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EFFECT OF PRICING STRATEGY ON PRODUCT PERFORMANCE (A CASE OF GLAXOSMITHKLINE NIGERIA PLC)

Abstract

This study examines effect of pricing strategy on product performance: A case of glaxosmithkline Nigeria plc. Other objectives are to identify the impact of price skimming on customer retention and to investigate the effect of penetration strategy on the firm’s market share. The study made used of primary source to generate data and the correlation co-efficiency techniques was used with aid of SPSS to analyze the stated hypothesis. The study revealed that that price skimming has impact of on customer retention. Based on the findings, the following recommendations have been made knowing fully well that, organizations must consider competitive based pricing and should always be on the lookout for what competitors’ strategies are in terms of pricing of similar products. To further improve product quality and customer perception of value, firms should improve quality of interaction with customers and rate of research and development. This will inform the company on what customers expect or the benefits they expect to derive from the products of the company.

CHAPTER ONE

INTRODUCTION

1.01     Background to the 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 (2015), marketing your business is about how you position it to satisfy your customers‘needs. Borden (2014) 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. 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 (Rosa, 2015).

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 glaxosmithkline Nigeria LTD 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

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