Effect Of Price And Price Changes On The Sales Of Consumer Goods

Project and Seminar Material for Marketing

Effect Of Price And Price Changes On The Sales Of Consumer Goods


Abstract


Consumers can be reactive. This situation is not abnormal in business, this is because, the purchasing power of consumers are not constant even as their needs are progressive. Price therefore is a potent determining factor for consumer decision. This study is undertaken to examine the effect of price and price changes on the sales of consumer goods. The survey research design was adopted for this study. This involved gathering data from a sample size to make a group inference. Using simple random sampling, 30 respondents, staff members of Mr. Biggs, Kaduma, were enrolled in the survey. The sample size is 30.The findings shows that 60% of the respondents were male while 40% are female. The result revealed that price determines the demand of consumer goods and serves as a strategy to gain competitive advantage. Price equally determines the revenue and sales volumes of consumer goods. The study recommended that management of Mr. Biggs should ensure that the pattern of their pricing aligns to customers’ purchasing power per time. Also, discount should be given to customer from time to time. This will attract more purchase and consequently increase their sale volume as well as profit.


Chapter One


Introduction

1.1 Background to the Study

Prices go by many names. It is all around us. The price of a worker is wages, incomes taxes are the price we pay for the privilege of making money. In economic theory, prices policy tends to be relegated to a secondary role and attention is devoted to other dimensions of competitive strategy. It is important to be clear what we mean by price.

According to Ode (2011), the term price simply means the amount of money that you actually pay in order to buy a good or service so that any relation between the buyer and seller is confined to the transaction itself. This definition is inadequate for marketing purposes because it ignores guarantees, after soles services, installation, maintenance, consultancy, delivery, credit, etc. which distinguish one transaction from the next but often “free” or included in the price.

Price in marketing is still broader than the economists conception. It is as much as the total product i.e the amount of money paid to acquire a good or service plus the cost of guarantees, after sales services, maintenance, consultancy, delivery, credit etc.

Price plays a central role in economy as a whole. It balance demand and supply, provide an incentive for new product distributes income between buyer and sellers, professionals consider price from two perspective which are consumer (suppliers or services of the product) and provider (services provided for a fee to product users). An organization that wants to provide a satisfactory marketing mix (product, price, place and promotion). The price of its product must be acceptable to target marketing members. Price has a direct impact on company profit and all other elements of the marketing mix. Thus, the price of a product can be on influence on how consumers perceive it and how prospective seller attempts to optimizing this return. He tries to deal with volume, cost and price but he cannot keep them all in the air at a time. If he increases the price of his product, his volume of sales will fall and if he reduces the price, the volume of sales will increase.

The main purpose of these study is to examine the activities of price and price change on the sales of consumer products in Mr. foods, it would however, highlight the problems and prospect of price changes in other to provide possible solutions that would be beneficial to the management.


1.2 Statement of the Problem

The issue of pricing decision and the effect of change in price is sensitive to both firms producing homogenous consumer goods and buyers of such products. On the part of the firms, it is only price that brings about revenue, as such a slight change in cost of production lead to price increment while the buyers on the hand, price is among the major determinant of buying or buying a product or services. In spite of the sensitivity of price, business organization tend to commit common mistakes in their pricing decision. This is evident in the way some organization frequently review their prices upwardly while others fixed their prices independently of other marketing mix element as well as their competitors. This has made so many firms in the consumer goods industry to close shop due to their inability to effectively compete. Hence, the effect of price change on the sales of consumer goods has cut the attention of business managers, captains of industries, consultants and scholars. As such the researcher sees the subject matter of this research worthy of investigation.


1.3 Objective of the Study

The central objective of the study is to examine the effect of price and price change on the sales of consumer goods.

The specific objectives are:

  1. To find out the effects of price policy on sales of consumers goods in Mr. Biggs.
  2. To examine how change in price affect the market share of Mr. Biggs.
  3. To examine the various price of strategies used by the organization in fixing pricing of consumer product of Mr. Biggs.
  4. To find out the effect of change in price on sales of consumer product of Mr. Biggs

1.4 Significance of the Study

The study will be beneficial to firms producing consumer products, especially as they utilize the finding of this study as a basis of their pricing policy. The study will equally contribute to knowledge as it will enhance the existing knowledge of the subject matter. The study will also serve as a reference materials to researchers undertaking similar study.


