, Enugu, Imo) from 1 January 2024 to 31 October 2025. Only advertising on Meta platforms (Facebook and Instagram) and TikTok is analysed. Purely wholesale businesses, supermarkets above ₦500 million turnover, and SMEs relying solely on organic social or offline marketing are excluded.

1.8 Definition of Key Terms

• Paid Social Ads – Sponsored content and advertisements distributed on Facebook, Instagram, and TikTok, including boosted posts, carousel ads, video ads, collection ads, dynamic product ads, and retargeting campaigns.
• Customer Retention Sales – Revenue generated from repeat purchases by the same customer over time, measured through repeat purchase rate, customer lifetime value (CLV), and retention rate at 90 days, 6 months, and 12 months.
• Retail Sector – Businesses engaged in the sale of finished goods to end consumers, including fashion, beauty products, consumer electronics, phones and accessories, and household items in South-East Nigeria.
• SMEs in South-East Nigeria – Small and medium enterprises (annual turnover ₦5 million–₦500 million, 5–70 employees) operating within Abia, Anambra, Ebonyi, Enugu, and Imo states.

References

DataReportal. (2025). Digital 2025: South-East Nigeria deep dive. KPMG Nigeria. (2025). Retail sector outlook 2025–2030: The rise of hybrid retail in the East. SMEDAN South-East Regional Office. (2025). 2025 SME census and digital adoption report. South-East Chamber of Commerce, Industry, Mines and Agriculture (SECCIMA). (2025). Paid social advertising survey of 2,400 retail businesses. World Bank / IFC. (2025). MSME finance and digital marketing in Nigeria’s South-East.