EFFECT OF PRICING STRATEGIES ON PROCURING NEW PRODUCTS IN

ADAMORE NIGERIA LIMITED KADUNA

BY

ISAH SHAKA EHIMEAKHE

KASU/MPSCU/ACC/SMS/18/00189

DEPARTMENT OF ACCOUNTING

KADUNA STATE UNIVERSITY

KADUNA

MARCH 2021

i
 EFFECT OF PRICING STRATEGIES ON PROCURING NEW PRODUCTS IN
ADAMORE NIGERIA LIMITED KADUNA

BY

ISAH SHAKA EHIMEAKHE

KASU/MPSCU/ACC/SMS/18/00189

BEING A PROJECT SUBMITTED TO SCHOOL OF POST GRADUATE STUDIES

DEPARTMENT OF ACCOUNTING KADUNA STATE UNIVERSITY

FOR THE AWARD OF MASTERS IN PROCUREMENT AND SUPPLY CHAIN

MANAGEMENT (MPSCM)

MARCH 2021

ii
 DECLARATION

I, ISA SHAKA EHIMEAKHE hereby declare that this thesis titled “Effect Of

Pricing Strategies on Procuring New Products In Adamore Nigeria Limited

Kaduna””was solely done by me under the supervision of Dr. Murtala of the department

of Accounting, Kaduna State University. All texts consulted and other sources for

materials used in this work have been duly acknowledged in the bibliography and the

project has never been submitted to any institution for an award.

Isah Shaka Ehimeakhe Date:____________________

KASU/MPSCU/ACC/SMS/18/00189

iii
 CERTIFICATION

This is to certify this thesis: “EFFECT OF PRICING STRATEGIES ON

PROCURING NEW PRODUCTS IN ADAMORE NIGERIA LIMITED KADUNA”

by Isah Shaka Ehimeakhe meets the regulations governing its award of Master in

Procurement and Supply Chain Management, Kaduna State University, Kaduna and it is

approved for contribution to knowledge and literary presentation.

Associate Prof. Lubabah Kwanbo Mansur Date:__________________

Project Supervisor

Dr. Miko Usman Nurudeen Date:____________________

Course Coordinator

Dr. Ali Ibrahim Labaran Date:____________________

Head of Department

Prof. Benjamin K. Gugong Date:____________________

Dean, Faculty of Management Science

iv
 DEDICATION

I dedicate this project work to my family and my parents Mallam Isah Umar

Ehimeakhe and Mrs. Saudat Isah Umar Ehimeakhe.

v
 ACKNOWLEDGEMENT

My gratitude goes to Almighty Allah, my wife, children and my parents. Also I

register my thanks to Mr. Mohammed Sado, Mr. Alabi Yunusa and Alhaji Dahiru for

making this work fruitful and a huge success in my life and also my lecturers in the

Accounting department especially my project supervisor, Associate Prof. Lubabah

Kwanbo Mansur.

vi
 TABLE OF CONTENT

Title page i

Declaration ii

Certification iii

Dedication iv

Acknowledgement v

Table of contents vi

Abstract x

CHAPTER ONE: INTRODUCTION 1

1.1 Background of the study 1

1.2 Statement of the study 5

1.3 Research questions 6

1.4 Objectives of the study 7

1.5 Hypothesis of the study 7

1.6 Significance of the study 8

1.7 Scope of the study 8

1.8 Definition of the term and concepts 9

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction 10

2.2 Conceptual Framework 10

2.2.1 Concept of pricing strategies 10

2.2.2 Differentiated pricing 12

2.2.3 Product price and competitors pricing 14

2.2.4 Ways of changing pricing 14

vii
2.2.5 Price perception 17

2.2.6 Initiating price increases 18

2.3 Empirical review 19

2.4 Theoretical framework 32

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction 29

3.2 Research design 29

3.3 Population of the study 29

3.4 Sample and sampling technique 29

3.5 Method of data collection 30

3.6 Instrument of data collection 30

3.7 Method of data analysis 31

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction 32

4.2 Data presentation 32

4.3 Data interpretation 38

4.3 Discussion of findings 39

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction 42
5.2 Summary 42
5.3 Conclusion 43
5.4 Limitation of the study 44
5.5 Recommendation 45
Reference 47
Appendix A 50

viii
 ABSTRACT

This research work is designed to determine the effect of pricing strategies on

procuring new products in Adamore Nigeria Ltd; to find out how pricing strategies
affect customer’s behavior on procuring new products in Adamore Nigeria Ltd; and to
determine the factors that can influence choice of pricing strategies by Adamore
Nigeria Ltd on procuring new products and to find out ways Adamore Nigeria Ltd can
attract customers to accept the pricing strategies on procuring new products.. The
research work contains five chapters. Quantitative survey method is adopted on this
research work and data collected from primary data are analyzed using quantitative
analysis method. The findings have shown that effects of pricing strategies on the new
products have led to improve the value of the new products in the market; rise in profit
margin of the company and of course, rise in demand of the new products. The pricing
strategies have positively affected customers’ choice and taste of Adamore new
products; their purchasing power and loyalty to the new products has improved
considerably as the pricing strategies have not affected their psychology and
preference for alternative products. The tested hypothesis also shows that there is
significant relationship between the effect of pricing strategies and procuring the new
products in Adamore Nigeria Ltd.

ix
 CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

For every business strategy, the seller and the buyer have some vital factors they

put into consideration before taking a market decision. This decision is usually hinged on

value attached to market product and that value is expressed on the face of price. Product

or service pricing is considered one of the most critical decisions made in a company.

However, a number of small and medium sized companies have no process in place to

assess competitive or market pricing none do they have a pricing strategy or plan (Bryan,

2010).

From a customer's point of view, value is the sole justification for price. Usually,

customers do not have idea of the cost of material and other costs that go into the making

of a product. But those customers appreciate what that product does for them by way of

providing value. It is on this basis that customers make decisions about the purchase of a

product.

According to Hilton (2005), setting the price for an organization’s product or

service is one of the most crucial decisions a manager faces, and one of the most difficult,

due to the number of factors that must be considered. Some of the factors that influence

pricing decision are demand, competitors, cost, political, environmental, legal and image-

related issues.

Look back at history of price, Hlton (2005) expounded that prices usually were set

by buyers and sellers bargaining with each other; sellers would ask for a higher price than

they expected to get and buyers would offer less than they are expected to pay. Through

1
the bargaining process, they would arrive at acceptable price individual buyer pay different

prices for the same products, depending on their needs and bargaining skills.

Truly, indeed, price has been the major factor affecting choice. This is skill trade

in poorer nations, among poorer groups, and with commodity products. However, non-

price factor have become more important in buyers – choice behaviour in recent decades.

In the view of Monroe (2003) taking a decision on price is a crucial one every

business institution has to make, because this will eventually affect their corporate

objectives, either directly or indirectly. Buttressing this point further, Horngren, et al

(1996) stated that managers are frequently faced with decisions on pricing and

profitability of their products.

Hence, for every business organization, the cost minimization and profit

maximization are the greatest desire they aspire to attain. Similarly, non-profit making

organizations have their need to reduce cost at all means and to maximize output. A

business whether small or big, simple or complex, private or public, is set up to provide

competitive prices (Ayozie 2008)

Price is the amount of money (or its equivalent) placed on a good or service

(Kotler, 2001). It is usually expressed in monetary terms, such as N120 for a chair. It may

also be expressed in non-monetary terms, such as free goods or services in exchange for

the purchase of a product.Pricing strategies are useful for numerous reasons, though those

reasons can vary from company to company.

Choosing the right price for a product will allow you to maximize profit margins

if that’s what you want to do. Contrary to popular belief, pricing strategies arenot always

about profit margins. For instance, you may opt to set the cost of a good or service at a
2
low price to maintain your hold on market share and prevent competitors from

encroaching on your territory.

In this case, you may be willing to sacrifice profit margins in order to focus on

competitive pricing. But you must be careful when engaging in an action like this.

Although it could be useful for your business, it also could end up crippling your

company. A good rule of thumb to remember when pricing products is that your

customers won’t purchase your product if your price it too high, but your business won’t

be able to cover expenses if you price it too low.

According to Kotler (2001), several other factors influence consumer purchase

decision, namely product choice, brand choice, dealer choice, purchase timing and

purchase amount. Many studies have attempted to understand the relationship between

price and consumer purchase decision, concluding that product pricing was а complex

matter and that there are many strategies that influence consumer perceptions and

purchase intentions (Аlbа et аl., 1994; Chаndrаshekаrа et аl., 2003; Hаrdesty et аl., 2003;

Hildаlgo et аl., 2008; Mаnzur et аl., 2011).

