Influence Of Pricing Strategy On The Sales Of New Products
ABSTRACT
The study investigated the influence of price change on consumption of new consumer products, a survey of fast food restaurants uyo, Akwa Ibom, Nigeria . This is because price is one of the most flexible of the four elements of the marketing mix. One frequent problem is that businesses are too quick to reduce prices in order to get a sale rather than convincing buyers that their products are worth a higher price. Another common mistake is applying pricing that is too-cost oriented rather than customer-value oriented. These, among others, form the main concern of this study. The specific objectives of the study were to determine the influence of sales oriented pricing on consumption of new fast food products at fast food restaurants , uyo, to identify the influence of competition on pricing at fast food restaurants , uyo, to establish the influence of sales promotion on consumption of new fast food products at fast food restaurants , uyo and to assess how the quality of the products affects on consumption of new fast food products at fast food restaurants . The researcher employed a descriptive research design. This study was carried out at the fast food restaurants uyo, akwa ibom. The sample population consisted of 86 employees and 160 current and past customers’. Data collection techniques included questionnaire, participatory observation and interview schedule. The data was organized, presented, analyzed and interpreted using descriptive methods of data analysis. The study concluded that it is clear that the firm sets prices to break-even on the cost of making and marketing a product or setting prices to make a target profit. The organization determines the prices at which it will break-even or make the target profit it is seeking. Based on the findings, the study recommends that there is need to apply or use more than one pricing strategy to increase sales volume in the company. The study further recommends that the hotel should continuously improve the quality of their consumer goods for fair prices as the end result. Suggestions for further research are made on factors determining pricing strategies in organizations are also recommended.
CHAPTER ONE INTRODUCTION
- Background of the study
In recent years, the world has experienced a remarkable rise in the prices of vital commodities, including energy and agricultural products. For example, between 2006 and 2008, the average world price for oil rose by 110 percent, rice by 217 percent, wheat by 136 percent, maize by 125 percent, and soybeans by 107 percent. The resulting economic impact on firms, households, and entire economies has renewed attention to the scarcity of natural resources and the best way of managing them in the twenty-first century.
According to Kotler (2004), price is the amount of money charged for a product or service or the sum of the values that consumers exchange for the benefits of having or using the product or service. The right price should meet the objectives of the buyer and seller. If you hit the optimum price, the theory suggests, the customers are happier, your profit is higher, and your bottom line will be healthier. In reality, pricing is far from simple. Setting the optimum price is one of the most difficult decisions managers ever make. Most companies are so bad at it that they leave money on the table. Pricing is about more than setting prices. Pricing represents a strategy to increase sales volume at a profit while incorporating and communicating critical messages about the value the offering delivers to the customer. In general, most organizations fail to use pricing in such a disciplined fashion (Monroe 2003).
The importance of price decision to Marketing Managers is that when a firm’s costs are lower than the competitors, low price that can be used to win customers. More so, Price cutting as a way to build or maintain market share is a strategy that has been
used by firms. Consumers rely heavily on price as an indicator of a product’s quality, especially when they must make purchase decisions with incomplete information. Price plays a major role in determining the consumption of new fast food products in any hotel in uyo town and its environs since it determines its performance.
- Statement of the problem.
Kotler (2004) states that price is the one element in the marketing mix that produces revenue. All other elements represent costs. Price is also one of the most flexible elements of the marketing mix. Unlike product features and channel commitments, price can be changed quickly. At the same time, pricing and price competition is a number one problem facing many marketing executives. Another common mistake is pricing that is too cost oriented rather than customer-value oriented.
