ABSTRACT
This study investigated the effects of product innovation and market performance using PZ Cussons Nigeria Plc as a study. The major objective of the study was to determine the effect(s) the innovation of a product has on market performance. The population of the study was 830 and Taro Yamane formula was used to determine a sample size of 270 respondents, comprising of Distributors, and, PZ Employees, and Households. A well-structured copies of questionnaire was distributed to the respondents to gather primary data for the analysis after which 250 valid questionnaires/usable survey forms were gotten. In the method of analysis, the study employed descriptive analysis, and Simple Bivariate Regression Analysis in varying multiple forms, wherein varying dependent variables were regressed against their corresponding explanatory variables, with the aid of an interactive computer software, the Statistical Package for Social Sciences (SPSS). Product innovation in this study was proxied with product quality, product packaging, product branding and product pricing; while competitive market advantage was proxied in the study with sales volume, profitability, market share, and customers’ attraction, satisfaction and retention. The findings of the study, in a bid to answer the research questions, indicated that three of the explanatory variables product quality (PQLTY) Product Packaging (PPCKG) Product Branding (PBRND) exerted positive effects on their corresponding competitive market variables Sales volume (SAVOL) Profitability (PROFT) and Market Share (MKTSH) whereas one of the explanatory variables product pricing (PPRCN) was found to have a negative effect on its competitive market variable customers attraction Satisfaction and Retention (CASRT). On individual hypothesis basis, two of the explanatory variables (PQLTY and PBRND) were found not to exert any significant effect on their corresponding dependent variables (SAVOL and MKTSH) whereas the other two variables (PPCKG and PPRCN) were found to exert significant effect (positive and negative) on their corresponding dependent variables (PROFT and CASRT) at 0.05 significance level. The study concluded that the innovation of a product is a recipe for market performance, as well as the sustainability of the company. The study recommended among others Companies should strive to identify and understand social, environmental, organizational and other factors that influence company’s operational effectiveness and accommodate same in their innovative processes.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Figures xi
Abstract xii
CHAPTER 1: INTRODUCTION 1
1.1 Background of the Study 1
1.2 Statement of the Problem 4
1.3 Objectives of the Study 4
1.4 Research Questions 5
1.5 Research Hypothesis 5
1.6. Significance of the Study 6
1.7 Scope of the Study 7
1.8 Limitation of the Study 7
1.9. Operational Definition of Term 8
1.10. Profile of PZ. Cussion PLC 8
CHAPTER 2: REVIEW OF RELATED LITERATURE 12
2.1 Conceptual Framework 12
2.1.1 Conceptual framework on product innovation 12
2.1.1.1 The concept of product 12
2.1.1.2 Concept of product innovation 13
2.1.1.3 Types of product innovation 15
2.1.1.4 Stages of product innovation 17
2.1.1.5 Process involved in introduction of product innovation 19
2.1.1.6 Reasons for product innovation 26
2.1.1.7 Factors (explanatory variables) for product innovation 27
21.1.7.1 Product quality 27
2.1.1.7.2Product packages 28
2.1.1.7.3Product branding 28
2.1.1.7.4Product pricing 29
2.1.2 Conceptual review in competitive market 31
2.1.2.1 Concept of market 31
2.1.2.2 Concept of perfect market 32
2.1.2.3 Types of competitive market 33
2.1.2.3.1 Monopolistic competition 33
2.1.2.3.2 Oligopoly competitive market 33
2.1.2.4 Concept of market performance 33
2.1.2.5 Concept of comparative market advantage 34
2.1.2.6 The rational behind competitive market advantage 35
2.1.2.7 Effect of product innovation on market performance 35
2.1.2.7.1 Sales volume 35
2.1.2.7.2 Profitability 36
2.1.2.7.3 Market share 36
2.1.2.7.3 Customers attraction satisfaction and retention 36
2.2 Theoretical Framework 37
2.2.1 Theories of product innovation 37
2.2.1.1 Prospect of innovation theory 37
2.2.1.2 Dynamic capable innovation theory 37
2.2.1.3 New product quality 38
2.2.1.4 The disruptive innovation theory 39
2.2.2 Theories of marketing performance 39
2.2.2.1 Theory of monopolistic competition 39
2.2.2.2 Resources based theory 40
2.3. Review of Empirical Studies 41
2.4. Summary of Literature Review 44
CHAPTER 3: METHODOLOGY 45
3.1 Design of the Study 45
3.2. Population of the Study 45
3.3. Sample Size Determination 45
3.4. Sample Techniques 46
3.5. Psychometric Properties of the Research Instrument 46
3.6. Administration of the Instrument 48
3.7 Scoring of Data (Operational Measures Variables) 48
3.8. Source of Data Collection 48
3.9 Model Specification 48
3.10. Method of Data Analysis 50
3.11 Test of Hypothesis 51
3.12. Area of Study 51
CHAPTER 4: RESULTS AND DISCUSSION 52
4.1 Results 52
4.1.1 Preamble 52
4.1.2 Data Presentation 52
4.2 Questionnaire Responses Rate Validity Reliability 52
4.3 Data Presentation and Description 54
4.4 Simple Bivariate Regression Analysis Result 57
4.5 Discussion 60
