Evaluation Of Pricing Strategies And Its Impact On Marketing Decision

Pricing as a marketing mix variable is an important determinant of one firm"s success and mother"s failure pricing has to be timely and appropriate in order to achieve its desired objectives. The purpose of this study is to evaluate existing pricing strategy in the Power Holding Company of Nigeria (PHCN) in terms of its effectiveness and assess its impact on their marketing decision. A total of 134 respondents were selected from the population figure out of which the sample size was determined. The primary source of data collected was mainly the use of a structured questionnaire which was designed to elicit information on an evaluation of pricing strategies and their impact on marketing decisions. Data collected will be analyzed using frequency table, percentage and mean score analysis while the nonparametric statistical test (Chi-square) was used to test the formulated hypothesis using SPSS (statistical package for social sciences). The results revealed that companies which search for a customer value-based pricing strategy and which set high prices, logically within the market context in which they operate, tend to yield a greater profit margin than their competitors who may adopt a competitive pricing strategy. On the other hand, market demand and availability of close substitute has a significant negative pricing policy while macroeconomic trend and market segment has an insignificant negative effect on pricing policy. This study therefore suggests that, effort should be made on reducing cost of production by focusing on cost minimization objectives profit maximization.

Introduction

1.1 Background of the Study

In a dynamic and ever growing environment such as the Nigeria economy firms and marking organization must adopt the right strategies in order to remain competitive in the market. A strategy refers to the skills and decision making process of the management of the company or firms or organization. It is also used to refer to the output of the process. This, a marking strategy can have a broad impact on the business in terms of instilling a marketing orientation among all those in the firms, the way of thinking or philosophy of the whole organization.

However, marketing strategy can alternatively be seen as dealing with the development of competitive advantages directly associated with the marketing function, such as customer loyalty and distribution channel control. Hence an organization like the Power Holding Company of Nigeria (PHCN) have a marketing strategy focus on broad or philosophical approach while other prefer a narrower or functional view. In the case, the domain is sometimes even further restricted by focusing attention on the various elements of marketing mix rather than more general issues of customer and channel relationship (Wensley, 1995).

In an organization like the Power Holding Company (PHCN) its marketing is said to be a reflection of the marketing activities that take place in an organization sometimes it is tagged the 4ps of marketing and it include product, price, place, and promotion. Pricing as a marketing mix variable is an important determinant of one firms" success and mother"s failure pricing has to be timely and appropriate in order to achieve its desired objectives. Evidence abound for product and service which met staff competition as a result of pricing strategy adopted and have consequently failed.

Similarly, pricing is considered by many to be key activity within the free enterprise system and organization system. A products" price influences the price paid for the factors of production-land, labour, capital and entrepreneurship. Price thus is a basic regulator of the economic system because in influences the allocation of these factors of production. High wages attract capital. As an allocation of scarce resources, price determines what will be produced (supply) and who will get the goods and services that are produced (demand). A product"s price is a major determinant of the market demand for the item. Price affects a firms" competitive position and its market share. As a result price has a considerable bearing on a company and organization (PHCN) revenue and net profit. It is only through price that money comes into a well established organization.

Customers rely heavily on price as an indicator of a decision with incomplete information. Some customers perception of product quality vary directly with price. Thus, the higher the price, the better the quality is perceived to be customers take this judgment particularly when no other dues as to product quality are available customers quality perception can of course also be influenced by such thing as sheer reputation.

In practice many difficulties associated with pricing occur because most people do not know the meaning of the word price, even through the concept is quite easy to define in familiar terms. The terms price can be used to describe the monetary value of an item. Price is value expressed in terms of naira and kobo or another monetary medium of exchange. Kotler (1999) observed that multinational face several pricing problem when selling goods abroad. They must deal with price escalation transfer prices, dumping charges reconnecting of lights. To achieve this set objectives organization such as the Power Holding of Nigeria (PHCN) must balance all these problems.

1.2 Statement of Problem

Price is the marketing-mix element that produces revenue, the other produces costs. Price is also one of the most flexible element. It can be changed quickly, unlike product features and channel commitment. At the same, price competition is one of the most critical problems facing companies yet many companies and organization do not handle pricing well common mistakes usually made during pricing are; pricing is too cost oriented, price in the company is not revised often enough to capitalize on market changes; the company sets its price independent of other marketing mix rather than as an intrinsic element of market-positioning strategy.

In practice the Power Holding Company of Nigeria inclusive pricing decision are often made arbitrarily or merely on basis of cost related criteria with limited or no pricing research to guide them. In the light of the above, a more effective goal- oriented approach to pricing is needed but this approach pricing strategy is lacking hence the problem of price variations.

1.3 Objectives of the Study

The main objective of this study is to evaluate existing pricing strategy in the Power Holding Company of Nigeria (PHCN) in terms of its effectiveness and assess its impact on their marketing decision.Specific objectives include;

To provide the overview of the steps involved in effective price decision at Power Holding Company of Nigeria.

