AN EVALUATION OF PRICING STRATEGIES AND ITS IMPACT ON MARKETING DECISION

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

In a dynamic and ever-growing environment such as the Nigeria economy firms and marking, organizations 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, a 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 others prefer a narrower or functional view. In this case, the domain is sometimes even further restricted by focusing attention on the various elements of the marketing mix rather than on more general issues of customer and channel relationships (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 includes product, price, place, and promotion. Pricing as a marketing mix variable is an important determinant of one firms’ success and the mother’s failure pricing has to be timely and appropriate in order to achieve its desired objectives. Evidence abounds for product and service which met stiff competition as a result of pricing strategy adopted and have consequently failed. Similarly, pricing is considered by many to be key activities within the free enterprise system and organization system. A products’ price influences the price paid for the factors of production-land, labor, capital, and entrepreneurship. Price thus is a basic regulator of the economic system because it influences the allocation of these factors of production. High wages attract capital. As the 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 market share. As a result, the price has a considerable bearing on a company and organization (PHCN) revenue and net profit. It is only through the price that money comes into a well-established organization. Customers rely heavily on price as an indicator of a decision with incomplete information. Some customer’s perceptions 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 though 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 problems when selling goods abroad. They must deal with price escalation transfer prices, dumping charges reconnecting of lights. To achieve this set objectives organizations such as the Power Holding of Nigeria (PHCN) must balance all these problems.

STATEMENT OF PROBLEM

Price is the marketing-mix element that produces revenue, the other produces costs. Price is also one of the most flexible elements. 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 mixes rather than as an intrinsic element of market-positioning strategy. In practice, the Power Holding Company of Nigeria inclusive pricing decision is often made arbitrarily or merely on the basis of cost-related criteria with limited or no pricing research to guide them. In 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.

PURPOSE OF THE STUDY

The issue of pricing dates back to the ancient period of a trade by barter. The distinction in strategy is not an issue of good or bad, but that of appropriate and inappropriate strategy (Ang Soft, 1970). This means that all strategies are good, but when used in a particular situation, a particular strategy becomes inappropriate if it does not yield the desired goal. The principal aim of this study is to evaluate the existing pricing strategy in the Power Holding Company of Nigeria (PHCN) in terms of its effectiveness and impact on its marketing decision.

1.      To provide an overview of the steps involved in effective price decisions.

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

3.      To identify alternatives most appropriate for the PHCN pricing environment.

4.      To examine a framework for effective goal-oriented pricing for the PHCN.

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

6.      To implement the selected strategies a price structure and price level have to be determined.

SIGNIFICANCE OF THE STUDY

The finding of this study will enable organizations such as the PHCN or other organizations to acquaint the role of pricing strategies and their impact on marketing decisions. It is hoped that they would take cognizance of the findings, since pricing pre-occupy most of the processes centered on pricing. Moreso, it is to bring to the attention of the government, the pricing strategies of a large organization and the achievement that can be derived from the utilization of pricing strategies.

RESEARCH QUESTIONS

1.      Does pricing strategy affect marketing decisions?

2.      How can we maintain a pricing strategy in Nigeria?

3.      Do pricing strategies affect our marketing decision?

4.      Is there any relationship between pricing strategies and sales growth?

5.      Are there limitations in pricing strategies in Nigeria?

6.      Is there any relationship between pricing strategies and sale turnover?

7.      Is there any need for pricing orientation?

8.      Why does a big organization like the PHCN need pricing strategies?

9.      Does a business grow without well- oriented pricing strategies?

10.   Does the PHCN have a limitation on pricing strategies?

SCOPE OF THE STUDY

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 the price is subject to rapid and unpredictable charges; a quarterly analysis of pricing will be conducted.

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