Pricing strategy is of great importance to all Organizations involved in the buying

and selling of consumer goods аnd services because it gives an idea of a company’s

pricing strategy. No company sets а single price but а pricing structure that covers

different items in its line Kotler et аl. (2001).

Explaining more on the importance of pricing strategy, Duttа et аl. (2002) posited

that a good pricing strategy also includes the perspectives of the consumer, the

organization, and the competition thus ensuring that an organization has а sustainable

competitive аdvаntаge.

3
 Kotler et al., (2001) further argue that 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 because a company does not set a single price

but rather a pricing structure that covers different items in its line. Pricing is the setting

up of a value to a product or service and is the result of a complex set of calculations,

research and understanding and risk taking ability (Danish et al., 2015).

In the same vein, Hirsch (1997) stated that effective pricing meets the needs of

consumers and facilitates the exchange process. It requires that marketers understand that

not all buyers want to pay the same price for products, just as they do not all want the

same product, the same distribution outlets, or the same promotional messages.

Therefore, in order to effectively price products, Hirsch (1997) argued that markets must

distinguish among various market segments. The key to effective pricing is the same as

the key to effective product, distribution, and promotion strategies.

Schewe and Smith (1980) identified two broad pricing strategies which

purchasing can adopt in setting the prices of new products. These are setting an initial

high price for the product (Skinghind Pricing Strategy) and/or setting an initial price

(penetration pricing strategy) aimed at facilitating consumer acceptance.

Product, price and promotion, make pricing decision aspect of a firm’s purchasing

programme comes partly from the fact that of all the elements of the purchasing mix,

price is the only one that generates income and revenue while the next represent lost to

the firm (Adirika, Ebue and Nwachukwu 1996:59).

With this, therefore, pricing function is handled different ways by different

organization. In small organization, for example, price decision is made by top

4
 management while in large organization it is handled by lower manager and purchasing

department in accordance with top management pricing objective, policies, strategies and

procedure. A purchasing firm should, therefore adopt such pricing strategies that will lead

to the realization of not only the pricing objective but also the normal corporate goals of

the firm.

1.2 Statement of the Problem

Many organizations have had the problem of taking appropriate decisions in

fixing price of products and services they produced or rendered. Product or service

pricing is considered one of the most critical decisions made in a company. However, a

number of small and medium sized companies have no process in place to assess

competitive or market pricing none do they have a pricing strategy or plan(Bryan, 2010).

From a customer's point of view, value is the sole justification for price. Usually,

customers do not have idea of the cost of material and other costs that go into the making

of a product. But those customers appreciate what that product does for them by way of

providing value. On this basis customers make decisions about the purchase of a product

Adamore Nigeria Ltd.

Adamore Nigeria Ltd is a private owned business organization incorporated in

Nigeria as a private liability company. The company is into importation and marketing of

Animal health products in Nigeria. It is one of the largest Marketers of veterinary

Pharmaceuticals in Nigeria. It is the sole agent to Kepro B.V, Holland. Adamore Nigeria

is also into Poultry Farming with a fully automated laying facility at the outskirt of

Lagos. It supplies animal Feed and other veterinary Pharmaceutical products.

5
 Adamore Nigeria Ltd is a Veterinary Pharmaceutical Company engaged in

wholesale distribution of several globally recognized products such as Kepro, Ceva,

Biofeed, Kanters and Ceetal. It also renders consulting services especially as it pertains to

Disease Management, Biosecurity Control, etc. It also prides itself in quality poultry

production.

The company also provides quality Veterinary products and outstanding

veterinary services for the livestock industry in Africa. In its business, it gives prominent

attention to the maintenance of ethical and professional standards. Its Chief Executive

Officer is a distinguished Veterinary Doctor and a professional to the core. He is

dedicated and diligent and he ensures no compromise on the best practice in the conduct

of business of the company. Its head office is located at 10A Joel Ogunaike Road, Ikeja

GRA, Lagos. It has its branch office at 25, Rescos Road, Close to Murtala Square,

Kaduna.

Owing to this, therefore, this research work is designed to determine the effect

of pricing strategies on procuring new products in Adamore Nigeria Ltd; to find out how

pricing strategies affect customer’s behavior on procuring new products in Adamore

Nigeria Ltd;and to determine the factors that can influence choice of pricing strategies by

Adamore Nigeria Ltd on procuring new products and to find out ways Adamore Nigeria

Ltd can attract customers to accept the pricing strategies on procuring new products.

1.3 Research Questions

The research questions designed for this study include the following:

i. What are the effects of pricing strategies on the new products in Adamore Nigeria

Ltd?

6
 ii. To what extent have pricing strategies affect customer’s behavior on procuring

new products in Adamore Nigeria Ltd?

iii. What are the factors that can influence the choice of pricing strategies by

Adamore Nigeria Ltd on procuring new products?

iv. What ways can Adamore Nigeria Ltd attract customers to accept the pricing

strategies on procuring new products?

1.4 Objectives of the study

i. The main objective of the study is to determine the effect of pricing strategies on the

new products in Adamore Nigeria Ltd. Other objectives are:

ii. To find out how pricing strategies affect customer’s behavior on procuring new

products in Adamore Nigeria Ltd;

iii. To determine the factors that can influence the choice of pricing strategies by

Adamore Nigeria Ltd on procuring new products.

iv. To determine ways Adamore Nigeria Ltd can attract customers to accept the pricing

strategies on procuring new products.

1.5 Hypothesis of the Study

The study is also based on the following hypothesis:

Ho: There is significant relationship between effects of pricing strategies and procuring

of new products in Adamore Nigeria Ltd

Hi: There is no significant relationship between effects of pricing strategies and procuring

of new products in Adamore Nigeria Ltd

7
1.6 Significance of the Study

This study will be useful in many ways. For instance, the management and staff of

Adamore Nigeria Ltd will benefit immensely from the findings of the study as it will

contribute to strategic knowledge on how pricing strategies influence consumer behavior

on procuring new products. It will also help them to know how many of their competitors

use the same pricing strategies and therefore know what do in order to position

themselves properly in the competitive marketing.

Aside this, the study will provide detail understanding on some factors that

influence everyday pricing strategy on consumer procurement decision and therefore they

will be able to adopt the right pricing strategy for their target market.

In addition, customers and the members of the public in general are equally going

to benefit from the research by getting to know the various pricing strategies that are

available. This will inform the customers on the right decision to make when procuring

new products and services.

The study will also be of great benefit to academicians who are into research by

providing them with yet another method of analyzing the pricing strategies and consumer

purchase decision variables. It can equally be useful to researchers who will go into

further research in related areas of study.

1.7 Scope of the Study

The scope of this study covers entire staff of Adamore Nigeria Ltd in Kaduna

branch office and some of their notable customers in Kaduna metropolis. Questionnaires

were distributed at the Kaduna branch office, to elicit the necessary data on the effects of

pricing strategy and factors that influence consumer behavior on pricing strategies on

8
 new products. The study took place between January and March 2021. The study was

delineated within Adamore Nigeria Ltd, Kaduna branch office.

1.8 Definition of Terms

i. Behaviour: Human conduct relative to social norms.

ii. Consumer: One who, or that which consumes.

iii. Effect: The result or outcome of a cause.

iv. New: Recently made or created

v. Pricing: The act of setting a price or the level at which a price is set

vi. Product: A commodity offered for sale. Anything that is produced

vii. Strategy: A plan of action intended to accomplish a specific goal.

9
 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter involves review of related literature and theoretical framework which

include concept of pricing strategies, differentiated pricing, product price and competitor’s

price, ways of changing prices, price perception, initiating price increase, empirical review and

theoretical fframework

2.2 Conceptual Framework

The conceptual review of this project work explains some sub-topics and areas

where this study derive its credence and these include understanding the term ‘concept of

pricing strategies’, and ‘the concept of new product’.

2.2.1 Concept of Pricing Strategies

Price is the one element of the marketing mix that produces revenue; the other

elements produce costs. Prices are perhaps the easiest element of the marketing program to

adjust; product features, channels, and even communications take more time (Gimbel,

2005: 93–98). Price also communicates to the market the company’s intended value

positioning of its product or brand. A well-designed and marketed product can command a

price premium and reap big profits. But new economic realities have caused many

consumers to pinch pennies, and many companies have had to carefully review their

pricing strategies as a result (Trottman, 2004).

Pricing decisions are clearly complex and difficult, and many marketers neglect

their pricing strategies.2 Holistic marketers must take into account many factors in making

pricing decisions—the company, the customers, the competition, and the marketing

10
environment. Pricing decisions must be consistent with the firm’s marketing strategy and

its target markets and brand positioning.

