THE IMPACT OF PRICING STRATEGY ON SALES PERFORMANCE

THE IMPACT OF PRICING STRATEGY ON SALES PERFORMANCE

Abstract

The study suggested that; Unilever Nigeria PLc should perform a comprehensive market research to study the market for effective pricing decision and strategy to later improve manufacturing sales; Marketing and sales managers should get sufficient training in strategic management which will help them set effective prices that would increase their sales; Marketing and sales managers should employ well thought out strategies that would help them improve on sales and their competitiveness; The government should review manufacturing competitive pricing policy and effect price control to ensure a level playing field to safeguard the manufacturing sector from undue and unfair competition.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Businesses today are facing one of the most competitive eras in history. The rise and fall of companies, and the complete failure of some companies, is a danger to organizational performance and ultimately to organizational sustainability when companies are poorly managed and lack clear direction. (Utaka, 2008). In addition, pricing strategy is a key component of an organization’s management that can either improve or impede a company’s performance. Therefore, it is very important that companies get their pricing strategy absolutely right.

Awareness of the impact of pricing strategies on product performance is gaining worldwide attention. Therefore, the pricing strategies adopted are in light of rapid economic and technological change that has made modern consumers more curious, educated and savvy about exactly what they want. has become very important. Nigerians are not excluded because the internet, e-commerce and e-shopping allow consumers to obtain a large amount of information about products from both manufacturers and external sources. In the industry, getting the pricing strategy right is important (Kotler & Armstrong, 2011).

Price is the amount that a customer pays for a product, or the sum of value that a consumer exchanges for the benefits he derives from owning or using the product or service (Bearden, Ingram, & Laforge, 2014). is the amount or value exchanged for possession or use of goods or services (Kevin, Hartley & Rudelius, 2014). Furthermore, it can be defined as the value attached to a product or service and is the result of a complex combination of cost, research, and a thorough understanding of the customer’s perceived value (Kelly & Willam, 2014). According to Kotler & Armstrong (2008), pricing determines the value a customer must provide in exchange for a product or service. Pricing is the process by which a company determines the price at which it sells its products and services and may be part of the company’s marketing plan (Dibb, Simkin, Pride & Ferrell, 2013). Moreover, price is a measure of the amount charged for an item or management, the sum of all the value that a customer gives up in order to obtain the benefit of owning or using the product (Kotler, Armstong & Tait , 2001). Pricing is one of the key elements of a marketing plan that is part of a complete business plan (Rao & Kartono, 2009). The main goal of pricing is to generate a reasonable profit that adequately covers overhead costs such as labor and materials, sustains business growth and helps create organizational sustainability (Nikoomaram & Jafari 2011). According to Yeoman (2011), price is one of the key elements of the marketing mix that companies can control. Agwu and Carter (2014) agreed that among his famous four Ps, price is the sole source of income because it is the only factor that creates value exchange. Kellogg, Youngdahl, and Bowen (2014) pointed out that effective pricing is the harvest when effective product development, promotion, and distribution sow the seeds of business success. Therefore, there is a need for pricing strategies tailored to specific products and services and customer perceptions of the value of products and services. Therefore, pricing strategies should use specific types of price information to represent price movements when constructing price indices (Mckenzie, 2015). Additionally, pricing techniques focus on characterized customers and competitors (Nreick, 2012). Product pricing is a strategic activity. Pricing strategies are chosen with business and financial goals in mind. Factors in a company’s business plan, such as the company’s vision and mission, can also influence the choice of pricing strategy.

The price assigned to a product influences consumer perceptions of the product and, ultimately, their willingness to buy. According to Rosa & Rodan (2011), the importance of price as a purchasing stimulus not only determines the perception and valuation of price, but also influences consumer purchasing decisions, thus playing a central role in price control. fulfill. Research shows that price is an important factor in purchasing decisions, especially for frequently purchased products, influencing store, product and brand selection (Simons, 2014; Rosa, 2011 Vanhuele & Dreze, 2012; Rondan, 2014). Additionally, Roth (2007) found that price can serve as a market segmentation strategy because it allows products to be differentiated from those of competitors. However, the price assigned to the product should be consistent with other marketing strategies and product attributes.