1.5 Research Question

The research questions that guided the research are:

  1. What are the effects of price policy on sales of consumer goods in Mr. Biggs?
  2. How does change in price affect the market share of Mr. Biggs.
  3. What are the various price strategies used by Mr. Biggs in fixing price of it’s consumer product.
  4. What is the effect of change in price on the sales of consumer goods in Mr. Biggs. Kaduna.

1.6 Scope of the Study

The study cover the examination of the effect of change in price of the sales of consumer products, as well as it effect on pricing policies of business organization, the study equally covers the examines of pricing strategies available to firm selling consumer products. The study cover the sales activities of Mr. Biggs from 2009 to 2011.


1.7 Definition of Terms

Marketing:

The performance of business activities that direct the flows of goods and services from the manufacture to the consumer.

Price:

Price refers to the monetary values of product.

PLC:

Public Limited Company.

Product:

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes objects, services, persons places, organization and ideas.

Service:

Is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of any thing. Its production may or may not be tied to a physical product.

Consumer value:

Is the different between the values the customer’s gains from owing and using a product and the cost of obtaining the product.

Customer satisfaction:

The extent to which a product perceived performance matches a buyer’s expectations. If the product does not perceive performance, the buyer is dissatisfied. If performances match or exceed expectations, the buyer is satisfied or delighted.

Manufacturer:

The owner of a factory or company that produced goods or services for sale to consumers.

Distribution:

The function of disbursing the goods manufactured or warehouse to the location where they will be consumed or received by consumers.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The study examines the effect of price and price change on the sales of consumer goods in Mr. Biggs. The research questions that guided the study were. What are the effect of price policy on sales consumer goods in Mr. Biggs? How does change in price affect the market share of Mr. Biggs. What are the various pricing strategies used by Mr. Biggs in fixing price of its consumer product? And what is the effect of change in price on the sales of consumer goods in Mr. Biggs.

The survey method was adopted as the research design 30 persons were selected out of the entire 150 staff of Mr. Biggs as the sample of study. The questionnaire constituted the instrument of data collection the mean (x) was used to analyze the findings obtained from the field. The analysis shows that price determines the demands of consumer goods and is also used to gain competitive advantage price affect Mr. Biggs products by gaining competitive advantages through their pricing policy while has improved their market share over the years. Mr. Biggs basically adopt demand based perceived pricing any as well as psychological and discount pricing strategy.


5.2 Conclusion

Price is an important tool in marketing as price change in any direction affects both the demand and supply of such product. change in price of consumer good down ward facilitate more purchases as such increases demand while upward reduces purchase as such reduce demand. This because is most consumer goods have close substitute which can easily lead to defection of consumer from one product to another. Hence the pricing policy of Mr. Biggs has being demand based and competitive pricing which has facilitate high sales volume and profitability which has help in no small ways to actualize the organizational goals and objectives


5.3 Recommendations

The following recommendations are made base on the research findings so as to facilitate the possibility of gaining competitive advantage through effective pricing policies.

  1. The management of Mr. Biggs most always ensure that the pattern of their pricing most be in accordance to what their customer can afford. This will always given their a competitive edge over other competitors.
  2. Discount should be given to customer from time to time. This will attract more purchase and consequently increase their sale volume as well as profit.
  3. In pricing formulation the issues of minimum wage has to be taken into cognizance in fixing price of consumer good to enhance high patronage and avoid defection from he products of Mr. Biggs to other close substituted.
  4. Management should ensure that price reflect quality so that customer will have a good Value for money spent. This will enhance patronage in no small way.
  5. Price must be consistent with the company pricing policies as such Mr. Biggs should set up a pricing unit under the marketing department to develop polices and establish or approve decisions concerning price change. This will help to maintain price that are reasonable to customers and profitable to the company.
  6. Management of Mr. Biggs must also consider the reaction of its customers to their price. This can be obtain through feedback from sales men.

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