- For the past one or two years, Jeff noted that Infobip has witnessed some shops close shop, hence stopped using their communication services.
- But mostly, the firm says if they're stopping to use support services, there's a high chance that they're also closing shop.
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Businesses are on the verge of cutting down some of their support services such as business-consumer communications, while others have already dropped off, an industry player now says.
The international communication firm Infobip, which specialises in helping businesses communicate with their customers through SMS, chatbots and online platforms such as WhatsApp, says businesses have been forced to strike a balance between what they see important and what could be considered less important to save on costs.
"In our case for instance, we have seen firms put business-consumer communications at the bottom list, despite its significance in fostering loyalty and boosting sales," said Jeff Oduor, an account executive at Infobip.
"Consumer communications help businesses track their clients activities, key in making marketing and sales decisions."
For the past one or two years, Jeff noted that Infobip has witnessed some shops close shop, hence stopped using their communication services.
"But mostly, if they're stopping to use our services, there's a high chance that they're also closing shop. In the last one year, I could think of around three firms which have dropped our communication services," he added.
"Reasons to this could be widespread, but we convincingly think their business strategy didn't work really well, and could be coupled with the economic situation thus decided to close shop."
There is another one that had to stop using our services, basically because of the costs of running the business, he adds in part.
The tough operating environment could be on the back of the newly introduced taxes in the 2023 Finance Act, for instance the disputed housing levy, which the Infobip says caught many businesses by surprise.
When such taxes are introduced, Oduor says companies look at how much it is spending on its operations, for instance communications, tending to cut down or do away with it completely.
In their case, he notes that clients would come up with resolutions such as, 'we used to send about 50 SMS, we need to see how we can be able to cut on this cost a bit. So, instead of 50, let's do maybe 30 or 20.'
“Such a move in the medium-to-long term will affect the businesses’ revenue triggered by reduced sales, mainly on the back of fading customer loyalty occasioned by reduced customer engagement,” he said.
He further cautioned that the looming introduction of the other six new taxes from July 2024, proposed in the latest medium-term revenue strategy, will make it more hard for businesses in managing operations costs.
The medium-term revenue strategy comes soon after the High Court threw out litigation against the contentious Finance Act 2023.
The National Treasury Cabinet Secretary Njuguna Ndung’u has proposed the introduction of six new taxes, while realigning some to match the neighbouring countries from July next year.
This would have a substantial impact on the labour market, as many companies will have to down further their employee base to stay afloat, he added in part.
Mostly impacting the startups, Odour advises that the government be considerate of such enterprises at most.
This when coming up with further tax measures as they could kill them within their first year of existence.
Communications Authority says close to 80 per cent of startups often die within the first year of operation, while only three to five per cent make it beyond the one year period of survival.
It further notes further that the remaining 15 per cent fall under the unpredictable category, who still have very low chances of survival.
“The government should therefore safeguard these businesses considering their potential in employment creation and revenue contribution,” Oduor said.