EFFECT OF PRICING STRATEGIES ON MARKETING PERFORMANCE (A STUDY OF MTN)

ABSTRACT

This research investigates the impact of pricing strategies on the marketing performance of MTN in Umuahia, Abia state. Specifically, it focuses on skimming, penetrating, and competitive pricing strategies. The study employs a mixed-methods approach, utilizing both quantitative analysis of sales data and qualitative insights from interviews with key stakeholders.

The findings reveal that skimming pricing strategy has significantly contributed to improved marketing performance for MTN in Umuahia. By setting higher initial prices for new products, MTN has been able to capitalize on early adopters and maximize profitability. However, the study also highlights the importance of sustainability in sales profitability, suggesting that MTN should remain conscious of skimming pricing strategy and continuously introduce new products to maintain customer interest and loyalty.

Furthermore, the research suggests that in the competitive marketing environment of Umuahia, penetrating pricing strategy is essential for MTN to gain a larger market share. By setting lower prices to attract price-sensitive consumers, MTN can effectively penetrate the market and increase its customer base. This strategy is particularly relevant in regions where competition among telecom companies is high.

Moreover, the study emphasizes the significance of adopting competitive pricing strategy when similar products are introduced to the market. By closely monitoring competitors' pricing and adjusting accordingly, MTN can remain competitive and safeguard its market position. This strategy not only helps in retaining existing customers but also in attracting potential customers who are price-conscious.

Based on these findings, several recommendations are proposed for MTN to enhance its marketing performance in Umuahia and beyond. Firstly, the company should maintain consciousness of its skimming pricing strategy while introducing new products, ensuring sustainable sales profitability and customer satisfaction. Secondly, in the face of intense competition, MTN should adopt penetrating pricing strategies to expand its market share and reach a wider customer base. Lastly, a proactive approach to competitive pricing is advised, enabling MTN to effectively respond to market dynamics and maintain its competitive edge.

In conclusion, this study provides valuable insights into the role of pricing strategies in shaping the marketing performance of MTN in Umuahia, Abia state. By understanding the nuances of skimming, penetrating, and competitive pricing strategies, MTN can devise effective marketing strategies to enhance sales, customer loyalty, corporate profitability, and market share. These recommendations offer practical guidance for MTN and other telecom companies operating in competitive markets, highlighting the importance of pricing strategies in achieving sustainable growth and success.

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION

1.1       Background of Study

1.2        Statement of the Problem

1.3         Objectives of the Study

1.4         Research Questions

1.5         Research Hypotheses

1.6         Scope of the Study

1.7         Significance of the Study

1.8         Limitations of the Study

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1         The concept of pricing strategies

2.2       Marketing Performance

2.2.1   Measures of marketing performance market share

2.2.2   Profitability

2.3         Pricing Objectives

2.4         Theoretical Framework

2.4.1     Consumer Pricing Theory

2.5         Conceptual Framework

CHAPTER THREE

RESEARCH METHODOLOGY

3.1         Research Design

3.2  Area of Study

3.2         Population of Study

3.5 Source of Data

3.6     Instrument of Data Collection

3.6         Sampling Technique                                                                   

3.7         Method of Data Analysis

3.8         Model specification

CHAPTER FOUR DATA

PRESENTATION AND ANALYSIS

4.1        Data Generation

4.2     Data for the Analysis of Hypothesis 1

4.3        Model Specification:

4.5 Model of Specification:

4.6        Findings and Discussions:

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1         Summary of Findings

5.2         Conclusion

5.2      Recommendation

REFERENCES

APPENDIX

LIST OF TABLE

Table 4.1:        Questionnaire Administration and Retrieval

Table 4.2:        Skimming Pricing Strategy and Corporate Profitability

Table 4.3:        Competitive Pricing and Corporate Market Share

Table 4.4         Components of r_s

Table 4.5         Penetrating Pricing Turnover

LIST OF FIGURES

Fig 2.1: Operational framework of the relationship between pricing strategies and