The pricing strategies to be adopted by a company differ and are influenced by

some factors. Some of the pricing strategies that may be adopted when pricing decision is

made include among others:

i. Market penetration strategy: This is the process of setting a considerable price,

which will be affordable for the customer, thus there may be need for price

reduction in order to gain acceptance and thus create speed for the product in the

market.

ii. Market skimming: This involves setting a product price high initially and later

reducing the price to improve sales. It is used mostly for newly introduced products

so that consumers will not react negatively to an increased price to meet cost or

make profit. When the price is reduced, consumers may see it as an advantage for

more patronage. However, this strategy may not work for some products where

increased price is attributed to greater prestige and products with numerous

substitutes in the market.

iii. Loss leader pricing: Where a product is sold at a lower price probably at a loss in

order to attract customers who might then buy other items at normal price. It is

used when consumers resist prices charged by sellers and thus encourage sales of

other products by the producer.

11
 iv. Promotional pricing: Short term reduction in prices intended to attract increase

sales. It may be used during dull seasons e.g. the price of soft drinks during rainy

seasons is reduced to increase sales

v. Demand oriented: This strategy has to do with setting prices on the basis of

demand for the product. When this strategy is adopted, changes in demand will

have an effect on the price that that product.

vi. Competitive pricing: This involves setting prices on the basis of activities of

competitors. When using this strategy, the company must be sensitive to changes in

the market.

vii. Cost oriented pricing: This is a strategy that is based on cost of production. With

this strategy, the full cost of production is considered plus the margin, before price

is set.

2.2.2 Differentiated Pricing

Companies often adjust their basic price to accommodate differences in

customers, products, locations, and so on. Lands’ End creates men’s shirts in many

different styles, weights, and levels of quality. As of January 2010, a men’s white button-

down shirt could cost as little as N1200 or as much as N3500

Price discrimination occurs when a company sells a product or service at two or

more price that do not reflect a proportional difference in costs. In first-degree price

discrimination, the seller charges a separate price to each customer depending on the

intensity of his or her demand (Bailey, 2004).

In second-degree price discrimination, the seller charges less to buyers of larger

volumes. With certain services such as cell phone service, however, tiered pricing results

12
in consumers paying more with higher levels of usage. With the iPhone, 3 percent of users

accounted for 40 percent of the traffic on AT&T’s network, resulting in costly network

upgrades (Bailey, 2004).

In third-degree price discrimination, the seller charges different amounts to

different classes of buyers, as in the following cases:

i. Customer-segment pricing: Different customer groups pay different prices for the

same product or service. For example, museums often charge a lower admission fee

to students and senior citizens.

ii. Product-form pricing: Different versions of the product are priced differently, but

not proportionately to their costs. Evan prices a 48-ounce bottle of its mineral water

at N200 and 1.7 ounces of the same water in a moisturizer spray at N600.

iii. Image pricing: Some companies price the same product at two different levels

based on image differences. A perfume manufacturer can put the perfume in one

bottle, give it a name and image, and price it at N100 an ounce. The same perfume

in another bottle with a different name and image and price can sell for N300 an

ounce.

iv. Channel pricing: Coca-Cola carries a different price depending on whether the

consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending

machine.

v. Location pricing: The same product is priced differently at different locations

even though the cost of offering it at each location is the same. A theater varies its

seat prices according to audience preferences for different locations.

13
 vi. Time pricing:Prices are varied by season, day, or hour. Public utilities vary energy

rates to commercial users by time of day and weekend versus weekday. Restaurants

charge less to “early bird” customers, and some hotels charge less on weekends.

2.2.3 Product Price and Competitors Price

Dockner et al (2004:3) stated that when firms are engaged in strategic

competition, a higher speed of diffusion causes the individual firm to decrease the price,

thus competition either directly or indirectly has an influence on the price of products, but

vary from company to company, depending on the nature of the product and the industry in

which the company operates. In an industry where there are few producers of the product

or few market leaders, competition may not be the main factor to consider when setting

price, but for small and medium enterprises, who operate in an industry where there are

market giants already, their pricing policy will be influenced by the competitors price. An

example is the case of Nigerian Bottling Company, amongst the producers of other

products in Nigeria, this company indirectly regulates the price of soft drinks in Nigeria,

therefore the 7-Up Bottling company has to either set its price at par or below the price per

unit of the products of the Nigerian Bottling Company, so also any company that wants to

operate in that industry, for them to remain in business. In a study carried out by Dockner

et al (2004), the result of the analysis conducted shows that, in the case of strategic

(oligopolistic) competition, the speed of diffusion have an important influence on the

optimal pricing policy. It can be said therefore that in a monopolistic market, when

essentials are sold, competition is not considered when setting price.

2.2.4. Ways of Changing Prices

There are various ways of changing price, with respect to changes in cost of

production and changes in other intervening variables, which may at the long run affect the
14
long term objectives of the company, if not changed. Most organizations only pay attention

to the amount of money to be received from the customer, without taking a close look at

the quantity of goods delivered. One way to change price is to change the quantity of

money or goods and services to be paid by the buyer. Another way is to change the

quantity of goods or services provided by the seller (Monroe 2003:5).

This a major approach adopted by most of the producers of biscuits in Nigeria.

When the cost of production increased, an attempt was made to increase the price of a pack

of biscuit, from N5 to N10, and after discovering that the attitude of buyers changed

negatively, these producers resolved to reduce the quantity of biscuit and thereafter

introduced new products that sold for N10. The third way is to change the quality of goods

and services provided. This is a method adopted by most large companies in Nigeria, who

introduce new products with lower quality and at reduced price, thereby increasing the

price of the existing products, giving different categories of buyers the opportunity to

choose. When you need to determine what to charge for your products and services, there

are some common mistakes management should avoid. Some of these mistakes include:

i. Underselling: To set realistic prices, you need to be aware of all costs involved in

producing your product or service. This includes easy to track costs such as the

price of parts and supplies, as well as less tangible costs associated with the skills

and knowledge you bring to the Table. Some entrepreneurs set prices that do not

account for all of these expenses. They may forget to add in overhead such as

utilities or rent, or have difficulty putting a price tag on the value of their time. One

approach service-based businesses use to determine a fair rate for their offerings is

to set an hourly wage to charge for services. They then multiply this figure by the

15
 total number of hours it takes to complete a job to determine a project's overall

price.

ii. Following the competition: Basing your pricing structure on the competition's can

be dangerous because the costs competitors use to calculate prices may have little

relation to your own. They may pay suppliers less or more than you do, buy

different technology, and have larger or smaller marketing budgets. That said, it

does pay to know how much competitors charge so you can confirm that your

prices are realistic for the market. If you notice your figures are much lower than

competitors', check to be sure you haven't left something out of the pricing

equation.

iii. Competing on price: Setting prices solely to beat the competition is a shaky

proposition. You're bound to attract buyers this way, but they are unlikely to be

loyal customers. If low cost attracted them to your business, they may abandon

your company when a less expensive option comes along. A better approach is to

differentiate your business from competitors in other ways, such as superior

customer service, enhanced product features, or finer quality.

iv. Waiting too long to raise prices: Increased demand or the rising cost of supplies

may put you in the position of having to decide whether or not to raise prices. Some

business owners avoid increases because they fear customers will react negatively.

In many cases it's a better strategy to make regular, small price increases than to hit

customers with one large increase. In other words, a 10 percent price increase is

likely to draw more negative attention than two 5 percent increases.

16
 v. Dropping prices without changing delivery: Some clients may try to negotiate a

better deal from your company. This can put you in a difficult position, especially

if you run a service-based business. Delivering an agreed-upon order for a lower

price can inadvertently send the message that your initial prices were too high, and

all future business is open to price negotiation. A better approach is to agree to a

lower price, but change the delivery terms slightly. For example, if you're

negotiating the price for a three-month long technical installation, you might agree

to a lower project cost if the number of weekly meetings is reduced or monthly

reports are streamlined. Another option that makes sense for large orders is to

position lower rates as volume discounts.

vi. Setting random prices: Some customers may insist upon having an understanding

of how your pricing structure is designed, so it is critical to be able to justify the

prices you charge. In addition, unless you have a clear sense of how costs relate to

your prices, it will be difficult for you to identify when the right time is to adjust

the amount you charge.

2.2.5 Price Perception

Price perception greatly affects a consumer's decision to purchase a product. The

perception of price explains information about a product and provides a deep meaning for

the consumers (Kotler and Keller, 2016). Hence, price is an important factor in the

purchasing decision, especially for products that are frequently purchased, and in turn,

influences the choices of which store, product, and brand to patronize (Faith and Agwu,

2014). Consumers are very rational when it comes to judging what benefits they wish to

get from buying products or services they pay for (Al-Mamun and Rahman, 2014).

