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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