          Marketing performance

CHAPTER ONE

INTRODUCTION

1.1      Background of Study

One of the most crucial operating decisions management must make is establishing a setting price for its products but this is quiet unfortunately that many firms are still mismanaging pricing causing lots of money and anticipated profit to be unexplored and wasted. Egbunike (2007) opined that setting the price for an organizations product or service is one of the most difficult due to some number of variety of factors that must be considered. The primary decision arises in virtually all types of organization, just to mention but a few of them such as manufacturers set prices for their products, they manufacture, merchandising companies set prices for their goods, service firms set prices for such services as insurance policies, bank loans etc. According to Kalu (1998), a strategy stipulates or indicates how a company plans to get to where it wants to. By way of definition, pricing strategy can be defined as how a firm plans to get to where it wants to go through its pricing activities and plans. However, pricing strategy should be congruent with other objectives of the firm. Kotler (2001), is of the view that pricing strategy is paramount to every organization involved in the production of goods and services because it gives a clue about the company and its product, a company does not get a single price but rather a pricing structure that covers different items in its line. A company’s survival and profitability depends upon its pricing decisions, thus price is the only element in the marketing mix that produce s revenue and thus ensures profit ability (kotler and keller 2006). Price adopted by firms must be able to cover all cost in the long run as well as to leave a profit margin to reward management. The Price of a Product has a direct relationship with many operations of the firm’s activities. A price decision will affect demand and this in turn affects the revenue generated by the firm. Similarly, a firm which makes profit has the propensity of attracting more new capital. This shows that the public has confidence in the ability of the firm to yield return to them. So, the performance of management is usually measured by the amount of revenue it generates to satisfy the shareholders of the organization. It is evident that management has a big responsibility before them in setting and adopting the most advantageous pricing policy and the most effective profit plan for their firms, since prices are not set arbitrarily therefore management must focus on all the important factors in setting its price. Thus, it has become imperative to investigate the effectiveness of pricing policy and profit planning in Nigerian organizations.

1.2    Statement of the Problem

Hilton (1991) observed that both the market forces of demand and supply and the cost of production have a Significant bearing on determination of prices. Equally Hilton (1991) explained that there are other variables that influence pricing decisions according to him, this includes: Manufacturer’s pricing objective, economic situation, level of competition, and availability of close substitute. For pricing to be effective, firms must incorporate all these factors in selecting the most advantageous price for its product.

At times, firms are not in the habit of considering these factors and this has led to the shutting down of many factories, downsizing of workforce and in most cases, winding up of firms (Hilton, 1991). Profit plans are made in form of budget and they help firms to forecast the level of profit, cost and revenue, they intend to generate in order to gain competitive advantage.

Unfortunately many firms still do not prepare these plans, thus, this has led firms undertaking unplanned ventures resulting in escalation and inability of firms to foresee shortage in resources or finance or personnel needed in the future operation of the firm. Where no plans exist, there will be no basis for firm to compare or evaluate their performance. Based on the foregoing, the problem of this study is in three (3) folds.

Firstly, the failure of some firms to incorporate factors such as economic situation, level of competition, availability of close substitute, among others in their pricing decisions, may have resulted to the minding up of several small scale manufacturing firm (SSMF) in Nigeria.

Secondly, it has been shown in accounting literatures that profit planning is a potential tool for achieving profit objectives and efficiency, which small scale manufacturing firms seems to ignore the use of profit planning (or budget) in their operations. This has led to far reaching problem such as huge unforeseen operating cost as well as shortages in good financial and human resources. Thirdly, and most importantly, the problem that stringated this study is the knowledge gap that is, it looks as if small scale manufacturing firms are not aware that pricing policy and profit planning impact positively on profit performance.

1.3        Objectives of the Study

The main objective of this study is to investigate the impact of pricing on marketing performance while the specific objectives will be to;

i.                  To determine the effect of skimming pricing strategy on corporate profitability.

ii.                To assess the influence of competitive pricing strategy on market share.

iii.              To determine the effect of penetrating pricing strategy on corporate turnover.

1.4        Research Questions

The following research questions will guild this study;

i.                   How does skimming pricing strategy contribute to corporate profitability in the automobile firms?

ii.                How does competitive pricing help to gain market share?

iii.              How does penetrating pricing strategy affect the corporate turnover?

1.5       Research Hypotheses

H0₁:    There is no significant relationship between skimming pricing strategy and corporate profitability.

H0₂:    There is no significant relationship between competitive pricing strategy and market share.

H0₃:    There is no significant relationship between penetrating pricing strategy andcorporate turnover.

1.6       Scope of the Study

The study focuses primarily on small scale distribution firms in Abia State and its environs from where the distribution firms of this study are drawn to enable the researcher carryout on extensive investigation on this subject.

1.7       Significance of the Study

This research will serve as a guide to firms in setting the most advantageous pricing policy giving its individual unique situation which will enhance profitability in the short and long run situation. It will help them to avoid choosing arbitrary prices without considering its distinctive situation and important factors.

It will serve as a guide in choosing pricing strategy which strikes a balance between what the consumers wants to pay for a product and the price in firm is willing to sell; also this research will expose them (the firm) to the need for accounting information in carrying out this decision. The research work will also be useful for the economy in the sense that if firms have substantial control over price setting, then their pricing behavior can influence national output/income and hence community welfare.

Finally, the research work will be useful for those carrying on further research on this or related topic.

1.8         Limitations of the Study

Lack of finance to aid the researcher transport to the different outlet of automobile dealers in Abia State was a problem encountered during the course of this work.

Also, poor responses from the respondents of automobile dealers during the research work was a problem encountered. Selection of suitable data and tools for analysis were also a problem encountered.