ABSTRACT
The main purpose of this study is to analyze the pricing strategy and its effect on sales performance in Abia State, with special emphasis on resin product made by Chemlap Nigeria Limited. The objectives of the study among others are to: Determine whether the companies have any pricing strategy. Determine how such pricing strategy is being used in these companies. Evaluate the effect of such pricing strategy on the sales performance of the companies. Identify factors that militate against effective pricing strategy. The research will have in state the objectives to be accomplished through the study. The extent to which the study meets the objective determines the success of the project. The method of data collection in the envisaged study will involve face to face distribution of copies of questionnaire to the staff of the case organization, the researcher will give the copies and allow one week filling period after which he will collect then fill out copies for analysis. Descriptive statistics, multiple regression analysis will be used to analyze the data collected while five point likert scale involving mean and ranking will be used in testing the hypothesis.The analysis of data will involve the use of descriptive analysis. In this the researcher will descriptively analyze the flow of responses by the target respondents, and percentage scores will be assigned to the responses. Data presentation will involve the use of the respondents flow table and the research question will be validated.
TABLE OF CONTENTS
Title page i
Topic ii
Declaration iii
Certification iv
Dedication v
Acknowledgement vi
List of Tables vii
Table of content viii
Abstract xi
CHAPTER ONE
INTRODUCTION 1
1.0 Background of the Study 1
1.1 Statement of the Problem 4
1.2 Objectives of the Study 5
1.3 Research Questions 6
1.4 Research Hypothesis 6
1.5 Scope of the Study 7
1.6 Significance of the Study 8
1.7 Limitation of the Study 8
1.8 Definition of Terms 9
CHAPTER TWO
REVIEW OF LITERATURE 11
2.0 An Overview of Price 11
2.1 Types of Pricing Strategy 13
2.1.1 Price Stabilization 13
2.1.2 Range Pricing 13
2.1.3 Perceived Value Pricing 14
2.1.4 Quality Pricing 14
2.1.5 Resale Pricing Maintenance 14
2.1.6 Penetration Pricing 15
2.1.7 Cost-Based Pricing Strategies 15
2.1.8 Market-Based Pricing Strategies 17
2.1.9 Economic Pricing 17
2.1.10 Consumer Behaviour Pricing 20
2.1.11 Synthesis Pricing Strategies 24
2.1.12 Improved Multi Step Synthesis Pricing 26
2.2 Pricing Decisions 26
2.3 Pricing Objectives 28
2.4 Factors Affecting the Price of Products 30
2.5 Internal Influences on Price 35
2.6 Brief Historical Background of the Resin
Manufacturing Companies 35
CHAPTER THREE
METHODOLOGY 37
3.0 Research Design 37
3.1 Area of the Study 37
3.2 Population of the Study 38
3.3 Sampling Technique and Determination of Sample Size 38
3.4 Method of Data Collection 38
3.5 Method of Data Analysis 39
3.5.1 Model Specification 40
3.6 Reliability of Data 42
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS 43
4.0 Introduction 43
4.1 Response Rate of the Total Questionnaire Distributed 43
4.2 The Identified Pricing Strategies Adopted by the Firms 44
4.3 Based on the Usage of the Adopted Pricing Strategies
by the Firms 45
4.4 The Effect of such Pricing Strategy on
Sales Performance of the Company 46
4.5 Factors That Militates Against Effective Pricing Strategy 49
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION 51
5.0 Summary of Findings 51
5.1 Conclusion 52
5.2 Recommendations 53
5.3 Recommendation 53
REFERENCES
QUESTIONNAIRE
CHAPTER ONE
INTRODUCTION
1.0 Background to the Study
The objective of every business enterprise, be it one man business or partnership or private company or public company, is to maximize profit. To achieve this goal, business organizations adopt so many strategies such as sales promotions, advertising, pricing, market analysis and the like (Mohammed, 2006). For these strategies to be effective, the organization must have a firm marketing policy “A marketing policy is a specification of a course of action to be followed under a given set of circumstances usually of a recurring nature”.