4.6 Summary of Major Findings 62
CHAPTER: CONCLUSION AND RECOMMENDATIONS 64
5.1 Conclusion 64
5.2 Recommendations 64
5.3 Suggestion for Further Studies 65
References 66
Appendices 70
LIST OF TABLES
2.1 Summary of product life cycle, characteristics, objectives and strategies 18
3.1. Questionnaire for respondents 47
4.1. Questionnaire response rate 47
4.5 Categorization/qualification of respondents with PZ products 56
4.6 Regression hypotheis one: sales volume against product quality 57
4.6 Regression hypothesis two: profitability against product packages 58
4.7. Regression hypothesis three: market share against product branding 58
4.8 Regression hypothesis four: customers attraction satisfaction / retention 59
LIST OF FIGURES
2.1. Nomenclature 17
4.1 Column chart representing gender respondents 54
4.2. Column chart representing age category 55
4.2 Column chart representing qualification 56
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Following the strong and dynamic competition in most modern markets, it is only necessary for companies or firms to keep developing new product as well as modifying their existing products in order to meet the needs and wants of their customers and defend corporate competitive activities. Olayinka C.K. (2006).
Product innovation has become so important to the growth of both the companies and the economy. It has been known to many organizations that it has strong global influence on company’s performance. In these days of global innovation, research has shown that effective product innovation will result to sustainable and competitive advantages Oko (2013.)
Product innovatiuon has been elevated in almost the level with marketing concept. Peter Drucker in support of the above statement stated that most business got their management philosophers from this and as a result strived at creating satisfied customers through product innovation. Developing great product is hard. Few companies are highly successful more than half the time and this has a significant challenge for a product development team. Some of the characteristics that make product innovation challenges are trade off , dynamic, time Pressure and creation. Other include satisfaction of societal and individual needs, team diversities and team spirits. Chuks Gervase Iwu ( 2010).
In the view of Kotler & Armstrong (2009) product is anything that can be offered to market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, service, persons, places, organizations and ideas. In the same vain. G.C.Ugorji (2006) defines innovation as any good, service or idea that is perceived by someone as new, though the idea may have a long history, but it is an innovation to the person who sees it as new. Innovation takes time to spread from its source of innovation or creation to its ultimate user or adopter.
Based on the strength of the above defined terms, the researcher has observed that it is encouraging for large firms such as the organizations understudy to adopt independent approaches to developing some new technologies and ensure that benefits derived therefore are internalized notwithstanding the difficulties that may be associated with the practice. The reason is that the independence of thought achieved by relying on competition result in creation of a niche in the product market-that is the practices will afford the organization concerned the ability to exercise monopolistic power by having a suitable differentiated product.
Innovation provides the company with an effective diversification strategy first mover advantage. For instance in a market where a new product needs specific complementary goods, a product innovation firm can use their temporary monopolistic technological advantages to design and produce the complementary goods that makes entry by other competitors much difficult. Since product innovation leads to fixed cost, then the innovation of opportunity of being directed or distributed to the largest market which will complement the firm as a market leader. Agbomfor, Ogwo & Nnolim (2010)
Though market niches and first mover advantages are subject to imitation by diffusion of technological knowledge, however, the temporary lead can be self reinforcing and often lead to long term monopolistic profits. Unless a firm enjoys product innovative monopoly, its life span as well as those of its market offer in a market environment may not altogether be easy to elongate. It must maintain a constant vigilance because other firms will keep on challenging its strength or try to take on advantage of its weakness.
Product innovation is the introduction goods or services that is new or development of new ideas into a new or an existing product. This comprises all the activities that would make a company to determine what product to offer to the markets. There is no gain saying the fact that the success or failure of any business is the function of the ability of its product to stand firm in the face to adverse competition from other products. Product quality , branding, packaging, price reduction, intensive promotion and advertisement, product innovation and effective distribution channel are all strategies used by management to position their product in the market. Anyanwu (2013).