To specify which pricing strategies may enable the PHCN attain its set objectives.

To find out the major aspects and factors influencing the price decision of PHCN.

To determine the relationship between pricing strategies and sales turnover

To determine the relationship between pricing strategies and sales growth

1.4 Research Questions

Does pricing strategy affect marketing decision?

Is there a significant relationship between pricing strategies and sale growth?

Are there limitations in pricing strategies in Nigeria?

Is there any relationship between pricing strategies and sale turnover?

1.5 Research Hypotheses

H01: Pricing strategies do not affect marketing decision

H02: There is no significant relationship between pricing strategies and sales growth

H03: There is no significant relationship between pricing strategies and sales turnover

1.6 Significance of the Study

The finding of this study will enable organization such as the PHCN or other organization to acquaint the role of pricing strategies and its impact on marketing decisions. It is hoped that they would take cognizance of the findings, since pricing pre-occupy most of the processes centred on pricing. Moreso, it is to bring to the attention of the government, the pricing strategies of large organization and the achievement that can be derived from the utilization of pricing strategies.This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work.This study contributes to knowledge and could serve as a guide for other study.

1.7 Scope of the Study

This study is on the evaluation of the pricing strategies used by PHCN and their impact on marketing decision. This study used the PHCN as a case study. It is an organization that deals with electricity and light connections in the country. However, there are a lot of strategies and tactics to achieve these objectives, although all these objectives and factors will be reviewed; only the ones adopted by the PHCN will be evaluated empirically. The study covers a period of 6 months, since price is subject to rapid and unpredictable charges; a quarterly analysis of pricing will be conducted.

1.8 Limitations of the Study

The demanding schedule of respondents at work made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaire in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all businesses or organizations but is restricted to the selected organization used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided.

Financial constraint:

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint:

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 Definition of Terms

Pricing:

Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business"s marketing plan. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product.

Pricing Strategies:

Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base the price of their products and services on production, labor and advertising expenses and then add on a certain percentage so they can make a profit.

Marketing:

Marketing refers to activities a company undertakes to promote the buying or selling of a product or service. Marketing includes advertising, selling, and delivering products to consumers or other businesses

Sales Turnover:

Sales turnover is the total amount of revenue generated by a business during the calculation period. The concept is useful for tracking sales levels on a trend line through multiple measurement periods in order to spot meaningful changes in activity levels. The calculation period is usually one year.

Summary, Conclusion and Recommendations

5.1 Summary of Findings

The purpose of this study was toevaluate existing pricing strategy in the Power Holding Company of Nigeria (PHCN) in terms of its effectiveness and assess its impact on their marketing decision. Three hypotheses were formulated (generated) to guide the researcher. The first was meant to find out if pricing strategies affects marketing decision.

The research also sought to find out if pricing strategy is significantly related to sales growth. The third hypothesis sought to find out whether there is a relationship between pricing strategies and sales turnover.

To attain these goals, a test questionnaire was administered to all the management staff Power Holding Company of Nigeria (PHCN).

The objectives of the study were to:

To provide the overview of the steps involved in effective price decision at Power Holding Company of Nigeria.

To specify which pricing strategies may enable the PHCN attain its set objectives.

To find out the major aspects and factors influencing the price decision of PHCN.

To determine the relationship between pricing strategies and sales turnover

To determine the relationship between pricing strategies and sales growth

Findings from the study revealed that majority of the respondents were of the opinion thatPricing strategy affects marketing decision significantly therefore, the null hypothesis is rejected. The study revealed a significant relationship between pricing strategies and sales growth as well as sales turnover therefore for both statements, the null hypothesis was rejected.

5.2 Conclusion and Recommendations

The profitability and cost effectiveness of the companies are highly attached to a pricing strategy that visualizes their internal capacities, skills and corporate advantages against their competitors while also considering their customer"s needs or how much they are willing to pay. Setting lower prices could sacrifice profits because a greater sales volume may not compensate for a lower profit margin. Higher prices could also sacrifice profits because greater margins per unit may not compensate for a smaller sales volume.

Therefore, the results of our study indicate that companies which search for a customer value-based pricing strategy and which set high prices, logically within the market context in which they operate, tend to yield a greater profit margin than their competitors who may adopt a competition-based pricing strategy and set lower prices. Another important fact is that the most innovative companies, or those who launch a higher quantity of new products, and operate with imported raw materials and supplies also show a higher profit margin. This indicates that the higher the usage of value-based pricing strategies (in which the company adds more innovation launching new products), the greater are the possibilities of increasing the company"s profit margin.

The results revealed that cost of sales has an insignificant positive effect on pricing policy, while company"s objective and consumer perception has a significant positive relationship on pricing policy. On the other hand, market demand and availability of close substitute has a significant negative pricing policy while macroeconomic trend and market segment has an insignificant negative effect on pricing policy. This study therefore suggests that, effort should be made on reducing cost of production by focusing on cost minimization objectives profit maximization. Corporate organisation should also strategies and focus on consumer perceptions about their product and the preference of the consumers.

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