17
 The price of a product is divided into three dimensions: fair price, fixed price, and

relative price. Fair price refers to the adjustment of a price that offers a combination of

quality and appropriate services at a reasonable price (Kotler and Keller, 2016). Fixed

price is a set price for all buyers (Kotler and Keller, 2016). Relative price is the price set

in accordance with the quality and service provided by the seller (Kotler and Armstrong,

2014). Research carried out by Komaladewi and Indika (2017) indicated that most

respondents consider price as an important factor influencing their purchase decisions,

similar to the finding of Djatmiko and Pradana (2015) and Termsnguanwong (2015).

Although the majority of consumers are rather sensitive to price, they also

consider other factors, such as brand image, store location, service, value, and quality

(Tjiptono, 2008). Along the lines of the conventional saying “You get what you pay for,”

many consumers use price as an indicator of quality (Lien et al., 2015). Tajdar et al.

(2015) recommended that a brand must come with a reasonable price. According to

Tjiptono (2008), price is an important element as it affects a brand’s image and

positioning strategy. Consumers tend to associate price with product level, such that a

perceived high price reflects high quality and vice versa. Furthermore, Buehler and

Halbherr (2017) stated that price is one factor that helps improve brand image.

2.2.6. Initiating Price Increases

A successful price increase can raise profits considerably. If the company’s profit

margin is 3 percent of sales, a 1 percent price increase will increase profits by 33 percent if

sales volume is unaffected. A major circumstance provoking price increases is cost

inflation. Rising costs unmatched by productivity gains squeeze profit margins and lead

companies to regular rounds of price increases.

18
 Companies often raise their prices by more than the cost increase, in anticipation

of further inflation or government price controls, in a practice called anticipatory pricing.

Another factor leading to price increases is over-demand. When a company

cannot supply all its customers, it can raise its prices, ration supplies, or both. It can

increase price in the following ways, each of which has a different impact on buyers.

i. Delayed quotation pricing: The Company does not set a final price until the

product is finished or delivered. This pricing is prevalent in industries with long

production lead times, such as industrial construction and heavy equipment.

ii. Escalator clauses: The Company requires the customer to pay today’s price and all

or part of any inflation increase that takes place before delivery. An escalator clause

bases price increases on some specified price index. Escalator clauses are found in

contracts for major industrial projects, such as aircraft construction and bridge

building.

iii. Unbundling: The company maintains its price but removes or prices separately

one or more elements that were part of the former offer, such as free delivery or

installation. Car companies sometimes add higher-end audio entertainment systems

or GPS navigation systems as extras to their vehicles.

iv. Reduction of discounts: The company instructs its sales force not to offer its

normal cash and quantity discount.

2.3 Empirical Review

The empirical review of literature here looks at the previous works done by other

researchers on the effect of pricing strategies on procuring new product à-vis taking the

Adamore Nigeria Ltd Kaduna into consideration.

19
 An effective pricing strategy ought to mirror a cohesive pricing structure that

facilitates the achievement of business objectives by ensuring the value of a

product/service offering compared to the value offered by competitors (Meehan,

Simonetto, Montan and Goodin, 2011). A good pricing strategy should therefore direct an

organization’s core behaviour as well as its peripheral communiqué to the market for all

pricing-related activities (Meehan et al., 2011).

According to a study carried out by Cant et al (2016) pricing strategy must be:

i. Based on valid data and fact rather than on narratives and speculations therefore

organizations need to evaluate key areas and make an informed decision based on

the valid findings of their investigation;

ii Lined up with organizational objectives as well as other functional policies and

structures and

iii. Supple, adaptive, reactive and carefully observed.

Most organizations, according to Docters et al., (2004) use more than one pricing

strategy which makes it is even more flexible. There are a lot of strategies/policies a firm

could adopt ranging from competitive based, value based pricing, prestige, dynamic,

predatory, differential, psychological pricing etc. to penetration and skimming for new

products.

Some consumers sometimes are exposed to a lot of information online which

affects their price sensitivity and as well shortens the product lifecycle of the product

online (Baye et al 2007). It is also unveiled that the more competitors there are for a certain

product, the more elastic the product becomes and the more price sensitive, consumers

become towards the product.

20
 Price is the most flexible element of marketing strategy in that pricing decisions

can be implemented relatively quickly in comparison with the other elements of marketing

strategy (Docters et al., 2004; Agwu and Carter 2014). Customer-perceived value comes

from evaluating the relative rewards and sacrifices associated with the offering thus

customers are inclined to feel equitably treated if they perceive that the ratio of their

outcome to International Journal of Research in Management, Science & Technology

inputs is comparable to the ratio of outcome to inputs experienced by the company (Oliver

& DeSarbo, 1988)

A) Pricing objectives: Xenfeldt (1983) cited in Avlonitis and Indounas (2005) stated that

pricing objectives provide reactions for action, ―to have them is to know what is

expected and how the efficiency of operations is to be measured‖. Objectives can be short

term and long term. According to Weber (2000) a firm ought to decide upon the

objectives of pricing before determining the price itself and some of the main objectives

are as follows:

i. Achieve target return on investment or on net sales: Kotler and Armstrong

(2008) described this as building a price structure designed to provide enough

return on capital used for specific products so that the sales revenue will yield a

predetermined average return for the entire firm. This objective is usually used by

most firms for short run periods (Ezeudu 2005) whereby a percentage markup on

sales is set. This set percentage covers anticipated operating cost plus desired

profit for the year.

ii. Stabilize prices: Another pricing objective could be to stabilize prices. This is

mostly found in industries where there is a market leader and prices fluctuate

21
 frequently. "Price leadership does not necessarily imply that the objective of

stability is reached by having all firms in the industry charge the same price as

that set by the leader (Stanton 1981). It only means that some regular relationships

exist between the leader‘s price and those charged by other firms" (Sean 2005).

iii. Maintain or improve target share of the market: Most companies have their

pricing objective to be to increase or maintain market share (Stanton 1981).

Increased market share is a result of effective long term pricing strategies. Any

firm who has this as a pricing strategy must be ready to operate and plan on the

long run. It is quite different from target return which might be deceptive because

a firm could be earning but losing market share gradually (Lancaster, et al., 2002).

iv. Meet or prevent competition: Lancaster, et al., (2002) stated that organizations

may try to meet up with competition by reducing prices or even prevent it by

adopting what is called 'follow the leader' policy (a policy whereby companies

price products based on competitor‘s price).

v. Maximize profits: This pricing objective is used by countless firms. The problem

with this goal is that it is often connected in the public mind with profiteering,

high price and monopoly although there is nothing wrong with it (Ezeudu 2005).

If the profit is high due to short supply in relation to demand new capital will be

attracted into the field.

B) Price Setting Decision Process: The step by step process presents a logical approach

for setting price. Price setting decision process International Journal of Research in

Management, Science & Technology

22
C) Importance of Price Decisions: According to Munroe (2003), pricing a product or

service is one of the vital decisions management makes. Pricing has been viewed as the

major pressure point for managerial decision making hence its importance. Munroe

examined the environmental pressures that allowed for an increased pressure on the

importance of pricing. The importance of pricing can be examined with faster

technological progress, proliferation of new products, increased demand for service,

increased global competition, the changing legal environment, and economic uncertainty.

D) Three Levels of Pricing Management: The pricing puzzle is more manageable when

taken in pieces. Price management issues, opportunities, and threats fall into three distinct

but closely related levels. The three level of pricing management according to Michael

and Robert (1992) are as follow:

(1) Industry supply and demand

Etzel et al (1997) stressed that this is the highest level of price management; the

basic laws of economics come into play. Changes in supply (plant closings, new

competitors), demand (demographic shifts, emerging substitute products), and

costs (new technologies) have very real effects on industry price levels. It is the

broadest and most general level of price management. The objective is to

determine the current and expected future state of key market place dynamics in

order to establish pricing strategies and deal with other key strategic issues

(Walter; et al., 2008). Managers who examine prices in this context must

understand the pricing 'tone' of the market (Michael and Robert 1992). This is the

overall direction of price pressure whether up or down and the critical

marketplace variable fueling that pressure. This will help managers to predict and

23
 exploit broad price trends and foresee likely impact of actions on industry price

levels.

(2) Product/ market strategy

This is concerned with how customers‘ perceive the benefit a product offers and

related services across available suppliers. It is focused on getting the right

position for price in relations to competitor‘s price at the product, market and

segment. The product/ market strategy issues mirror a marketer‘s view on how

customers compare prices and benefits of one product against competitive

offerings (Roegner et al 2005). If a product delivers more benefit to customers,

then the com

pany can charge a higher price versus its competition (Michael and Robert 1992).

All that is needed is an understanding of what factors of the product and service

package customers perceive as important, how the company and its competitors

stack up against this factors and how much consumers are willing to pay for

superiority in those factors.