The reliance of this study would help to highlight benefits the companies in this industry would derive. It would help the firms in this industry to compete favourably with others. If others would help consumers to make rational choices it would aid growth to firms and explore them to better revenue generation. The central Bank of Nigeria and other financial institutions would benefit in this study and restore both foreign and local entrepreneurs. The distribution, supplies of confidential and profitability quest for new product development by firm is based on the assumption that customers want new items which the introduction of new product would help achieve the goals of the firm. It suggests that PZ Cusson, Nigeria must engage in three of the following product development marketing strategies so as to remain dominant in the health care industry especially in the cities.
First the firm must find ways to expand total demand of its products secondly, the firm must protect its current market share through good defensive and offensive actions. Thirdly, the firm can try to expand its market share further even if its market size remains constant . Chucks Gervase Iwu (2010).
1.2. STATEMENT OF THE PROBLEM
P.z. Cussion Plc, Aba products are widely distributed all over Nigeria through their extensive distribution network. From their Annual published report of 2008 to 2014 their sales volume, profitability and market shares have been rapidly increased.
There is observed in 2015 to date that their sales volume, profitability and market shares began to dwindling to the extent that many people, even their major distributors and customers began to ask what are being responsible for that. So many people attributed it to lack of market research, poor product quality and development and lack of product innovation. Others also lay blame to wrong application of packaging, poor product quality and branding, inability of the company to know when to detect a product during product life cycle, improper presentation of product to the market and serious competition for its product due to co-existence of the company with some other companies which manufacture identical products in the same industry.
Based on this gap, the researcher decided to go into this study “product innovation and market performance”. The study would help to contribute positively to the growth of the society, P.Z. Cussion and Nigeria industralizational goal.
1.3 OBJECTIVES OF THE STUDY
The general purpose of this study is to determine the effects of product innovation and market performance.
Other specific objectives include
1. to ascertain the effect of product quality on sales volume.
2. to examine the impact of product packaging on profitability.
3. to determine the effect of product branding on market share.
4. to examine the effect of product pricing on customers’ attraction, satisfaction and retention.
1.4 RESEARCH QUESTIONS
The following research questions which emerged in the course of this study were answered:
1. What is the effect of product quality in product innovation on sales volume?
2. What is the effect of product packaging in product innovation on profitability?
3. What is the effect of product branding in product innovation on market shares?
4. What is the effect of product pricing in product innovation on customers’ attraction, satisfaction and retention?
1.5 RESEARCH HYPOTHESES
The following research hypotheses which serve as a guide to the study were stated in the null form.
Hypothesis one:
Ho1: There is no significant impact of product quality on sales volume.
Hypothesis two:
Ho2: There is no significant impact of product packaging on profitability.
Hypothesis three:
Ho3: There is no significant impact of product branding on market shares.
Hypothesis four:
Ho4: There is no significant impact of product pricing on customers’ attraction, satisfaction and retention.
1.6 SIGNIFICANCE OF THE STUDY
This research work would be useful to the following groups of people (government, companies, investors, education planners, society and students. they would benefit from the study through the following.
Government: the study would help companies to generate more income and profit which at the end increase their tax payment thereby stimulate economic growth and development.
Companies: the study would enhance the efficiency of companies management on product innovation towards target profit, customer attraction, market share and constitute a strategy for survival while other companies who have discover the need to product innovation would find the need to introduce one in their range of product. It will equally help companies to know the basic key indicators for measuring performance society: it will help citizens to have verities quality product with moderate price and the same time, create employment opportunities
Investors: the study would help the investors in small scale industries to identify the need of product innovation within the limited source surrounding them. It will equally encourage them to see product innovation as one of their business.
Education planner: it would help the marketing education planners to increase the scope of their curriculum and scheme of work in the areas of product innovation and market performance.
Research students: the study would be a source of reference materials to future students who would go in for such similar project work. It would also be an opportunity to gain practical experience during the studies the researcher will be working with his supervisor and advice team. Information obtained from the study would expose the researcher especially marketing students to know more about product innovation and market performance and even turn the study to text book to justify the money and time spent. Chuks Gervase Iwu (2010).
1.7 SCOPE OF THE STUDY
The study is limited PZ Cussions Nigeria. The researcher limited the research work within the range of the company’s product such as soap, creams and detergent. The study investigated product innovation and market performance to know the degree to which product innovation contribute to profitability sales volume market share customers attraction, and stake holders return. The researcher limited his work on existing product innovation or product improvement which include: Product Quality, product packaging, product branding and product pricing.
1.8. LIMITATION OF THE STUDY
Naturally a study of the nature is bound to be limited by some constraints. Some limitation as encountered by the researcher in this course is non-availability of enough materials and information, these constituted a problem in data collection.
