IMPACT OF PRICING STRATEGIES ON CONSUMER PURCHASE BEHAVIOUR (A CASE STUDY OF AIRTEL AND ETISALAT)

ABSTRACT

This study is on the impact of pricing strategies on consumer behavior. Primary data was employed in this study using a sample size of 100 despondence drawn from 50 Etisalat subscribers and 50. Airtel subscribers, respectively in Umuahia so as to elicit useful information on the thrust of the study. A descriptive research design was used in this study. However, three research questions and hypotheses were formulated for the study and were tested using Chi-square test and spearman rank correlation at 5% level of significance. Based on the empirical findings of the study, it was organizations and consumer's perception. Furthermore, the study also revealed that respondents considered the pricing strategies of both telecommunications companies (Airtel and Etisalat) to be similar enough to be considered as same. Apparently, both adopt similar pricing strategies to create and cultivate their own share of the market. This most likely, since both are new entrants in the Nigerian telecommunications market (Airtel has been in the market since 2001 why changing ownership from Econet, Vmobile, Celtel, Zain and the most recent Airtel). The study equally revealed that purchasing strategies positively and significantly impact on organization profitability. This conclusion was based on the empirical evidence emanating from this study where the respondents to this study strongly agreed that a Firm's turnover depends on pricing strategy and [hat low call tariff increased firms profit base on high patronage. Hence, any telecommunications firm that does not improve in quality service delivery at affordable price will soon find itself wept into the gutters with most of its loyal subscribers "decamping" to a better option or alternative. It is therefore recommended that telecommunication companies, Airtel and Etisalat in particular should maintain consistent quality services, since the Nigerian market will switch loyalty within a short time if their services focus more expectation in terms of satisfaction is not met. Airtel and Etisalat Should on quality services delivery (widen their coverage, ensure uninterrupted communication, etc), also, they shouldput into consideration their pricing strategy as a sine qua nonfor high profitability. Their pricing strategy should cater for both the rich and poor.

TABLE OF CONTENTS

Cover page                                                                                                                              i

Title page                                                                                                                                ii

Declaration                                                                                                                             iii

Certification                                                                                                                           iv

Dedication                                                                                                                               v

Acknowledgement                                                                                                                  vi

Tableof content                                                                                                                       vii

Abstract                                                                                                                                 ix                                                                                                          

CHAPTER ONE INTRODUCTION                                                                                  1

1.1        Background of the Study                                                                                           1

1.2       Statement of the Problem                                                                                           2

1.3       Research Objectives                                                                                                   3

1.4       Research Questions                                                                                                    3

1.5       Research Hypotheses                                                                                                  4

1.6Research Hypotheses                                                                                             4

1.7Scope of the Study                                                                                                 4

CHAPTER TWO                                                                                                                  5

REVIEW OF RELATED LITERATURE                                                                         5

2.1       Marketing Concept                                                                                                     5

2.1.1     Marketing Orientations                                                                                             5

2.1.2    Marketing Environment                                                                                             7

2.1.3    Marketing Mix                                                                                                            8

2.2       Pricing                                                                                                                        11

2.2.1Approaches Companies use to set Price                                                             12

2.3       Setting the Price                                                                                                         14

2.3.1     Selecting the pricing objectives                                                                                14

2.3.2    Determining demand                                                                                                  15

2.3.3     Estimating costs                                                                                                         16

2.3.4    Analyzing competitors' cost price and offers                                                             17

2.3.5     Selecting a pricing method                                                                                        17

2.3.6    Selecting the final price                                                                                              20

2.4       Adapting the price                                                                                                      21

2.4.1     Geographical pricing (cash, countertrade, barter)                                                     21

2.4.2    Price discounts and allowances                                                                                  21

2.4.3    Promotional pricing                                                                                                    22

CHAPTER THREE                                                                                                              23

RESEARCH METHODOLGY                                                                                           23

3.1       Research design                                                                                                          23

3.2       Sample procedure                                                                                                       23

3.3       Data collection method                                                                                               23

3.4       Method of data analysis                                                                                              24

CHAPTER FOUR                                                                                                                26

DATA ANALYSIS AND DISCUSSION OF FINDINGS                                                 26

4.1 Questionnaire distribution and analysis                                                                           26

4.2       Demographics of sample                                                                                            26

4.3       Test of Hypotheses                                                                                                     36

4.3.1     Testing hypothesis one                                                                                              36

4.3.1.1  Test Statistics                                                                                                             37

4.3.1.2 Computation of test statistic                                                                                       38

4.3.2 Testing hypothesis two                                                                                                  41

4.3.2.1 Computation of test statistic                                                                                       41

4.4    Discussion of findings                                                                                                   45

4.4.1  Relationship between pricing strategy and consumer perception                              45

4.4.2 Impact of pricing strategies of both organizations on the behaviour                                    46

4.4.3 Impact of pricing strategies on organizational profitability                                          46

CHAPTER FIVE                                                                                                                  47

SUMMARY, CONCLUSION AND RECOMMENDATIONS                                        47

5.1  Summary of findings                                                                                                       47

5.2 Conclusion                                                                                                                        48

5.3 Recommendations                                                                                                            49

5.4 Limitations                                                                                                                        49

REFERENCES                                                                                                                     51

APPENDIX 2                                                                                                                        53

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

One of the most viable industries in Nigeria is the telecommunication industry. It is also the most active sector in terms of marketing activities. One just needs to tune in to any form of media vehicles to be a washed with the various marketing strategies by one member of the industry trying to outsmart another member in a bid to gain more patronage. Marketing strategies here covers the use of the marketing mix elements which are price, place promotion and product". This study will cover the use of pricing strategies basically as a tool in industry competition.

