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CHAPTER ONE
INTRODUCTION
1.1  BACKGROUND OF THE STUDY
This chapter is the introduction to the study on the analysis of the effect of pricing strategy for effective marketing of a product. The chapter will contain the general introduction, aims and objectives of study, statement of the problem, hypotheses, research question, justification and scope of study. 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 how you position it to satisfy your customer’s 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 effect a change either in a new product or reinvigorate a new brand 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). In the context of this study, the emphasis will be on price; hence the need to elucidate more on meaning of price to both customers and firms. 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 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 marketing stimulus has a key role in price management since not only does it determine the way prices are perceived and valued, but it also influences effective marketing (Rosa, 2001; Simon, 1989; Vanhuele and Dreze, 2002). Studies have shown price as an important factor in effective marketing, especially for frequently purchased products, affecting choices for store, product and brand (Rondan, 2004). The greater the importance of price in effective marketing, 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, the customers who usually purchase are more frequently in contact with prices. Pricing strategy is paramount 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 and 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. Marketing generally helps companies define, promote and distribute its product, and maintain a relationship with your its. Pricing, as part of the marketing mix, is essential and has been always one of the most difficult decisions in marketing because of heightened competition (Myers 1997), gray market activities (Assmus and Wiese, 1995), counter-trade requirements (Cavusgil and Sikora ,1988), regional trading blocks (Weekly, 1992), emergency of intra-market segments (Dana 1998), and volatile exchange rates (Knetter, 1994). Consumers have different perception of the products depending on the price. Therefore, pricing products for consumers is a difficult task, mainly because a high price may cause negative feelings about products, and also a low price can be misleading on other products features such as quality. There are many pricing objectives that lead to different strategies and businesses have to develop and apply the best strategy in various situations. Some of the ways of pricing a product are: premium and penetration pricing, price skimming, economy and psychological pricing, product and optional product pricing, captive and product bundle pricing, promotional, geographical and value pricing. However, the situation is further complicated when it comes to pricing for international and global markets.
1.2  AIMS AND OBJECTIVES OF THE STUDY
The main aim of this study is to analyze the effect of pricing strategy for effective marketing of a product while the following are the specific objectives:
1. To examine the effect of pricing strategy for effective marketing of a product.
2. To examine factors that affect pricing and marketing of a product.
3. To examine the relationship between pricing strategy and effective marketing of a product
1.3  STATEMENT OF THE PROBLEM
It is less clear how pricing activities can be guided by the effective 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. An organization that does that will run dry and out of business and would not be able to create value for the customers. However, these constitute problems that have provided a purpose for this research. The crux of this study is to understand the extent to which customers perceive the pricing strategies of firms. It is dangerous to assume that customers perceive a particular pricing strategy as fair; furthermore it is also out of place to state that customers believe that whatever price is set is a reflection of the cost of producing a product. More so, other pricing strategies used by competitors also interfere and have an eect on products. Another problem is rooted in consumers not understanding the concept of value in pricing strategy of the firm and it is a strategy that is adopted by a few firms (Hinterhuber 2008). If a firm thinks it is communicating value via its prices and customers on the other hand do not perceive value as relating to the set prices then the pricing objective of the firm is defeated based of zero marketability. The web has come into existence and businesses have gone online and pricing of products and services have also taken another form. Presently, the exposure of customers to online and online prices have a significant influences on effective marketing of a product. The new technologically advanced distribution channels permit anyone to receive the most up-to-date multimedia information on the best connections, and at the best prices.
1.4  RESEARCH HYPOTHESES
Hypothesis One HO: There is no significant difference in the mean rating of consumers responses on the effect of pricing strategy for effective marketing of a product.
HA: There is significant difference in the mean rating of consumers responses on the effect of pricing strategy for effective marketing of a product
Hypothesis two HO: There is no significant relationship in the mean rating of the consumers responses on the factors affecting pricing and marketing of a product
HA: There is significant relationship in the mean rating of the consumers responses on the factors affecting pricing and marketing of a product
Hypothesis Three HO: There is no significant relationship between pricing strategy and effective marketing of a product
HA: There is significant relationship between pricing strategy and effective marketing of a product
1.5  RESEARCH QUESTIONS
1. What is the effect of pricing strategy for effective marketing of a product?
2. What are the factors that affect pricing and marketing of a product?
3. What is the relationship between pricing strategy and effective marketing of a product?
1.6  JUSTIFICATION OF STUDY
As a consequence of the global economic downturn in which Nigeria as a country as its own share of it, there has been an increase in the up-spring of new businesses all over the place. The survival of these competing businesses has been based on the pricing system adopted by the company’s management for their respective products and services. Businesses that charges higher fees for value are considered expensive by consumers leading to lower patronage and consequent extinction of the products. This study is justifiable as it will provide an educative framework in which managers of companies and other business administrators can key into for the regulation of their pricing system towards effective marketing of their products.
1.7  SCOPE OF STUDY
This study will cover the pricing system of a particular product and its effects on the effective marketing of the product.

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