Financial resources for transportation cost in acquiring materials, time factors to face the academic work with one private job are among constrains encountered by the researcher
It is too hard to convince the respondents that the research is exclusively for academic purpose. Many of the respondents who promised to assist for answering some of the questions failed at the end because they felt it is highly against their business policy to disclose some business information to outsiders.
However, the experience will be a good lesson as new ground will be opened for both scholars and marketing practitioners.
1.9. OPERATIONAL DEFINITION OF TERM
1. Competitive market strategy: these are means by which companies position themselves against competitors to enable them gain the greater possible competitive advantages.
2. Market challenger: This is a firm that occupies the second position in an industry. There may be many market challengers but smaller than the market leader.
3 New product: They are products developed to replace those products that have become out dated in the eyes of consumers and also to satisfy the changing needs of customers.
4 Life cycle: This entails the sales and profit history of that product over a specific period of time. It is the life span of a product in relation to the sales and profit derived from it. Amaechi (2003:46) adoption process. It is the decision making action of the individual as decides to adopt a given innovation in a full scale or not.
5 Product position: It is the way a product or services is seen by consumers and how they view its importance attributes in relation to competitors products.
6 Strategy: This is a broad plan of action by which an organization intended to reach its goal.
1.10. PROFILE OF PZ CUSSON PLC
PZ Cusson was founded in 1879 as a trading post in Serria Leone by George Paterson and George Zochonis. As Paterson Zochonis was incorporated on the 14th December, 1948. Under the name of P.B. Nicholas who has for some years prior to the date established a factory, for that purpose. PZ and company Limited of Manchester subscribed 75.5% of the company’s issued share capital and since directly or through subsidiary companies retain the controlling interest PZ itself incorporated in England in 1884, because a public Company quoted on the London and Northern stock exchange in 1953. Its principal activity then was generally in merchants in West Africa.
In 1954, Mr. P.B. Nicholas sold out his interest in the company to P.Z two years later, the company changed its name to Akimbo industries limited in 1960, adopted the name associated industries limited. During the year, the company, achieved its first indigenous and Nigeria equity participation and by the end of 1972, it had sold 40% of its share capital to indigenous Nigerians.
In accordance with the federal Government directives” indigenous Act is sold 20% of its share to Nigeria in 1976, thus bringing the equity share participation to 60% in favour of Nigerians.
Following the merger of PZ and company (Nig) Limited and associated industries Limited in 1976, the company changed its name to PZ industries limited between 1976-1970, manufacturing operation in Aba factory were disrupted as a result of the civil war and in consequences, the company open a ranted premises in Lagos state. However, PZ industries limited become a public company in 1972 and was listed on the Nigerian Stock exchange. The name was finally changed to Paterson Zochonis industries plc. In 1976” PZ industries plc.”
Furthermore in 1996 PZ industries plc merged with Thermocol Nigerian Ltd to answer PZ industries Nig. Plc and July 2002, the company merged with Cussons international England to become the present P.Z Cussons plc.
The company has the following range of product-Soap, imperial leather soap, Robert, premier, baby Cussons soap, Carex; Duck green bar soap etc all are produced in Aba.
Detergents: Elephant detergent, Tempo, jet, morning fresh etc.
Cosmetics: Venn-dee mib, Venus relaxer, jet hair cream and flourish gel. Pharmaceutical: Maladin, Drastin plus, Rob ointment, Robert paracetamoil, Alagbin etc. Hair thermocool: air conditioner, Refrigerators and television, generations etc. PZ products are widely distributed. In the country through their extensive distribution network with buffer stock held at strategic centuries. The company have a staff strength of about 6000 throughout the country. Through product innovation PZ has progressed from being merchant company to against industrial concern. Having production factory in Aba, Illupeju, Ikorodu and Isolo with more than ten ware houses, depot scattered across the country. The company has the staff strength of about 500 employees excluding temporary staff of about 200 at Aba factory present.
PZ products innovation as follows:
1948: Bar soap
1987/1998: Detergent soap
1909: Bleach production
2003: evaporated milk/milk powder original personal care brand
2004: Carpet cleaner brand
2005: Hair care brand
2008: sanctuary SPA, morning fresh and sanctuary products
2015: Cussons Baby etc.
PZ. sales volume, profitability and market share 2008-2015
Date Sales Profitability Market Share
2008 55,239,416.023 3,950,041 16.16
2009 63,800,733.523 4,818,611.591 1600
2010 62,667,410,617 5,301,742.372 19.3
2011 65,875,015,432 5,217,530,031 6.71
2012 72,154,614,689 2,410,490,028 8.03
2013 70,343,108,185 4,875,046.961 14.75
2014 69,905,717,343 4,591,915.771 13.52
2015 68,126.07 4,470.787 12.45
Source P.Z. Annual published report 2008-2015
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