Marketing theory states clearly that price is one of the 7 P’s (Product, Positioning, Place, Promotion, Packaging, People and Price) that contributes to the marketing mix in order to get potential customers’ attention, motivate them, and get them to buy products or services (Ndajimana,2005). A more visible set of marketing policy is the conditions of sale or terms which the seller usually circulates to his customers having put a firm marketing policy in place, the next stage is to make a realistic market analysis.
There are many pricing objectives that lead to different strategies and businesses have to develop and apply the best strategy in various situations. Some of the ways of pricing a product are: premium and penetration pricing, price skimming, economy and psychological pricing, product and optional product pricing, captive and product bundle pricing, promotional, geographical and value pricing. However, the situation is further complicated when it comes to pricing for international and global markets (Ndajimana,2005).This is to identify the current and potential buyers of the product, their size, location, need and wants, socio – economic characteristics, attitudes, perceptions and values, preference regarding alternative products currently offered by competing marketers. A number of different authors have underlined the importance of pricing decisions for every company’s profitability and long-term survival. If effective product development, promotion and distribution sow the seeds of business success, effective pricing is the harvest. Although effective pricing can never compensate for poor execution of the first three elements, ineffective pricing can surely prevent those efforts form resulting in financial success (Nagle & Holden, 1995). Similarly, Finch et al., (1998), Potter (2000) and O’Connor (2003) , and Shipley and Jobber (2001) have mentioned that pricing is the only element of the marketing mix that produces income for the firm, while all the others are related to costs. Diamantopoulos (1991) has also argued that price is the most flexible element of marketing strategy in that pricing decisions can be implemented relatively quickly in comparison with the other elements of marketing strategy. In spite of this importance of pricing as a factor of the company’s marketing strategy, there seems to be a lack of interest among marketing academics on this issue, which has brought Nagle and Holden (1995) to suggest that pricing is the most neglected element of the marketing mix. Within this context, the empirical research that has been conducted on the field of pricing is very limited, while this is even more evident in the case of services. However, the distinctive characteristics of services (intangibility, heterogeneity, perish ability and inseparability) necessitate a closer look at the way at which services are priced (Schlissel and Chasin, 1991; Zeithaml and Bitner, 1996; Kurtz and Clow, 1998; Langeard, 2000; Hoffman et al., 2002).
In Nigeria, research has shown that among other market strategies, pricing has been identified as the most sensitive strategy. This is because no matter how effective sales promotion or advertising is, if the price of the product is on the high side compared with its substitute, the greater part of the population will go for the substitute. Why is it so? What factors are responsible for this consumer behavior? Is it applicable to all products or are there exceptional? These and more other questions and problems associated with pricing strategy and its effectiveness on company sales performance are what the researcher is going to find out.
1.1 Statement of the Problem
Pricing policy determines the major source of income for most companies, which is why it is so important. The major objectives of a pricing policy are two – folds; to achieve a target return on investment and to maintain or improve the company’s share of the market. Pricing policy is subject to long-term and short-term considerations so that a company’s pricing strategy may well change markedly over time (Mohammad, 2005). For instance, prices may be set low in the short run in order to capture a new market segment, or in order to maintain production in a slack season and a company may bear a temporary loss as a result. This loss may be made up in the future if the company is able to increase its prices without losing sales.
Pricing strategy must include provision for many factors in addition to the income received from each sale; all the incentives that are offered to persuade the customer to buy the product (such as special discounts, trading stamps, gifts, competitions) must be accounted for when the price is set (Langeard, 2000; Hoffman et al., 2002).
In our country Nigeria, the high mortality rate of manufacturing firms especially those in the Resin industry is a source of concern to the society. It seems that these firms do not adopt appropriation pricing strategies in the pricing of their products. In a highly competitive market like ours in Nigeria if a manufacturing firm fails to adopt appropriate pricing strategies, its competitors will knock it out of the market.
A situation where manufacturers of Resin and Allied products continue to experience low sales volume or an eventual close up of business as a result of low profit margin arising from the adoption of wrong pricing strategies calls for investigation. This study seeks to find out what pricing strategies these companies are using and how far these strategies have helped to accomplish their goal.
