AN ANALYSIS OF THE EFFECT OF THE PRICING STRATEGY FOR EFFECTIVE MARKETING OF A PRODUCT.
1.1 Background of the study.
Marketing is a form of communication between you and your customers with the goal of selling your product or service to them. Communicating the value of your product or service is a key aspect of marketing. A Start up or a company's strategy combines all of its marketing goals into one comprehensive plan. A good marketing strategy should be drawn from market research and focus on the product mix in order to achieve the maximum profit and sustain the business. The marketing strategy is the foundation of a marketing plan.
In the face of rapid economic and technological changes, today‘s consumer is more curious, more educated and conversant with what he/she exactly wants. These changes also affect the needs of firms. According to Ehmke et al (2005), marketing your business is about satisfying your customers‘ needs. Borden (1984) stated that marketing manager must weigh the behavioral forces and then handle marketing elements in his mix with focus on the resources with which he has to work when building a marketing program to fit the needs of a firm. For marketing to be effective, a change either in a new product or rebranding a new product, there are elements that remains constant which must be incorporated in the marketing mix and this is called the "Four P‘s". These four P‘s are product, price, promotion and place (Ehmke et al 2005).
Price is the amount a customer pay for a product or the sum of the values that consumers exchange for the benefits of having or using a product or service (Bearden et al 2004). Price means different things to different people; it is interest to lenders, COT or service charged by the banker (lenders), premium to the insurer, fare to the transporter, honorarium to the guest lecturer etc, (Kotler et al 2008). According to Rosa et al (2011), the importance of price as a purchasing tool has a key role in price management since it not only determine the way prices are perceived and valued, but it also influence consumer purchase decisions (Rosa, 2001; Simon, 1989; Vanhuele and Dreze, 2002).
Studies have shown price as an important factor in purchase decision, especially organizations that purchased products, affecting choices for store, product and brand (Rondan, 2004). The greater the importance of price in purchases decisions, the greater the intensity of information and the greater the amount of comparisons between competing brands (Mazumdar and Monroe, 1990). Considering the nature of the consumer products (frequently purchased and consumed products, implying medium-low level of consumer-supplier interaction), the basic is that the customers who usually purchase are more frequently in contact with prices. Pricing strategy is essential to every organization involved in the production of consumer goods and services because it gives a cue about the company and its products, a company does not set a single price but rather a pricing structure that covers different items in its line (Kotler et al, 2001). According to Hinterhuber (2008) pricing strategies vary considerably across industries, countries and customers. It can be categorized into three groups: cost-based pricing, competition-based pricing, and customer value-based pricing.
Choosing a pricing strategy is an important function of the business owner and an integral part of the business plan or planning process. It is more than simply calculating the cost of production and adding a markup (Roth 2007). Therefore, assigning product prices is a strategic activity and the price or prices assigned to a product or range of products will have an impact on the extent to which consumers view the firm‘s products and determine its subsequent purchase. However, it is less clear how pricing activities can be guided by the marketing concept. Certainly, customers would prefer paying less, in fact, they would even prefer to pay nothing but it is simply not feasible to give products without price (Sagepub.com 2009). An organization that does that will run dry and out of business and would not be able to create value for the customers.
According to Agwu and Carter (2014), ‘among the four Ps, price is the only income generator and it is the value attached to a product. Price is the amount of money charged for a product or service. It is the sum of all the values that customers give up in order to gain the benefits of having or using a product (Kotler et al 2010). Baker (1996) noted that price is the mechanism which ensures that the two forces (demand and supply) are in equilibrium. According to Santon (1981) price is simply an offer or an experiment to task the pulse of the market. It is the monetary value for which the seller is willing to exchange for an item (Agbonifoh et al, 1998). Ezeudu (2004) argues that price is the exchange value of goods and services. Schewe (1987) defines price as what one gives up in exchange for a product or service.
Price is one of the most important elements of the marketing mix as it is the only one that generates revenue for the firm unlike the others that consume funds (Agwu and Carter 2014). Lovelock (1996) suggested that pricing is the only element of the marketing mix that produces revenues for the firm, while all the others are related to expenses. Diamantopoulos (1991) also argued that, price is the most dynamic element in marketing strategy in that pricing decisions can be implemented relatively quickly in comparison with the other elements of marketing strategy. It is capable of determining a firm‘s market share and profitability. Kellogg et al., (1997 p.210) point out that If effective product development, promotion and distribution sow the seeds of business success, effective pricing is the harvest. Although effective pricing can never compensate for poor execution of the first three elements, ineffective pricing can surely prevent those efforts from resulting in financial success.
1.2 Statement of the problem.
Inorder to attain effective product marketing, effective pricing strategy is important. Therefore the need arise to examine the effect of pricing strategy on effective marketing of a product. Also to research the best pricing strategy for marketing a product.
1.3 Objective of the study.
The main objective of the study is to examine the effect of pricing strategy on effective marketing of a product.
1.4 Research Questions.
What is marketing?
What is price?
What is pricing strategy?
What is the effect of pricing strategy on effective product marketing?
1.5 Significance of the study.
This study will examine pricing strategies, find the most effective and research it effect on marketing a product.
1.6 Scope of the study.
This study focus on the analysis of the effect of effective pricing strategy on effective marketing of product.
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Sagepub.com. (2009). Retrieved December 15, 2013, from http://www.sagepub.com/upmdata/43169_1.pdf