CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The subject under study is the effect of pricing policy on sales in beverage industry, the principle, of pricing entails that companies be cautious and efficient in setting up price for their product. Price as one of the four Ps of marketing, demand good attention, because it plays a major role in the successful marketing of a company’s product, customers or consumers decide either to buy or not to buy a particular product judging the nature and characteristics of the product and their purchasing power through its price. Therefore, price of product is the major determinant, of the market demand for such product, price is one of the most powerful weapons that are available for or to a market to beat down competitors. Customers are likely to patronize company’s product whose prices is satisfying and psychologically fair to them. Effective strategy and policy must be adopted in order for the company’s to succeed in its marketing programme so that it will result to an effective implementation of pricing.
Pricing is an area of primary importance in marketing and it is central to the profitable operation of a business, its marketing activities without critically monitoring and controlling it’s pricing system profit can only be made if consumer buy what the company produce, on the other hand consumer will only buy at the price that satisfies them. In the past many firms did not under stand the theory and concept of pricing. This is very peculiar to developing economy especially Nigerian. They merely set prices that suit their purpose and interest without viewing it from customer point to view. This is because there were no or not enough competitive firms. Many firm have to realize the importance of pricing as one of the most important element that helps to determine the success of any business enterprise.
In managing the pricing of product which is part of company’s marketing mix, management must first of all decide on its pricing goal, policy and strategy about a given product to satisfy consumers, efficient pricing of goods and services which is often a critical factor in successful operation of any business enterprise. Pricing has many definitions as there are many definitions given by some price authors;
- Price, is defined by Stanton (1985) as the “”amount of money charged for a product or services.
- Brown and Jalques (1995) sees it as the amount of money which will be accepted in return for legal transfer of a product and services.
- A.D Umar, M. Tanko Y.A. Hashim (2005) described price as the “Values of a product (good and services) expressed in a monetary term”.
The above definitions do not consider price or pricing in relation to the physical product alone, this is due to the fact a seller usually price or is pricing the constituent of the physical product severed services as well as it satisfying benefits for instance one model of an automobile may at a stated price included ratio power steering, tinted glass, are condition, metallic door are services of same for another model of the same make these six listed items may be priced separately. To this end Kotler (2000) defined price as “the amount of money needed to acquire some or a combination of a product and its accompanying or separate services. Pricing is there fore the parallel of the total product offered to a buyer for a price and receives not only the product of offering but may include installation. Maintenance services and repair of a brand / new which may be helpful in future for promotion. This question here is how are price arrived at: historically in a competition environment (market) through bargaining with each other sellers would offer more than they expect to set from buyer who will in turn offer less than they expect to pay. They would arrive at a mutually acceptable price through bargaining.
1.2 STATEMENT OF THE PROBLEM
Many companies do not handle pricing as it should be. The most common mistake is that pricing is too cost oriented, it is not revised often enough to capitalize on market changes, it is also set independent of the rest of the marketing mix other then as an interior element of market positioning strategy and price is not varied enough to different product item. Therefore, many companies find it difficult to break even due to largely the impact of competition, hence the need to adopt appropriate pricing policy. The current decline in business activities due to the worlds economic depression is drawing many industries to the extend that profit is far beyond reach for many companies. The inflation trend makes it so difficult for consumers to actually buy or even afford most of their needs. The value of naira that keep plunging day after day makes it so difficult for companies to services their metered product from overseas, the high import duties and other cost doing business that increase the cost of the end product to the detriment of the consumers. The adoption of price over time and space to meet varying circumstances and opportunities when price change should be initiated and now should it respond to competitors price changer.
1.3 OBJECTIVE OF THE STUDY
i. To examine the organization pricing system and it importance
ii. To examine the price sensitivity of consumer to small or large change in price.
iii. To identify the impact of price and pricing on consumer patronage, firm market share and profitability in a beverage industry.
iv. To identify the problem or hardships encountered by organization when pricing their product and services in the face of competition proper solution.
1.4 SIGNIFICANCE OF THE STUDY
It is important to note that, in most organization today effective pricing helps in increasing sales which has a multiplier effect that generate more revenue to the organization and for such reason more emphasis is needed to be given to pricing so that much sales of the company’s product can be achieved. To this end this research work will be of benefit to the academic community especially to Kaduna polytechnic and other similar institutions where reference materials on effect of pricing policy on sale in the beverage industry are in short supply. Also this research work would be of significance benefit to the researcher because as an academic exercise, it will broaden the researcher’s Knowledge on the subject matters.
1.5 RESEARCH QUESTIONS
i. What are the management decision choice of price strategy.
ii. What are the impact of sales and profitability in the beverage industries.
iii. What are the reactions of competitors to change in price in the beverage industries.
iv. What are the pricing system of coca-cola bottling Company
1.6 SCOPE OF THE STUDY
The scope of this project is limited to effect of pricing policy on sale in beverage industry. The Coca-Cola Bottling Company Nigeria. Other areas of vital interest which the researcher, intends to focus on will include: price theory pricing objective, importance of price, price strategies, price determination in a competitive market and factors affecting prices.
1.7 LIMITATION OF THE STUDY
Despite the researcher’s desire and willingness for investigation, a lot of limitations hindered such success. Among such hindrances includes. Partial responses and bureaucracy that is synonymous to most companies in Nigeria, where issues take longer than recessing before action taken to them. Another limitation is that there is a code of silence or law of secrecy in the company as most staff are not willing to respond effectively to the questionnaire especially when it seems to be comparing their company with others or when it seeks to know the company’s competitive position. Another limitation is the non-suitability of related textbooks and data to the topic under research which limited the depth, scope and length to which the researcher intends to view related literature. In addition to the above limitation is the uncompromising attitude of top management staff. They regarded some information needed as top secrets which they cannot release to researcher.