(3) Transactional strategy

The transactional level is the most granular level of price management and the

critical issue is how to manage the exact price charged for each transaction or

customer (Walter; Michael; and Craige 2008). The transaction price issues reflect

the sales representatives concerns for coming up with the right price for each sale

(Roegner et al 2005). This level focuses on the exact price that each customer pays

including discounts, payments terms and incentives (Walter; Michael; and Craige

2010). It is the most complicated and expansive level of price management. At this

24
 last level of price management, the critical issue is how to manage the exact price

charged for each transaction i.e., what base price to use, and what terms, discounts,

allowances, rebates, incentives, and bonuses to apply (Michael and Robert 1992).

2.4 Theoretical Framework

Price theory is concerned with explaining economic activity in terms of the

reaction and transfer of value, which includes the trade of goods and services between

different economic agents (Tellis 1986). According to Friedman (1990), it is the

explanation of how relative prices are determined and how prices function to coordinate

economic activity. The author further outlined two reasons why we must understand

pricing theories.

The first reason to understand price theory is to understand how the society

around you works. The second reason is that an understanding of how prices are

determined is essential to an understanding of most controversial economic issues while a

misunderstanding of how prices are determined is at the root of many, if not most,

economic errors. According to Nagle and Holden (1995), a market economy is

coordinated through the price system. Costs of production ultimately, the cost to a worker

of working instead of taking a vacation or of working at one job instead of at another, or

the cost of using land or some other resource for one purpose and so being unable to use

it for another are reflected in the prices for which goods are sold.

The value of goods to those who ultimately consume them is reflected in the

prices purchasers are willing to pay. If a good is worth more to a consumer than it costs

to produce, it gets produced; if not, it does not. Having examined the relevance of price

theories, other price theories are explained below:

25
A) Naive pricing theory: Naive price theory is grounded on the assumption that price will

stay the same. The theory states that the only thing determining tomorrow's price is today's

price. Naive price theory is a perfectly natural way of dealing with prices if you do not

understand what determines them (Friedman 1990). The use of this theory is least plausible

because prices change. Just as it makes very little sense to assume that as a baby grows

older he/she remains the same size, it makes no more sense to assume that the market price

of a good remains the same when you change its cost of production, its value to potential

purchasers, or both.

One must understand the causal relations involved. According to Friedman

(1990), although the theory may have errors, the alternative to correct economic theory is

not doing without theory (sometimes referred to as just using common sense) but the

alternative to correct theory is incorrect theory.

B) Game pricing theory: According to Ezeudu (2005), it is a collection of tools for

predicting outcomes of a group of interacting agents where an action of a single agent

directly affects the payoff of other participating agents. It is the study of multi-person

decision problems (Gibbons 1992). It could also be referred to as a bag of analytical tools

designed to help us understand the phenomena that we observe when decision-makers

interact (Osborne and Rubinstein 1994). Myerson (1997) defines it as the study of

mathematical models of conflict and cooperation between intelligent rational decision-

makers.

According to Diamantopoulos (1991), game theory studies interactive decision-

making. There are two key assumptions underlying this theory:

26
i. Each player in the market acts on self-interest. They pursue well-defined

exogenous objectives; i.e., they are rational. They understand and seek to

maximize their own payoff functions.

ii. In choosing a plan of action (strategy), a player considers the potential

responses/reactions of other players. She takes into account her knowledge or

expectations of other decision makers’ behavior; i.e., the reasons strategically. A

game describes a strategic interaction between the players, where the outcome for

each player depends upon the collective actions of all players involved (Bolton

and Lemon 1999).

C) Arbitrage pricing theory: Contemporary, there are two theories of portfolio choices

with reference to which risk diversification is more dominant i.e. Capital Assets Price

Model (CAPM) and Arbitrage Price Theory (APT).

The APT model states that the forecasted rate of return on assets depends on the

unpredictable nature of macroeconomic variables which points out that factor risk takes

more significance in assets pricing (Holbrook 1994). APT is comparatively a moderate

diverse technique for analyzing the assets prices model.

APT model assumes that the stock prices were influenced partially and

uncorrelated with most of the macroeconomics variables and these variables are not

multi-collinear with each other. APT defines that expected return on stock prices is

composed on the capital gain plus the realization of risk premium (macroeconomics

variables risk) during the course time, (Walter et al., 2011).

D) Consumer theory: Consumer theory is concerned with how a rational consumer

would make consumption decisions (Martijn 2011). The consumer theory arises because

27
the consumer‘s choice sets are assumed to be defined by certain prices and the

consumer‘s income or wealth.

There are certain assumptions for this theory. The assumptions as stated by

Lichtenstein et al., (1993) can be seen below:

The assumption of perfect information is built deeply into the formulation of this

choice problem, just as it is in the underlying choice theory (Blythe 2005). Some

alternative models treat the consumer as rational but uncertain about the products, for

example how a particular food will taste or how well a cleaning product will perform.

Some goods may be experience goods which the consumer can best learn about by trying

the good. In that case, the consumer might want to buy some now and decide later

whether to buy more. That situation would need a different formulation. Similarly, if the

agent thinks that high price goods are more likely to perform in a satisfactory way that,

too, would suggest quite a different formulation.

i. Agents are price-takers: The agent takes prices as known, fixed and

exogenous. This assumption excludes things like searching for better

prices or bargaining for a discount.

ii. Prices are linear: Every unit of a particular good ‗x‘ comes at the same

price ‗px‘ (Levin et al 2004). This excludes quantity discounts (though

these could be accommodated with relatively minor changes in the

formulation).

iii. Goods are divisible: means that the agent may purchase good x in any

amount she can afford (Mazumdar and Monroe 1990). Note that this

divisibility assumption, by itself, does not prevent us from applying the

28
 model to situations with discrete, indivisible goods. For example, if the

commodity space includes automobile of which consumers may buy only

an integer number, we can accommodate that by specifying that the

consumer‘s utility depends only on the integer part of the number of

automobiles purchased. In these notes, with the exception of the theorems

that assume convex preferences, all of the results remain true even when

some of the goods may be indivisible.

Furthermore, there are two main features of the consumer theory:

preferences and constraints, and these two theories interact to produce

choices.

iv. The Budget Constraint: Consumer‘s budget constraint identifies the

combinations of goods and services the consumer can afford with a given

income and given prices (Reynolds 2005). Two factors can cause a change

in the budget constraint and these factors are changes in income and

changes in price (Munroe 2003).

v. Preferences: It is assumed that consumers have preferences that they are

trying to satisfy, so as to maximize their personal satisfaction (Rohani and

Nazim 2012). In order to create a model of consumption behavior, certain

assumptions about people‘s preferences have to be made:

A) Comparability (given any two bundles, you can say ―better,‖

―worse,‖ or ―indifferent‖). More is better (if one bundle has more of a

good than another, and no less of any other goods, then it‘s a preferable

bundle).

29
B) Transitivity (if A is better than B, and B is better than C, then A is better

than C).

30
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter looks at the design of the study, population of the study, sample and

sampling technique, method of data collection, instrument of data collection and method

of data analysis.

3.2 Design of the Study

Survey research design was adopted for this study. According to Shaughnesby,

Harps and Andaugy (2011), survey research is often used to assess true opinion and

feeling of individuals known as respondents. The survey method is used because it allows

a large sample size of the population whose findings can be generalized unlike in-depth

interview or focus group discussion methods.

3.3 Population of the Study

The population of the study comprises only the 15 staff members of Adamore

Nigeria Ltd and its 10 selected customers in Kaduna. The total number of respondents

used for the study was 25 people.

3.4 Sample and Sampling Technique

The stratified simple random sampling technique was used to draw sample of 25

respondents from the sample size. The sample was drawn from among the different

categories of customers in Kaduna metropolis which comprise male and female. The

researcher and his assistant administered questionnaires to the staff members and selected

customers.

31
3.5 Method of Data Collection

The researcher used questionnaires to collect data from the respondents. He

administered 35 questionnaires to the respondents under study and thereafter, only 25

questionnaires which duly filled were retrieved from the respondents.

Questionnaire was used to source for primary data. Questionnaire as a method of

data collection was used because it enables respondents to feel free to respond to

questions at their convenient time and place. In addition to this, the researcher also

collected data from secondary sources like the Internet, textbooks, newspapers,

magazines, academic projects etc in order to buttress the points raised in the project.

3.6 Instrument of Data Collection

The instrument used to collect data for this study was the questionnaire. The

questionnaire contains two sections. Section ‘A’ is on personal data of the respondent

which comprises three items: marital status of the respondents, academic qualifications

and sex.

Section ‘B’ is on researcher question where the respondents expressed their views

about the questions raised in the study. The respondents are expected to express their

feelings and opinion using the Likert method.

