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EFFECT OF PRICING STRATEGIES ON THE PURCHASING OF TOILET SOAPS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Toilet soaps are very important to the health of the human being. It is used for cleanliness. This important product has to be appropriately pricing in order to attract customer patronage and increase profitability. According to Kotler (1996:46) price is the amount of money customers pay for the product or service and the time a place of exchange. Mumer (1994:10) in the quality renew of purchasing stated that price is the exchange value of goods/services and the value of an item is what it can be exchange in the market place, every product and service has its price. It is through price and payment that firms recover their cost of production and active their margin of profit.

Pricing is the monetary expression of value, is created on utility, utility is an expression of usefulness, whole usefulness is based on the potential for need and want, satisfaction value and utility are culturally based while needs and want – cultural, psychological, sociological and physiological based, therefore price as an ultimate expression of needs and want satisfying potential of an item of product or services which has cultural psychological economic implication on market. Edoga and Ani (2000:319) noted that price is often used to indicate value when it is pained with the perceived quality of product or service specifically, value can be defined as the ratio of perceived quality to price (value perceived quality/price).

This relationship shows that for a given price as perceived quality increase, value increases. Also, for a given price, value decreases when perceived quality decrease. For some products, price itself influences the perception of quality and ultimately value, to consumers. This include toilet soaps. Pricing is an important and complete element of the purchasing mix and generate the highest level of external interference. It is a major determinant with volume of goods and services available for the consumer in any economy. Therefore, forms especially those on profit business has to choose with the contain of the environmental variables, both external and internal pricing policies and techniques which are available to achieve its organizational objectives.

The importance of price in the purchasing of toilet soaps cannot be over emphasized. If an organization wants to maximize its net profit, the right price must be selected for its products price in goods may either be too high or too low to be good. When the price and changed are two high the size of the market for that particular product may be unnecessarily restricted and if the right price where used. The size of net profit is directly related to the effectiveness of price because price usually causes change in market demand for a given product and in turn its revenue and net profit. Monrce (1994:210) noted that the consumer perception of product quality vary directly with the price, the higher the price, the better the quality is preferred to be.

In the word by Ichie (1993:25) without price there can be no purchasing, product may be marched with market/but only when buyers or sellers agree on price, buyer or a seller may propose a price but it is not effective until price is accepted by the owner. In the view of the complex nature of price and important to customers patronage decision, the researcher in the study critically examine the effect of pricing strategies on purchasing of toilet soap in Enugu State.

1.2 STATEMENT OF THE PROBLEM

The high mortality rate of manufacturing business especially those firms in the beverages industries in our country Nigeria is a source of concern to the management of business organization and the society in general. It seems that these forms do not adopt appropriate pricing strategies in the pricing of their products. Today, one can see small manufacturing firms spring up in the city in the guise of manufacturing toilet soaps, some of these firms after a few months/years of operation start to experience low sales, low profit, as a result of poor customer patronage caused partly by failure to adopt appropriate pricing strategies.

A situation where manufactures of consumer products and services continue to experience low sales volume or an eventual close up of business as a result of low profit margin arising from the adoption of wrong pricing strategies calls for investigation. The study seeks to find out what pricing strategies are used by as well as those manufacturing firms in the Toilet Soap Industry and how far they have helped in goal accomplishment. A delegated economy like one in an attempt to make quick money or an excess profit. Toiletaria Industry especially soap manufacture usually increase a price of their products indiscriminately. This is no doubt affect the patronage of customers. It has also been discovered that the price of some toilet soaps are not commensurate with the quality of the product. The pricing for the product calls for serious questioning.

1.3 OBJECTIVES OF THE STUDY

1. To determine whether the pricing system of Toilet Soaps company attract customers.

2. To find out the problems associated with the pricing system of toilet soaps.

3. To determine the effect of pricing system on the profitability of toilet soaps.

4. To find out the problems associated with the pricing system of Toilet soaps.

5. To see if repeat patronage of the customers of toilet soaps as a rest of the pricing system.

6. To find out how toilet soap companies fix their charge.

7. To make appropriate recommendation on how to improve on the pricing system of the toilet soaps.

1.4 FORMULATION OF HYPOTHESIS

HYPOTHESIS 1

HO: Pricing system adopted for toilet soap does not attract customers.

HI: Pricing system adopted for toilet soap companies attract customers.

HYPOTHESIS 2

HO: Pricing system of toilet soap companies does not lead to increased profitability of the companies.

HI: Pricing system of toilet soap companies leads to increased profitability of the companies.

HYPOTHESIS 3

HO: Pricing system adopted for toilet soap does not lead to customer repeat patronage.

HI: Pricing system adopted for toilet soap leads to customer repeat patronage.

HYPOTHESIS 4

HO: Pricing system as adopted for toilet soap is not commensurate with quality of product.

HI: Pricing system as adopted for toilet soap is commensurate with quality of product.

1.5 SIGNIFICANCE OF THE STUDY

The study is not only an academic exercise, it will have a substances benefit to the researcher. It will lightened the researcher knowledge in research writing on pricing strategies adopted by toilet soaps industries. It will be of immense benefit to the researcher or readers who will find the study as a source of literature review. Toilet soaps manufacture and other related firms will find the write up very useful. It will help them to know how to fix prices in their service/product. The government also will equally benefit from the study since they equally involve in purchasing of Toilet Soaps.

1.6 SCOPE OF THE STUDY

This research was undertaken to examine the effect pricing strategies of purchasing of toilet soap in Enugu State. A case study of selected of toilet soaps. However in the view of limited resources, time and other constraints emphasis was placed or as selected toilet soaps like lux, premier, eve, etc.

1.7 DEFINITION OF TERMS

i. Price – Is the monetary expression of value.

ii. Purchasing – The process of identifying, anticipating and satisfying customers needs and wants. Through exchanged needs.

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