It is common to see some manufacturing companies in Nigeria, increasing the prices of their products indiscriminately in an attempt to make fabulous profit without considering the effect this attitude will have on their sales volume. When the price of a product is not competitive in the market or is not commensurate with the quality of that product, no doubt customers patronage will reduce. This study will also seek to find out whether or not these companies have defined pricing policies.
1.2 Objective of the Study
The main objective of this study is to identify the pricing strategies of the Resin industries in Abia State and the effect of those strategies on the sales performance of the companies.
The specific objectives are to;
1. Determine whether the companies have any pricing strategy.
2. Determine how such pricing strategy is being used in these companies.
3. Evaluate the effect of such pricing strategy on the sales performance of the companies.
4. Identify factors that militate against effective pricing strategy.
1.3 Research Question
From the above objective of the study, the research questions are:
1. How are these companies going to formulate their pricing Policies and manage their pricing strategies to achieve their objectives?
2. Do these companies have any pricing strategies?
3. How are the pricing strategies adopted by these companies being used or implemented?
4. What is the effect of the pricing strategy on the sales performance of these companies?
5. What are the hindrances to effective pricing strategy?
1.4 Research Hypothesis
Ho1: There is no significant relationship between pricing strategies and sales.
Ho2: marketing objective, marketing mix, product cost and organizational factors are expected to have no significant effect on the pricing strategy.
Ho3: Nature of the market, competition and environmental factors are expected to have no significant effect on the sales of the firm.
1.5 Scope of the Study.
This study will focus on the Resin Industries in Abia State. The ones that are operating in Abia State presently are Chemlap Nigeria limited Aba, Nycil Nigeria limited with Head Office at Lagos. Desern Nigeria limited with head office at Enugu, Intercil Nigeria limited with head office at Enugu. The researcher will visit their head offices and also depots to ascertain the impact of pricing strategy on their sales performance.
The researcher will determine empirically the effect of pricing strategy on the sales performance of these establishments. On this note, this study would want to know the various types of pricing strategies these companies are adopting, have a look at their annual turnover for at least five years and make empirical comparisons to ascertain the overall effect on the performance of the companies within the period the study will cover. The researcher will also conduct personal interviews with some of the managers and other relevant officials of the companies to authenticate the information from the sales records.
Questionnaire will also be distributed to the relevant staff of gather a variety of opinions.
1.6 Significance of the Study
This study will help the companies to have a critical appraisal of the type of pricing strategy they are adopting in the marketing of their products. It will also help them to evaluate the effect of the pricing strategy on their sales performance.
The study will also enable the companies to consider whether there will be need to change the strategy or not. The recommendations at the end of this study will be very significant to the Resin industries in Abia State, as it will form a basis for comparison of performances of both the past and future years.
1.7 Limitation of the Study
In the course of this study, the researcher envisages some constraints. The first is the accessibility of the documents. It is certain that most documents may not be accessible to the researcher because of their confidential nature. Again, the fear that the report of the research may expose certain ills of the establishments might hinder staffers from giving adequate and accurate information. Inadequate finance is another constraint. This may hinder the researcher’s plan of extensive travels and resource commitments that would have been done in order to collect relevant information and necessary data.
The last constraint is time. This research is conducted within the normal academic session and as such, the researcher’s time would be shared between other academic needs and the research.
Therefore, taking into consideration the amount of work necessary in this study, time may not be adequate for extensive and exhaustive research on the topic. For this reason the researcher’s findings might not be as conclusive as that of a full time researcher.
1.8 Definition of Terms
The researcher intends to give operational definition of some terms used in this chapter. The definitions may not necessarily be their literal dictionary meaning but as they are used and applied in this context.
Effective: This is the quality of being able to bring about the result intended and working a striking impression.
Strategy: This is the act of planning operations that aim at wining customers in the market. In other words it is the tactics adopted by the marketer to attract buyers.
Policy: This is a specification of a course of action to be followed under a given set of circumstances usually of a recurring nature.
Performance: This is a notable achievement.
Depot: This is a location or store house.
Resin: This is the raw material used to produce paints.
Login To Comment