The Likert five (5) point rating scale was used to guide the respondents’

decisions. Thus:

Strongly Agree (S.A.) = 5 points

Agree (A) = 4 points

Undecided (UD) = 3 points

Disagree (D) = 2 points

Strongly Disagree (S.D.) = 1 point

32
 Likert method is used because its simplicity to display analysis of data collected

using mathematical and statistical method (mean).

3.7 Methods of Data Analysis

Data collected are analyzed using quantitative method of data analysis (mean). In

analyzing data quantitatively, mathematical and statistical based methods, table and mean,

were used to present data. The quantitative method of data analysis is used in the study

because it intends to generate numerical data which are quantitative in nature with high

level of precision and accuracy.

33
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction

This chapter presents: Data presentation, Analysis of data, interpretation of data and

Discussion of findings.

4.2 Data Presentation

Section A: Presentation and analysis of demographic data of respondents

Table 1: Sex of the Respondents

Sex Frequency Percentage

Male 18 72

Female 7 28

Total 25 100%

Source: Field work 2021

The table on sex of the respondents shows that the majority of the respondents52.5% are

male while 47.5% are female. This shows that the majority of the respondents are male.

34
Table 2: Age of the respondent

Age Frequency Percentage

25 years -35 10 40

36- 45 years 8 32

46 – 55 years 6 24

56 – 65 years 1 4

Total 25 100

Source: Field work 2021

The table on age of the respondents shows that the majority of the respondents (35%) falls

between the age of 36 – 45 years, followed by 25% falls between the age 26 – 35 years,

followed by 17.5% falls 46 – 55 years, followed by 5% falls 56 – 65% while the least

respondents (2.5%) falls between the age of66 – 76 years.

Table 3: Marital Status of the Respondents

Marital Status Frequency Percentage

Married 15 60

Single 10 40

Divorcee - -

Total 25 100

Source: Field work 2021

The table on marital status of the respondents shows that the majority the respondents

(53.5%) are married, 40% of the respondents are not married while 6.5% are divorcees
35
 Table 4: Academic Qualification of the respondents

Academic Qualification Frequency Percentage

HND/BA/BSC 19 76

NCE/OND 6 24

Pry/SSCE/GCE - -

Total 25 100

Source: Field work 2021

The table on academic qualification of the respondents shows that the majority the

respondents (52.5%) are uneducated, 20% have Pry/SSCE/GCE, 25% have NCE/OND

while 2.5% of the respondents have HND/BA/BSC.

36
 Table 4: Contingency table showing relationship between the effect of pricing strategies

and the new products in Adamore Nigeria Ltd

S/ STATEMENTS SA A UD D SD Total
N

1 Improve the value 15 5 1 2 2 25

of the new
products in the (10.48) (3.22) (2.23) (3.43) (5.65)
eyes of customers
2 There is rise in 18 3 1 1 2 25
profit margin of
the company (10.48) (3.22) (2.23) (3.43) (5.65)

3 Consumers refuse 2 3 4 5 11 25
to patronize the
new products (10.48) (3.22) (2.23) (3.43) (5.65)

4 There is rise in 17 3 2 2 1 25
demand of the new
products (10.48) (3.22) (2.23) (3.43) (5.65)

5 There is sharp 1 2 3 7 12 25
decline in the
demand of the new (10.48) (3.22) (2.23) (3.43) (5.65)
products
TOTAL 52 16 11 17 28 124

Source: Field work 2021

The results are presented and interpreted in the table 9 using mean statistics and

the hypothesis was tested using the chi square statistics at 0.05 level of significance.

37
 SECTION ‘B’: RESEARCH QUESTIONS

Research Question 1:

What are the effects of pricing strategies on the new products in Adamore Nigeria Ltd?

TABLE 5

s/n Item 5 4 3 2 1 Mean Remark

SA A UD D SD

1. Improve the value of the new 15 5 1 2 2 4.16 V. High

products in the eyes of customers
2. There is rise in profit margin of the 18 3 1 1 2 4.36 V. High
company
3. Consumers refuse to patronize the 2 3 4 5 11 2.2 Low
new products
4. There is rise in demand of the new 17 3 2 2 1 4.32 V. High
products
5. There is sharp decline in the demand 1 2 3 7 12 1.8 V. Low
of the new products
Source: Field work 2021

Table 1 shows that the majority of the respondents strongly agreed thatthe effects

of pricing strategies on the new products include to improve the value of the new products

in the eyes of customers; rise in profit margin of the company; rise in demand of the new

products.

However, majority of the respondents strongly disagree that the effects of pricing

strategies on the new products make consumers refuse to patronize the new products and

lead to sharp decline in the demand of the new products.

Research Question 2:

To what extent have pricing strategies affect customer’s behavior on procuring new

products in Adamore Nigeria Ltd?

38
 Table 6

s/n Item 5 4 3 2 1 Mea Remark

SA A UD D SD n

6. Affect customers’ psychology about the 2 2 5 6 10 2.2 Low

new products
7. Affect choice and taste of the new products 11 6 6 1 1 4.0 V. High

8. Customers prefer alternative products 1 2 4 6 12 1.96 V. Low

9. Affect customers’ purchasing power 17 2 2 1 3 4.08 V. High

10. Improve customers’ loyalty of the new 14 4 3 2 2 4.04 V. High

products

Source: Field work 2021

Table 2 shows that the majority of the respondents strongly agreed that the pricing strategies have

affected customers’ choice and taste, their purchasing power and loyalty of the new products.

While the majority of the respondents strongly disagreed thatthe pricing strategies have

affected customers’ psychology and the customers’ preference for alternative products.

Research Question 3:

What are the factors that can influence the choice of pricing strategies by Adamore Nigeria

Ltd on procuring new products?

39
TABLE 7

s/n Item 5 4 3 2 1 Mean Remark

S A UD D SD

11. Customers’ demand schedule 15 5 3 1 2 4.32 V. High

12. Breaking into market 14 4 4 2 1 4.12 V. High

13. Competitor’s price or retention 15 4 2 3 1 4.16 V. High

14. Profit maximization 18 2 1 2 2 4.28 V. High

15. Control market 18 4 2 1 - 4.56 V. High

Source: Field work 2021

Table 3 shows that the majority of the respondents strongly agreed that the

factors that can influence the choice of pricing strategies by the company on procuring new

products include customers’ demand schedule; breaking into market; competitor’s price or

retention; profit maximization and control market.

Research Question 4:

What ways can Adamore Nigeria Ltd attract customers to accept the pricing strategies on

procuring new products?

40
 TABLE 8

s/n Item 5 4 3 2 1 Mea Remark

S A UD D SD n

16. Giving discount 16 4 1 3 1 4.24 V. High

17. Lower price tag 15 5 3 1 1 4.28 V. High

18. Offer of gifts 16 5 2 1 1 4.36 V. High

19. Consistent advertisement of the 11 7 3 2 2 3.92 High

new products
20. Good human relations 10 5 3 4 3 3.6 High

Source: Field work 2021

Table 4 shows that the majority of the respondents strongly agreed that the ways

the company can attract customers to accept the pricing strategies on procuring new

products include giving discount; lower price tag; offer of gifts; commission and good

human relations.

4.3 Test of Research Hypothesis

H0: There is no significant relationship between the effect of pricing strategies and

procuring of new products in Adamore Nigeria Ltd

H1: There is significant relationship between the effect of pricing strategies and procuring of

new products in Adamore Nigeria Ltd

Table 9: Chi-Square Analysis of the Relationship between the effect of pricing strategies

and procuring of new products in Adamore Nigeria Ltd.

41
 2 2 2 2
O E O–E (O – E) (O – E) /E X cal Df X crit
15 10.48 4.52 20.43 1.94 59.53 16 12.026

18 10.48 7.52 56.55 5.39

2 10.48 -8.48 71.91 6.86

17 10.48 6.52 42.51 4.05

1 10.48 -9.48 89.87 8.57

5 3.22 1.78 3.17 0.98

3 3.22 -0.22 0.05 0.01

3 3.22 -0.22 0.05 0.01

3 3.22 -0.22 0.05 0.01

2 3.22 -1.22 1.488 0.66

1 2.23 1.23 1.51 0.67

1 2.23 -1.23 1.51 0.67

4 2.23 1.77 3.13 1.40

2 2.23 -0.23 0.053 0.02

3 2.23 0.77 0.59 0.26

2 3.43 -1.43 2.04 0.59

1 3.43 -2.43 5.90 1.72

5 3.43 1.57 2.46 0.71

2 3.43 -1.43 2.04 0.59

7 3.43 3.57 12.74 3.71

2 5.65 -3.65 13.32 2.35

2 5.65 3.65 13.32 2.35

42
 11 5.65 5.35 28.62 5.06

1 5.65 -4.65 21.62 3.82

12 5.65 6.35 40.32 7.13

59.53

The analysed data in table 9 revealed that the calculated value (X2cal) was 59.53,

while the critical table value (X 2crit) was 21.026 at 0.05 level of significance and 16 degree

of Freedom (df). Since the X2cal(59.53) was greater than X2crit(12.026) at 0.05 level of

significance and 16 degree of freedom, the null hypothesis was rejected and the alternative

accepted. This implies that there is a significant relationship between the effect of pricing

strategies and procuring of new products in Adamore Nigeria Ltd.

