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| Pages: 71
EFFECT OF PRICING STRATEGY ON SALES OF CONSUMER PRODUCT (A CASE STUDY OF CADBURY NIGERIA PLC)
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the face of rapid economic and technological changes, today‘s consumer is more curious, more educated and conversant with what he/she exactly wants. These changes also affect the needs of firms. According to Ehmke et al (2005), marketing your business is about how you position it to satisfy your customers‘ needs. Borden (2004) stated that marketing manager must weigh the behavioral forces and then handle marketing elements in his mix with focus on the resources with which he has to work when building a marketing program to fit the needs of a firm. For marketing to effect a change either in a new product or reinvigorate a new brand there are elements that remains constant which must be incorporated in the marketing mix and this is called the ―Four P‘s". These four P‘s are product, price, promotion and place (Ehmke, 2005). In the context of this paper, the emphasis will be on price; hence the need to elucidate more on meaning of price to both customers and firms.
Price is the amount a customer pays for a product or the sum of the values that consumers exchange for the benefits of having or using a product or service (Bearden et al 2004). Price means different things to different people; it is interest to lenders, COT or service charged by the banker (lenders), premium to the insurer, fare to the transporter, honorarium to the guest lecturer etc, (Kotler et al 2008). According to Rosa et al (2011), the importance of price as a purchase stimulus has a key role in price management since not only does it determine the way prices are perceived and valued, but it also influences consumer purchase decisions (Rosa, 2001; Simon, 1989; Vanhuele and Dreze, 2002). Studies have shown price as an important factor in purchase decision, especially for frequently purchased products, affecting choices for store, product and brand (Rondan, 2004).
Lancioni and Gattorna (2013) in their study affirmed that pricing strategy has a positive relationship with the initiation and implementation of an advertisement and sales strategies that is expected to improve performance whenever there is a synergy between marketing and sales duty and moreso, the organization benefits. But when chaos occurs between these two functional areas, it posts inverse influence on the organization and as a result hampered their overall performance (Crepedes& Piercy,1996; Strahle, Spiro & Acito,1996; Dewsnap& Jobber 2000). Therefore, pricing strategy is concluded to be a marketing strategy (Varadarajan 2010). Similarly, Ramaswamy, Gatignon and Reibstein (1994); Palazon and Delgado-Ballester (2009) and Gu, Kim, Tse and Wang (2010) said that competitive market response to a pricing communication or signal may lead to unpleasant behavior involving a price war, or cooperative behavior in which the competitor raises prices to the new established considerable level.
The greater the importance of price in purchases decisions, the greater the intensity of information and the greater the amount of comparisons between competing brands (Mazumdar and Monroe, 1990). Considering the nature of the consumer products (frequently purchased and consumed products, implying medium-low level of consumer-supplier interaction), the basic is, the customers who usually purchase are more frequently in contact with prices. Pricing strategy is paramount to every organization involved in the production of consumer goods and services because it gives a cue about the company and its products, a company does not set a single price but rather a pricing structure that covers different items in
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the face of rapid economic and technological changes, today‘s consumer is more curious, more educated and conversant with what he/she exactly wants. These changes also affect the needs of firms. According to Ehmke et al (2005), marketing your business is about how you position it to satisfy your customers‘ needs. Borden (2004) stated that marketing manager must weigh the behavioral forces and then handle marketing elements in his mix with focus on the resources with which he has to work when building a marketing program to fit the needs of a firm. For marketing to effect a change either in a new product or reinvigorate a new brand there are elements that remains constant which must be incorporated in the marketing mix and this is called the ―Four P‘s". These four P‘s are product, price, promotion and place (Ehmke, 2005). In the context of this paper, the emphasis will be on price; hence the need to elucidate more on meaning of price to both customers and firms.
Price is the amount a customer pays for a product or the sum of the values that consumers exchange for the benefits of having or using a product or service (Bearden et al 2004). Price means different things to different people; it is interest to lenders, COT or service charged by the banker (lenders), premium to the insurer, fare to the transporter, honorarium to the guest lecturer etc, (Kotler et al 2008). According to Rosa et al (2011), the importance of price as a purchase stimulus has a key role in price management since not only does it determine the way prices are perceived and valued, but it also influences consumer purchase decisions (Rosa, 2001; Simon, 1989; Vanhuele and Dreze, 2002). Studies have shown price as an important factor in purchase decision, especially for frequently purchased products, affecting choices for store, product and brand (Rondan, 2004).
Lancioni and Gattorna (2013) in their study affirmed that pricing strategy has a positive relationship with the initiation and implementation of an advertisement and sales strategies that is expected to improve performance whenever there is a synergy between marketing and sales duty and moreso, the organization benefits. But when chaos occurs between these two functional areas, it posts inverse influence on the organization and as a result hampered their overall performance (Crepedes& Piercy,1996; Strahle, Spiro & Acito,1996; Dewsnap& Jobber 2000). Therefore, pricing strategy is concluded to be a marketing strategy (Varadarajan 2010). Similarly, Ramaswamy, Gatignon and Reibstein (1994); Palazon and Delgado-Ballester (2009) and Gu, Kim, Tse and Wang (2010) said that competitive market response to a pricing communication or signal may lead to unpleasant behavior involving a price war, or cooperative behavior in which the competitor raises prices to the new established considerable level.
The greater the importance of price in purchases decisions, the greater the intensity of information and the greater the amount of comparisons between competing brands (Mazumdar and Monroe, 1990). Considering the nature of the consumer products (frequently purchased and consumed products, implying medium-low level of consumer-supplier interaction), the basic is, the customers who usually purchase are more frequently in contact with prices. Pricing strategy is paramount to every organization involved in the production of consumer goods and services because it gives a cue about the company and its products, a company does not set a single price but rather a pricing structure that covers different items in
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