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SIGNIFICANCE OF PRICE ON THE SALES OF NEW PRODUCT

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Pricing is a strategy for selling the product or services of a new business, it is a reflection of how serious a company is in meeting the competition ahead. A good pricing strategy plan is backed by carefulling collected market, consumer and competitor information, sometime citing professional device. Pricing strategy plan will help to improve your chances against more experience competitors and newly emerging once the plan enable you to recognize  and take action on any trends and consumer preferences that other companies have overlooked, and to develop and expand your own select group of loyal customers new and into the future. The plan will also show to other that you have carefulling considered how to price a product that is innovative, unique and marketable- improving your chance of stable sales and profits –reasons for investors to financially back you.

Setting a price for new product is usually difficult because as a product passes through it life cycle, the introductory stages is especially challenging company developing a new product face the challenge of selling for the first time. They can choose between the three major pricing strategy which include market skimming pricing, market penetration pricing and market demand curve. The price of new  product  has  a way of determining the acceptance or rejection of the product. Thus, it has become imperative to investigate the influence of pricing strategy  on the sales of new product using Brazilian hair as a case study

1.2   STATEMENT OF THE PROBLEM

Price is seen as a perception of value. Consumers mostly beliefs that the price of goods and services determine the quality in the product. Business organization do not seems to appreciate the use of a good pricing system in the introduction of their new product. The problem that this work will look at are:

i.            Knowing if the pricing strategy of the organization affects the present economic situation in the environment.

ii.            Examining if effecting pricing strategy affect consumer behaviour.

iii.            Finding out if profit planning result in cost reduction

1.3   RESEARCH QUESTION

1.     Dose the pricing strategy of the firm affect the present economic situation in the country?

2.     Does effective pricing strategy affect the consumer behaviour through its product? 

3.     What influence does pricing strategy have on new product?

1.4   RESEARCH HYPOTHESIS     

To achieve the objective of the study the following hypothesis are formatted.

Hypothesis One

Ho: Pricing strategy does not affect the buying habits of consumers in the country.

HI:    Pricing strategy affects buying habits of consumer in the country-.

Hypothesis Two

Ho: Effective pricing decision does not rely more on the estimate of likely demand than knowledge of cost of Brazilian hair.

HI:    Effective pricing decision rely more on the estimate of likely demand than the knowledge of cost of Brazilian hair.

1.5   PURPOSE OF THE STUDY.  

This research is aimed at achieving the following  purpose:

1.     To know the influence, pricing strategy has on new product

2.     To establish the efficiency and effectiveness of pricing Strategy in selected organizations.

3.     To find out the various factors that influence pricing decision in selected organization.

4.     To determine if pricing decision can make an impact of a  firm’s profit and efficiency.

5.     To investigate if profit planning can result in cost reduction and increased profit performance.

1.6   SCOPE OF THE STUDY         

In an attempt   to achieve the predetermined objective, this research work will be limited with the scope of how management’s performance of manufacturing firms are influenced by the choice of it’s pricing strategy and it’s profit planning. The study will focus primarily on Brazilian hair.

1.7 SIGNIFICANCE OF THE STUDY.

This research will serve as a guide to firms in setting the most advantageous pricing strategy given it’s individual unique situation which will enhance profitability in the short and long run situation. It will help them to avoid choosing arbitrary prices without considering it’s distinctive situation and important factors. It will serve as a guide in choosing pricing strategy which strikes a balance between what the customers want to pay for a product and the price the firm is willing to sell. This research work will also be useful for the economy in the sense that if firms have substantial controls over price setting than their pricing. Behaviour can influence national output income and hence community welfare. Finally this research work will be useful for those carrying on further research on this or related topics.

1.8   LIMITATION OF THE STUDY

Like in most studies gathering all the needed information is usually met with a number of limitations.      

The first constrained which affect this research work is time and cost. There is no enough time to strict accuracy and reliability. The attitude of some of the users of Brazilian hair were not helpful.

Theories were reluctant to part with some vital information despite the fact that the information were for academic purpose only. Despite all these problems, the researcher still believed that a great task has been accomplished and the purpose of this study has not been undermined and the approach of this objective.     

1.9   OPERATIONAL DEFINITION OF TERMS 

Pricing strategy:  It is a guiding philosophy or course of action designed to influence and determine pricing decisions. Pricing strategy set guidelines for achieving objectives.

Profit Plan: This profit plan is the operating plan detailing revenue expenses and resulting to met income for specific period of time. It is the firm’s optimal plan in the high of management expectation in future.

Efficiency: Ability to work or produce well without wasting time or resources.

Fixed Cost: Cost that remains constant within a level of production. It does not vary with production.  

Marking Mix: The combination of the four primary element that comprises of company`s marketing programme which are price, product place and promotion.

Variable Cost: They are cost that varies with level of production. They are constant per unit but vary with total production.

Strategy: Strategy is a general statement of the vary in which an organization plans to achieve it’s objectives. The strategy contains the basic approach but not the detail of how a firm plans to attain it’s objective.

Short Run: It is a period of time that is less than one year. The firm is unable to vary all its input in this span of time.

Long Run: It is a period of time sufficiently long to allow the firm to change the physical amount of all resources in its production. It is usually five (5) year and above.

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