4.3 Data Interpretation

From the analysis of research question one it is clear that majority of the

respondents strongly agreed that the effects of pricing strategies on the new products

include to improve the value of the new products in the eyes of customers; rise in profit

margin of the company; rise in demand of the new products.

However, majority of the respondents strongly disagree that the effects of pricing

strategies on the new products make consumers refuse to patronize the new products and

lead to sharp decline in the demand of the new products.

Research question two analysis reveals the majority of the respondents strongly

agreed that the pricing strategies have affected customers’ choice and taste, their

purchasing power and loyalty of the new products.

43
 While the majority of the respondents strongly disagreed that the pricing strategies

have affected customers’ psychology and the customers’ preference for alternative

products.

Research question three findings revealed that the majority of the respondents

strongly agreed that the factors that can influence the choice of pricing strategies by the

company on procuring new products include customers’ demand schedule; breaking into

market; competitor’s price or retention; profit maximization and control market.

Research question four findings revealed that the majority of the respondents

strongly agreed that the ways the company can attract customers to accept the pricing

strategies on procuring new products include giving discount; lower price tag; offer of

gifts; commission and good human relations.

4.4 Discussion of Findings

From the analysis of research question one, it is clear that majority of the

respondents strongly agreed that the effects of pricing strategies on the new products have

led to improve the value of the new products in the market; rise in profit margin of the

company and of course, rise in demand of the new products. This is in line with Danish et

al., (2015) when they stated that pricing is the setting up of a value to a product or service

and is the result of a complex set of calculations, research and understanding and risk

taking ability. The effects of pricing strategies on the new products are clearly manifested

in the value of the new products, rise in profit margin of the company and the customers

are interested in buying of the new products.

44
 However, the analysis again shows that the effects of pricing strategies on the new

products do not make consumers refuse to patronize the new products and again do not

lead to sharp decline in the demand of the new products.

Research question two analysis though reveals that the pricing strategies have

affected customers’ choice and taste, their purchasing power and loyalty to the new

products, the pricing strategies have not affected customers’ psychology and the

customers’ preference for alternative products. This confirms what Al-Mamun and

Rahman, (2014) when they stated that consumers are very rational when it comes to

judging what benefits they wish to get from buying products or services they pay for.

Research question three findings revealed the factors that can influence the choice

of pricing strategies by the company on procuring new products. These include customers’

demand schedule; breaking into market; competitor’s price or retention; profit

maximization and control market. Finding is in line with Faith and Agwu, (2014) that the

price is an important factor in the purchasing decision, especially for products that are

frequently purchased, and in turn, influences the choices of which store, product, and brand

to patronize.

Research question four findings revealed that the ways the company can attract

customers to accept the pricing strategies on procuring new products include giving price

discount; lower price tag; offer of gifts; consistent advertising of the new products and

good human relations. This also confirms what Al-Mamun and Rahman, (2014) when they

stated that consumers are very rational when it comes to judging what benefits they wish to

get from buying products or services they pay for.

45
 CHAPTER FIVE

CONCLUSION, SUMMARY AND RECOMMENDATION

5.1. Introduction

This chapter deals with summary, conclusion, limitation of study and recommendations

5.2 Summary

The study was aimed at assessing the effect of pricing strategies in purchasing new

products in Adamore Nigeria Limited, Kaduna Branch. In the background to the study

some previous research works were reviewed. Conceptual framework and empirical study

from related studies were also reviewed. The study adopts price theory to explain the effect

of pricing strategies in purchasing new products in Adamore Nigeria Limited. Thirty- five

(35) questionnaires were administered to the respondents to elicit their views and opinions

on the subject matter and twenty-five questionnaires were later retrieved. The method used

was survey research and data collected were analyzed using descriptive statistic (mean),

thus making the result quantitative.

Finally, based on the study, the researcher finds that the effects of pricing strategies

on the new products have led to improve the value of the new products in the market; rise

in profit margin of the company and of course, rise in demand of the new products.

Finding has also shown that effects of pricing strategies on the new products have affected

customers’ choice and taste of Adamore new products in the market, raised their

purchasing power and loyalty to Adamore new products, the pricing strategies have not

affected customers’ psychology and the customers’ preference for alternative products.

46
5.3 Conclusion

From the findings of this research, the following conclusions were made based on

the four research questions, thus:

i. The effects of pricing strategies on the new products have led to improve the value

of the new products in the market; rise in profit margin of the company and of

course, rise in demand of the new products. This is in line with Danish et al.,

(2015) when they stated that pricing is the setting up of a value to a product or

service and is the result of a complex set of calculations, research and

understanding and risk taking ability. The effects of pricing strategies on the new

products are clearly manifested in the value of the new products, rise in profit

margin of the company and the customers are interested in buying of the new

products.

ii. The pricing strategies have positively affected customers’ choice and taste of

Adamore new products; their purchasing power and loyalty to the new products

has improved considerably as the pricing strategies have not affected their

psychology and preference for alternative products. This confirms what Al-

Mamun and Rahman, (2014) when they stated that consumers are very rational

when it comes to judging what benefits they wish to get from buying products or

services they pay for.

iii. The factors that can influence the choice of pricing strategies by the company on

procuring new products include customers’ demand schedule; breaking into

market; competitor’s price or retention; profit maximization and control market.

This finding is in line with Faith and Agwu, (2014) that the price is an important

47
 factor in the purchasing decision, especially for products that are frequently

purchased, and in turn, influences the choices of which store, product, and brand to

patronize.

iv. The ways the company can attract customers to accept the pricing strategies on

procuring new products include giving discount; lower price tag; offer of gifts;

consistent advertising of the new products and good human relations. This also

confirms what Al-Mamun and Rahman, (2014) when they stated that consumers

are very rational when it comes to judging what benefits they wish to get from

buying products or services they pay for.

5.4 Limitation of the Study

The researcher underwent some hindrances in the course of putting together

the materials for this study. One of the limitations was the epileptic power supply that

made it difficult for the researcher to access the Internet on several occasions.

Another hindrance was non-availability of adequate relevant materials for

the study which caused the researcher to travel far before getting some data in the

face of Covid 19 pandemic. The general lockdown of businesses also caused

hindrance as some of the staff members of Adamore were at home to observe social

distancing as a protocol of Covid 19 pandemic.

The uncooperative attitude of some of the respondents at the point of filling

the questionnaires was also a limitation to the research work. Some of the respondents

were reluctant to give information as they expressed doubt and fear to provide

information or response to the questionnaire until they were convinced that the

48
 information given would be used purely for academic purpose and would be treated

with utmost confidentiality.

5.5 Recommendations

Based on the findings of this study, the following recommendations are made:

i. For Adamore to maximize its profit of new products, it should come up with particular

products that it can sell at lower prices in the market as compared to its competitors. As

noted consistency and standardization of the products need to be at its best at all times.

ii. Customer needs are dynamic and as a result, more innovations need to be introduced, to

cater for the diverse market segments.

iii. Adamore should continuously strive to offer their consumers price discounts, lower price

tag; offer of gifts; consistent advertising of the new products and good human relations as

these are ways consumers derive a form of appreciation from the company.

iv. There is a need for Adamore to undertake research to consider consumers’ needs and

interests in the pricing strategy process in order to boost levels of consumer loyalty.

v. More price promotions strategies should be adopted to retaining old and attracting new

consumers can be profitable.

vi. There is a need to enhance consumers pride and positive feelings by continuously

appreciating them. At all times Adamore should maintain good relationship with its

consumers as this builds loyalty and brand equity of the firm.

vii. For further study, similar research should be undertaken in other small private companies

in order to be able to generalize the findings. In addition, there could also be a study to

compare the effects of pricing on consumer behavior; consumer behavior influence

49
pricing strategies and what are the consumer behavior challenges affecting pricing

strategies across the major in private firms in the country.