Nigeria is Africa’s largest economy and the world’s 27th largest country, but is largely considered a poor country based on the Human Development Index (UNDP, 2017). Many price theorists therefore suggest that in economies where the majority of indigenous peoples are low-income, price skimming may not be successful, especially for homogeneous products (Spann, Fischer & Tellis, 2015). ). As such, some price theorists have suggested percolation pricing as an appropriate strategy for a deeply depressed economy (Marn, Roegner & Zawada, 2013). According to Nagle and Hogan (2014), penetration prices are low relative to perceived value in target segments. According to Richards (2008), penetration pricing is used as a promotional tool to gain large market share. According to Raisoni (2013), penetration pricing strategies help enter markets that are already saturated with products, especially if the target market is low- and middle-income. On the contrary, Singh (2013) opines that the best strategy in an underdeveloped economy like Nigeria is a market parity pricing strategy that takes over the prices of other similar products in the market. argued that it was appropriate for the low-income populace.Furthermore, comparable pricing was primarily adopted by Nigerian manufacturing companies, and was a function that differentiated their products from those of their competitors. There are very few

Unilever Nigeria Plc. is a multinational company with a wide range of consumer goods and does not have a fixed price strategy for all products (Attih & Adams, 2014). However, establishing an effective pricing strategy that works for all products can go a long way in maintaining a company’s sales performance.

According to Nwokah, Ugoji, and Ofoegbu (2009), sales performance is important for improving an organization’s organizational performance. Furthermore, Kyckling believed that a company’s performance could never be better than its sales performance. Therefore, a company’s sales performance is he one of the most important indicators for judging a company’s overall organizational performance. According to Yhi (2006), sales performance is a measure for measuring a firm’s sales performance in a company or department. It is also used to measure the effectiveness of sales strategies according to Naver & Slater (2004). Therefore, it is almost impossible for the company to survive with sluggish sales and Unilever Nigeria plc. There is no difference.

Nigeria’s population is so large and uniquely diverse that pricing strategies are important for businesses aiming for high sales performance. The Nigerian market offers a lot of potential for manufacturers and service providers to develop an appropriate pricing strategy, and Unilever appears to have been a company with high sales performance in Nigeria over the years.April 11, 1923 Founded as Lever Brothers West Africa Ltd in , the company is one of West Africa’s strongest brands and the largest producer of spreads (butter and margarine) in Nigeria (Morenikeji, 2015). Many studies attribute this to the success of the company’s sales strategy, including its pricing strategy, with many citing consistently high sales performance and ultimately the growth and sustainability of the company.

The fear for Unilever is the fact that Previous research done on pricing strategies hasn’t made clear the pricing strategies that works and guarantees increased sales and profitability in Nigeria. Koske (2012), made the case that price skimming strategy would make the consumers see the product as a high quality one. He concluded that this would increase sales, as the consumers will feel safe in the knowledge that they are getting value for their money. However, Attih & Adams (2014) contrarily made the case that companies that adopt penetration pricing strategy are more likely to achieve increase in sales revenues and gain more market share especially in developing countries like Nigeria.

Furthermore, Unilever Nigeria plc. We have trouble achieving high volumes of sales, resulting in many products being sold back in stock, wasting losses and overtime. Unilever Nigeria plc. A lot of economic pain. Parr (2015) suggests that market price parity is an effective strategy to increase sales volume. However, Duess (2014) disagreed that using market parity pricing does not guarantee increased sales due to the presence of other competitors. Therefore, building on the conclusive results of previous research on effective pricing strategies, this study determined how different pricing strategies affect sales performance in Nigeria and identified which pricing strategy I am trying to decide which is the best fit for Unilever Nigeria plc.

1.3 Purpose of the survey

The overall purpose of this study is to examine the impact of pricing strategies on sales performance. The following are the specific objectives of this study.

Identify the impact of price skimming on customer retention.
Investigate the impact of penetration strategies on a company’s market share.
Determine the impact of market prices on sales volume.