There has been a decrease in customers patronizing new fast food products restaurant due to increased competition from various hotels which have been opened in the same locality, including Cicada Hotel, Hotel Comfy among others that offer the same services and new fast food products at
low prices like those charged at new fast food products restaurant, hence making them preferred choices due to different or lower prices charged. More so, there have been price fluctuations among different hotels and restaurants so as to attract more customers. Since quality is difficult to measure in the industry due to their homogeneity, pricing is quite challenging. Most of the fast food restaurants have experienced problems in its pricing since it has sometimes to lower its price to attract and retain customers and sometimes it has to increase the price of its offering to reflect costs. This has led to customers staying on or turning away, depending on the price charged. This has affected the restaurants since it cannot guarantee specific customers. These, among other factors formed the basis of this study, to determine the influence of price changes on consumption of new consumer products, using the case of fast food restaurants in uyo.
- Purpose of the study
The main purpose of this study was to determine the influence of price change on consumption of new consumer products at fast food restaurants , uyo, akwa ibom.
- Research Objectives
The study was guided by the following objectives:
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- To determine the influence of sales oriented pricing on consumption of new fast food products at fast food restaurants , uyo.
- To identify the influence of competition on pricing at fast food restaurants , uyo.
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- To establish the influence of sales promotion on consumption of new fast food products at fast food restaurants , uyo.
- To assess how the quality of the products affects on consumption of new fast food products at fast food restaurants .
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- Research Questions
The questions that the study answered are:
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- What is the influence of sales oriented pricing on consumption of new fast food products at fast food restaurants , uyo?
- What is the influence of competition on pricing at fast food restaurants , uyo?
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- What is the influence of sales promotion on consumption of new fast food products at fast food restaurants , uyo?
- How the quality of the products does affects on consumption of new fast food products at fast food restaurants ?
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- Significance of the study
The study is of significance to a number of stakeholders, including the researcher, the university of uyo and other institutions of higher learning, as wells as managers and business owners in the fast-moving consumer goods industry.
The findings and recommendations of this study is useful to the management of fast food restaurants as well as other businesses, since it can lead to developing suitable mechanisms of determining prices of products so as to apply an appropriate price increase that does not impact negatively on sales.
The university of uyo, being an academic institution has a library where completed studies are kept for reference by students and faculty members are stored. The study will benefit students enabling them to learn more about effects of price on consumption of new food products, that is, the study will contribute to the existing pool of knowledge, useful to all other institutions of higher learning as well.
- Limitation of the study
The study focused on the influence of price changes on consumption of new consumer products of a firm which may not be the only factors in determining the firm’s growth or failure because some factors such as production, technology, financing, and level of skilled labor and sources of suppliers contribute to growth. Some of the sources of information by employees was mainly based on memory status and therefore subject to omission of other important facts. Low response from respondents due to suspicion that useful information could leak to competitors
- Delimitation of the Study
The study focused on influence of price change on consumption of new consumer products at fast food restaurants , uyo. The key respondents were managers, supervisors, employees and the customers. The study was conducted between May to July 2013 in, uyo town.
- Definition of significant terms as used in the study
new fast food products: term given to food that can be prepared and served very quickly.
While any meal with low preparation time can be considered
Price Amount of money for which an item is offered or sold.
Pricing strategy Is a method applied to marketers in order to come up with a price that is equal to service offered
Strategy Criteria or basis of doing things
Market skimming – this involves setting prices of a new product to skim maximum revenue layer for segments willing to pay high prices the company makes fewer but more profitable sales.
Market penetration – setting low initial price in order to penetrate the market quickly and run a large market share
- Organization of the study
Chapter one provided the basis of this study. It specifically covered the background of the study, statement of the problem, objectives of the study, research questions, purpose, significance and limitation of the study. Chapter two presented the literature review to identify and examine what has been done by other scholars and researchers and also assist the researcher to limit the problem to define it better. Methodology and procedures and modalities in data collection covers research design, determination and identification of the population sample size, sampling design, sampling procedure, the instruments of data collection, validity and reliability of data collected was presented in chapter three. Chapter four contains the data analysis, presentation and discussion of the findings. The conclusion and recommendations will form the chapter five of this
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