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 businesses and the outright failure of some businesses suggest that if businesses are not properly managed and do not have a clear direction, its organizational performance and ultimately organizational sustainability is bound to be in jeopardy (Utaka, 2008). Furthermore, pricing strategy is a pivotal component of an organization’s management focus that can elevate or deter a company’s performance. As such it is extremely important that businesses get their pricing strategies absolutely right.

Globally, there have been a realisation of the impact that pricing strategies have on the product performance. Therefore the pricing strategy adopted has become extremely important in the face of rapid economic and technological changes in which the modern day consumer has become more curious, more educated and conversant with what he/she exactly wants. Nigerians, are not left out, with the advent of the internet, e-commerce and e-shopping allowing consumers to get loads of information about a product both from the manufacturer and external sources. Therefore it is pertinent that companies especially in the manufacturing industry such as Unilever Nigeria get their pricing strategies right (Kotler  & Armstrong, 2011).

Price is the amount a customer pays for a product or the sum of the values that consumers exchange for the benefits of having or using a product or service (Bearden, Ingram & Lafforge, 2014).  Price is the amount of money or value traded for the possession or utilization of a good or service (Kevin, Hartley & Rudelius, 2014). Furthermore, it can be defined as the worth that is put to a good or service and is the result of an intricate combination of costs, research and a full understanding of the perceived value of customers (Kelly & Willam, 2014). According to Kotler & Armstrong (2008) pricing is determining the value that must be provided by a customer in return for a product or service. 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 (Dibb, Simkin, Pride & Ferrell, 2013).  Furthermore, price is the measure of cash charged for an item or administration, it is the sum of all the values that customers give up in order to gain the the benefits of having or using a product (Kotler, Armstong & Tait, 2001). Pricing is one of the major components of a marketing plan, which is a component of a full business plan (Rao & Kartono, 2009). The principle objective of pricing is to adequately to cover overhead costs including work and materials costs and produce adequate profits which helps to maintain growth in the business and create organizational sustainability (Nikoomaram & Jafari, 2011). According to Yeoman (2011) price is one of the significant components in the marketing mix that organizations can control. Agwu and Carter (2014) agreed stating that among the famous four Ps, price is the only income generator as it is the only element that creates an exchange of value.

Kellogg, Youngdahl, & Bowen (2014) pointed out that if effective product development, promotion and distribution sow the seeds of business success, effective pricing is the harvest. Hence the need for pricing strategies designed to fit specific products and services and the customers perception of the value of the product or service. Therefore pricing strategies involves the use of a specific type of information on prices to represent the evolution of price in price index compilation (Mckenzie, 2015). A pricing technique is additionally focused at the characterized clients and against contenders (Nreick, 2012). Assigning product prices is a strategic activity. Pricing strategies are selected with the business and financial goals in mind. Elements of a company’s business plan (such as the vision and mission of the company) can also influence the choices of a pricing strategy.

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