1.4 Research question

This study aims to answer the following questions: they are:

How do price skimming strategies affect customer loyalty?
How does penetration pricing strategy affect a company’s market share?
How does market parity affect sales volume?
1.5 Research hypothesis

This study aims to test the hypothesis that

Hypothesis 1

H0:
Price skimming does not significantly affect customer loyalty. H0:
Pricing skimming impacts customer loyalty.

Hypothesis 2

H0:
Penetration strategy does not affect the company’s market share

H0:
Penetration strategy affects a company’s market share

Hypothesis 3

H0:
Market parity does not affect sales volume.

H0:
Market parity affects sales volume.

1.6 Operationalization of research themes

In this study, we have an independent variable and a dependent variable. During manipulation, the dependent and independent variables are transformed into mathematical form. The independent variable is the price strategy (PS).

The dependent variable is actual sales (SP)

Y=F(x)

From where

Y = dependent variable

X= independent variable

F = function

Substitute the values ​​for X and Y.

Y=SP {Consumer Purchase Decision}

X=PS {price strategy}

Therefore SP=F {PS}

that’s why

SP or Y= {Y1, Y2, Y3…….YN}

From where

Y1= customer retention

Y2 = company market share

Y3 = sales volume

X or price

From where

X1= penetration strategy

X2 = Skimming

X3= market parity

1.7 Scope of investigation

This study focuses on the impact of pricing strategies on the sales performance of Unilever Plc, Oregun Ikeja, Lagos. The target group is middle management of Unilever Nigeria Plc. In this study, we apply a simple random sampling technique while analyzing the data using regression analysis. The geographic location of the study is Unilever Nigeria plc in Lagis State. Finally, the survey will be conducted between September 2017 and April 2018 (8 months).

1.8 Validity of research

This research is important to the operations of Unilever Nigeria plc. Because it helps you understand the importance of your pricing strategy in driving sales, profits, and ultimately business growth. It is also important to detail the appropriate pricing strategy for each product type.

The study is important to the industry as it shows how the pricing strategies adopted by manufacturing companies affect the industry performance of the manufacturing sector. It is also important to demonstrate pricing strategies that consumer goods manufacturers can effectively adopt.

This research helps governments understand their role in price regulation to prevent exploitation by manufacturing companies. This research will significantly raise public awareness of pricing strategies and why product prices are high or relatively low. The result is increased knowledge that helps consumers make purchasing decisions.

1.9 Definitions

price:
A price is the amount charged for a product or service. It is the sum of all the values ​​consumers give up in order to obtain or enjoy the benefits of a product or service (Kotler & Arsmtrong, 2008).

strategy:
Strategy is the framework that guides decisions that determine the nature and direction of an organization (Tregoe, 2010). consumer:
Consumers are those who purchase or acquire goods/products and services for their final use (Ibidunni, 2012).

Consumer behavior:
It refers to the processes individuals, groups or organizations use to select, protect, use and dispose of products, services, experiences or ideas to meet their needs, and how these processes affect consumers and society. It is a study of impact. (Purner, 2016).

service:
These are economic activities offered by one party to another party, most commonly using time-based services, desirable in objects or other assets for which the recipient himself or the buyer is responsible. Achieve results (Kelly & William, 2014).

Marketing mix:
A marketing mix is ​​a set of controllable variables that a company can use to influence buyer responses. (Kotler & Armstrong, 2010)

Market parity:
Parity pricing is when the price of one asset is directly related to the price of another asset (American Marketing Association, 2008). Price skim:
Price skimming is a pricing strategy in which marketers initially set a relatively high initial price for a product or service and then lower the price over time. This is a temporary version of price discrimination/yield management (Kotler & Armstrong 2008).

Penetration strategy; Penetration pricing is a pricing strategy in which a product is priced low initially to quickly reach broad segments of the market and first word of mouth (Kelly & William 2014).

Customer Retention:
Customer retention refers to the activities or actions taken by a business or organization to reduce the number of customer churn (Naver & Slater 2010)