50
 Reference

Al-Mamun, A. and Rahman, M.K. (2014). a Critical Review of Consumers’ Sensitivity to

Price: Managerial and Theoretical Issues. Journal of International Business and
Economics, 2 (2), 01-09
Agwu, J. (2013). The influence of Prior Beliefs, Frequency Cues, and Magnitude Cues of
Consumers‟ perceptions of Comparative Price data. Journal of Consumer
Research, 21, 219-235
Avlonitis, G. J. And Indounas, K. A. (2006). Pricing Practices of Service Organizations;
Journal of Services Marketing, 346–356
Ayozie, D. O. (2008) “The Role of Small Scale Industry in National Development in
Nigeria” ICAN Students’ Journal Jan/March 2008 Vol. 12, No. 1. pp 10-17.
Bolton, R. N., and Lemon, K. N. (1999). A Dynamic Model Of Customers‘ Usage Of
Services: Usage As An Antecedent And Consequence Of Satisfaction; Journal Of
Marketing Research, 36
Byan, X. and Moutinho, L. (2008). The Role of Brand Image, Product Involvement, and
Knowledge in Explaining Consumer Purchase Behaviour of Counterfeits Direct
and Indirect Effects. Research Memorandum, 77 (March), 1-34
Djatmiko, T. and Pradana, R. (2015). Brand Image and Product Price: Its Impact for
Samsung Smartphone Purchasing Decision. Procedia Social and Behavioral
Sciences, 221-227
Danish, R., Ahmad, A., & Ali, H. (2015). Factors Affecting Customer Retention in
Telecom Sector of Pakistan. American Journal of Marketing Research 1 (2), 28-36.
Dutta, S., Bergen, M., Levy, D., Ritson, M., & Zbaracki. M. (2002). Pricing as a strategic
capability. MIT Sloan Management Review, 43(3), 61-66.
Etzel, M. J., Walker, B. J. and Stanton, W. J. (1997). Marketing; 11th edition, Irwin
McGraw Hills, USA.
Ezeudu, I. J. (2005). Principles Of Marketing, Cecta Nigeria Limited, Enugu, Nigeria.
Faith, D.O. and Agwu, M.E. (2014). a Review of the Effect of Pricing Strategies on the
Purchase of Consumer Goods. International Journal of Research in Management,
Science & Technology, 2 (2), 88-102
Friedman, D. D. (1990). Price Theory: An Intermediate Text, Southern Prestige
Publishing
Hidalgo, P., Manzur, E., Olavarrieta, S. & Farias, P. (2008). Customer retention and price
matching: the AFPs case. Journal of Business Research, 61(6), 691-696

51
Hilton, R.W. (2005) “Managerial Accounting: Creating Value in a Dynamic Business
Environment” McGraw Hill New York.
Holbrook, M. B. (1994). The nature of customer's value: An axiology of service in
consumption experience. In R. T. Rust, & R. L. Oliver (Eds.), Service quality:
New directions in theory and practice (pp. 21–71). Thousand Oaks, CA: Sage
Publications.
Holden, R. K. and Nagle, T. T. (1998). Kamikaze Pricing; When Penetration Strategies
Run Amok, Marketers Can Find Themselves In A Dive-Bomb Of No Return.
Horngren, C.T., Foster G., & Datar S.M. (1996) “Cost Accounting: A Managerial
Emphasis” Prentice Hall, New Delhi.
Komaladewi, R. and Indika, D. (2017). A Review of Consumer Purchase Decision on
Low Cost Green Car in West Java, Indonesia. Review of Integrative Business &
Economics Research, 6 (2), 172-184
Kotler, P. and Armstrong, G. (2014). Principles of Marketing. 15th ed. New Jersey:
Pearson Prentice Hall
Kotler, P. and Keller, K.L. (2016). Marketing Management. 15ed. New Jersey: Pearson
Prentice Hall
Kotler, P. & Amstrong, G., Wong, V. & Saunders, J. (2001). Principles of Marketing,
Harlow, United Kingdom
Kotler, P. (2003). A Framework for Marketing Management. London, UK: Prentice Hall.
Kotler, P. and Armstrong, G. (2008). Principles Of Marketing; 12th Edition, Prentice Hall
Lien, C., Wen, M.J., Huang, L. and Wu, K. (2015). Online Hotel Booking: The Effects of
Brand Image, Price, Trust and Value on Purchase Intentions. Asia Pacific
Management Review, 20, 210-218
Michael, V. L. and Robert, L. R. (1992). Managing price gaining profit; Harvard business
review
Munroe, K. B. (2003). Pricing: making profitable decisions; 3rd edition, McGraw hill
companies, England.
Mazumdar, T. and Monroe, K. B. (1990). The Effects of Buyers‘ Intentions To Learn
Price Information On Price Encoding; Journal Of Retailing, volume 66.
Martijn, G. (2011). Pricing in the Digital World; Journal of Business Strategy, 32 (4), 4
11
Sean, H. L. (2005). An application of a five stage consumer behavior decision making
model: an exploratory study of Chinese purchasing of imported health food.
Stanton, W. J. (1981). Fundamentals of marketing; 6th edition, McGraw Hills Inc, USA
Tajdar, S., Ahmad, S., Ahmad, J. and Khan, A. (2015). Customers' Prescription of
Foreign versus Local Brands in the Pharmaceutical Industry of Peshawar
(Pakistan). Review of Integrative Business & Economics Research, 4 (2), 378-396
Tellis, G. J. (1986). Beyond the many faces of price: an integration of pricing strategies;
The Journal of Marketing, 50 (4), 146-60.
Temsnguanwong, S. (2015). OTOP Product Champion Marketing Strategy Model Which
are Selected the Best OPC 5-Star Product Approach of Chiang Mai Province: The
Fabric and Apparel Community, Thailand. Review of Integrative Business &
Economics Research, 4 (4), 259-276
52
Tjiptono, F. (2008). Strategic Pemasaran, Edisi 3. ANDI: Yogyakarta
Walter, B., Michael, M. and Craig, Z. (2011). The price advantage; 2nd edition, business
book summaries
Weber, T. A. (2000). Price theory in economics; the oxford handbook of price
management, oxford university press

53
 APPENDIX A

QUESTIONNAIRE

Department of Accounting
Faculty of Management Science
Kaduna State University,
Kaduna.
11th December, 2020.

Dear Respondent,

QUESTIONNAIRE

This questionnaire is designed by the researcher to assist in the collection of data

for a research work. The researcher is interested in assessing “The Effect of Pricing

Strategies on Procuring of New Products in Adamore Nigeria Ltd, Kaduna” and whatever

information that is given will be purely used for academic purpose and it would be treated

with utmost confidentiality.

Yours faithfully,

Isah Shaka Ehimeakhe

KASU/MPSCU/ACC/SMS/18/00189

54
 QUESTIONNAIRE

SECTION ‘A’

Section A: Presentation and analysis of demographic data of respondents

Table 1: Sex of the Respondents

Sex Frequency Percentage

Male

Female

Total

Source: Field work 2021

Table 2: Age of the respondent

Age Frequency Percentage

25 years -35

36- 45 years

46 – 55 years

56 – 65 years

Total

Source: Field work 2021

Table 3: Marital Status of the Respondents

Marital Status Frequency Percentage

Married

Single

55
 Divorcee

Total

Source: Field work 2021

Table 4: Academic Qualification of the respondents

Academic Qualification Frequency Percentage

HND/BA/BSC

NCE/OND

Pry/SSCE/GCE

Total

Source: Field work 2021

SECTION ‘B’: RESEARCH QUESTIONS

Research Question 1:

What are the effects of pricing strategies on the new products in Adamore Nigeria Ltd?

TABLE I

s/n Item 5 4 3 2 1 Mean Remark

SA A UD D SD

1. Improve the value of the new

products in the eyes of customers
2. There is rise in profit margin of the
company
3. Consumers refuse to patronize the
new products
4. There is rise in demand of the new
products
5. There is sharp decline in the demand
of the new products

56
Source: Field work 2021

Research Question 2:

To what extent have pricing strategies affect customer’s behavior on procuring new

products in Adamore Nigeria Ltd?

Table 2

s/n Item 5 4 3 2 1 Mea Remark

SA A UD D SD n

6. Affect customers’ psychology about the

new products
7. Affect choice and taste of the new products

8. Customers prefer alternative products

9. Affect customers’ purchasing power

10. Improve customers’ loyalty of the new

products

Source: Field work 2021

Research Question 3:

What are the factors that can influence the choice of pricing strategies by Adamore Nigeria

Ltd on procuring new products?

57
TABLE 3

s/n Item 5 4 3 2 1 Mean Remark

S A UD D SD

11. Customers’ demand schedule

12. Breaking into market

13. Competitor’s price or retention

14. Profit maximization

15. Control market

Source: Field work 2021

Research Question 4:

What ways can Adamore Nigeria Ltd attract customers to accept the pricing strategies on

procuring new products?

58
TABLE 4

s/n Item 5 4 3 2 1 Mea Remark

S A UD D SD n

16. Giving discount

17. Lower price tag

18. Offer of gifts

19. Consistent advertisement of the

new products
20. Good human relations

Source: Field work 2021

59