The whole essence of marketing is simply to meet needs profitably. Every firm operating under the marketing concept puts the customers first; however the marketing mix is used majorly to alter the purchase patterns and buying behaviour of consumers. Does the price of a product influence customers in their purchases? Latecomers into the Nigerian telecommunication market; Etisalat has introduced several pricing strategies to secure a portion of the market. On the other hand, Zain has also used pricing strategies to retain some form of normalcy in their seemingly unstable organization. Presently Zain Nigeria Pic has been bought over by Bhartel Corporation and subsequently the product has been rebranded and is now referred to as "Airtel". The launch of the brand was done on 28th November, 2010.

In November 2001, MTN debuted with the first GSM (Global System for Mobile Communication), call, although Econet-Nigeria was the first to be issued a license. Initially, the cost of the SIM card (Subscriber Identity Module card) was in the neighborhood for $200, i.e, N30,000 (Thirty thousand naira) and a handset with the most limited of functions, the Nokia 3310 series; the enormous Sony Ericsson; etc was sold for $300, i.e,  N45,000 (Forty-Five thousand naira). With the entrance of Econet (now Airtel) and Glo, the cost of the SIM card reduced drastically, from $200 to almost free (once you buy the SIM card for N100, you meet the equivalent as call credit). Since there are several players in the industry, has caused several price wars. The battle continued into the product-core, augmented and formal; did not stop there. We had promotional battles, coverage battles; even with the entrance of Etisalat we still had more price wars.

1.2     Statement of the Problem

The Telecommunications Industry is a unique and diverse environment. An industry that has weathered the storm and come to stay, and is providing jobs for thousands of Nigerians. However every firm exist to make profits, - even the marketing-oriented firm seek to understand the needs and wants of consumers and meet this needs satisfactorily at a profit. The Nigerian market is price sensitive, slight changes in the pricing of any firm will be noticed and reacted to by the market, yet firms must make profits in this markets. The Telecommunications industry is one of the most competitive industries in Nigeria, competition among firms is centered on being able to provide the best quality of service at the most affordable price. Therefore, strategies are constantly formulated to capture and maintain market share, the crust of this study is how pricing strategies can be used to stay afloat in an industry of stiff competition.

Understanding consumer behaviour has become a factor that has a direct impact in the overall performance of business (Kolter and Keller 2001). From the background of study, it is' imperative to note that consumers buying 'behaviour is not only influenced by price but also by services, location (place), coverage, quality and other factors. We would like to find out how pricing can influence buying behaviour? How sensitive is the Nigerian market to price alterations? Is the market elastic or inelastic? In a view to answer these questions, I was prompted to conduct this study and investigate the "impact of pricing strategies on consumer buying behaviour".

1.3 Research Objectives

This study seeks to understand how consumers behave with regards to price, i.e; consumers' reaction to pricing strategies of organizations. Organizations adapt to consumers using the 4Ps of marketing, the goal here is to discover if price alone can influence the behaviour of consumers (all other factors on hold). For this study, the following objectives have been put forward;

      i.         To examine the extent to which price determines the patronage orotherwise of consumers.

     ii.         To evaluate the various pricing strategies of the two Organizations andthe impact it has on the perception and behaviour of the consumer.

   iii.         To find out the impact of pricing strategy on the profitability of an organization.

1.4 Research Questions

      i.         To what extent does price determine the rate of patronage or otherwise ofconsumers?

     ii.         What impact do the various pricing strategies of both organizations have on the perception and preference of the consumers?

   iii.         To what extent does pricing strategy impact on the profitability of an organization?

1.5  Research Hypotheses

The following hypotheses are postulated in this study:

Hoi: There is no significant difference between pricing strategy and consumer patronage.

Ho₂:There is no significant Impact of the pricing strategies of both organizations on the behaviour of the consumers.

Ho₃: Pricing strategy does not have significant impact on the profitability of an organization.

1.6Significance of the Study

A study of this nature will be of immense value to companies, students and individuals interested in this life.

This study will aid present and potential players in the telecommunications industry know what they are up against. It will also help the major players evolve a marketing strategy that will leave them relevant in this dynamic environment. New entrants into the industry will also have a big picture of the pricing strategies to apply, to be able to carve a niche for themselves. At present, there are several players in the Nigerian telecommunications industry- Visafone, Multilinks, Starcomms, Zoom, MTN, Glo, Airtel,Etisalat, etc. Each has its market that it caters for. This study will help the participators plan better for their market.

1.7     Scope of die Study

The scope of this study covers Airtel and Etisalat users in Umuahia. Although it has been noticed that certain telecommunications industry operate different pricing strategies in each of the six geo-political zones in Nigeria. The concept may be unconnected to the uniqueness of each market segment. At the end of this study, I hope to answer most of these questions.

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