Impact Of Multiple Pricing Strategies On Consumer Purchasing Behavior
The purpose of this study is to investigate the impact of multiple pricing strategies on consumer purchasing behavior, a case study of MTN and Globacom Nigeria. The study adopts a survey research design and with the aid of convenience sampling method, the researcher selected 80 participant who are staff of GLOBACOM and MTN in Lagos Stat as the sample size for the study. Self-Structured questionnaire was issued to the respondent of which 77 was retrieved and validated for the analysis. The researcher concludes that multiple pricing can play a significant role in influencing the consumers purchasing behavior especially in the initial stage of implementation or if a company is trying to penetrate the market. The findings from this study will contribute to the body of Knowledge and serve as reference material to both scholars and student who wishes to conduct further studies in related field.
1.1 Background of the Study
Numerous price strategies can be seen everywhere in the modern society. Whenever we turn on the TV, look through a newspaper, or listen to the radio advertisements, different price strategies immediately jump into our sight. These include the mailboxes, the Internet, and many more. Advertisements provide us with up-to-date information about the latest products and are a good method to introduce products and help manufactures to promote their new products. The goal of advertisement is to force people to notice their products. As they make things so attractive, we often end up buying things that we do not really need, especially when these ads are presented with price strategies, such as discounts.
Price is undoubtedly one of the most important market variables (Bauer, Klieger & Koper, 2004). It becomes apparent from the literature that there are numerous ways of price framing. Specifically, price framing is defined as how the offered price is communicated to the consumer (Briesch, Krishna, Lehman & Yuan, 2002). Framing the same information in different ways can have a great impact on consumer decision making and choice behavior.
For example, Blair and Landon (1981) found that consumer estimates of the advertiser’s regular price are higher for ads with a reference price than for ads without one. Reference price can be defined as a concept of an internal standard against which observed prices are compared (Kalyanaram & Winer, 1995). This effect can subsequently cause a heightened interest in the advertised offer by increasing consumer estimates of the product savings offered by the advertiser. In a study on the effects of promotion framing on price expectations and choice DelVecchio, Krishnan, and Smith (2007) found that frame affects consumers’ perceptions of the promoted price and the weight they place on the promoted price. In their first study it was found that when the monetary value of a promotion is high, price expectations are significantly higher when the promotion is framed as a percentage off rather than as cents off. Hence, we use a percentage off promotion in the present study. The second study tested whether frame has an effect on post promotion choice. The results showed that when the monetary value of a promotion is high, a cent-off promotion leads to lower post promotion choice.
Customers are the pivot of every business. For every business to be able to survive will immensely depend on its potential customers. As a result, it will be a flop for any business which does not identify and retain its customers. Businesses are springing up from different corners in Finland thereby increasing the sizes of various industries. Businesses in one industry normally have a common target group of potential customers, thus eventually, as the number of businesses in one industry increases the competition for customers and for that matter market share becomes keen (Berry, 2001).
A close survey shows that relationships between companies and customers are getting weaker and weaker. Customers do not praise their corporate partners rather they express sentiments about the stress, confusion, and manipulative transactions in which they find themselves trapped and victimized. Ironically, marketers are doing so many things to establish strong relationships with customers, however, most of the things that they do end up destroying those relationships (Berry, 2001,p 134). The twenty first century age represents key changes in the marketing strategies employed by organizations and institutions in order to help them be very competitive and be sustainable in the turbulent market that they find themselves. Today’s consumers live in a world where the purchase of products and services is enormous and continuous (Rindell, 2008).
The survival or success of companies is now dependent on the amount of information that is carefully gathered by the former with regards to the purchasing habits displayed by consumers
In order to survive in the market, companies are keenly interested in developing strong brands that leads to long term and customer relationships (Hess, Story and Danes, 2011). Companies inject heavy resources and time into the study of behavioral and sociological factors in order to gain much insight and to understand consumer purchasing patterns.
Thus brands represent key assets to companies (Rindell, 2008).
Pricing has emerged as part and parcel of modern day marketing strategies and now considered a key organizational asset (Kotler, 2000). Organizations shifting their from a product or market point of view to consumer or customer focus reflect the evolution of marketing. As an implication to this paradigm shift, companies are relentlessly injecting huge resources into understanding their consumers in relation to the 4 p’s (thus product, price, place and promotion) and the additional 3 p’s (people, process and physical evidence), (Kotler,1999).
Competition in telecommunication industry has called for telecommunication firms to improve their corporate performance not only in terms of teledensity (The number of subscribers out of every 100 people), but also engage in intensive marketing activities such as branding, promotion, advertisements.
The telecommunication industry has created the platform for new opportunities in terms of obtaining and sharing knowledge for different purposes. Families have also been able to stay in touch.
1.2 Statement of the Problem
Though many companies are able to have better products and yet are sometimes unable to compete in the market due to poor pricing strategies. Thus strong brands have the potential to generate long term and loyal customers, which would eventually lead to an increase in sales in the future. (Hess, Story and Danes, 20011).
As a result of the challenges in managing brands and its benefits, the research will bring into focus a critical evaluation of branding and its role or impact in the purchase decision making process of consumers.
Multiple pricing strategies is a type of pricing strategy that involves selling the same product with difference pricing. One of the major challenges of multiple pricing strategies of Telecommunication products (excpecially MTN and Globacom) is the inconsistency in the price and this influence the trust of customers on the products. When there is no consistency in the price of products, customers tend to loss trust in the credibility of the organization. These problems necessitate the need to carry out a study on the impact of multiple pricing strategies on consumer purchasing behavior, a case study of MTN and Globacom Nigeria.
1.3 Objectives of the Study
The general objective of this study is to investigate the impact of multiple pricing strategies on consumer purchasing behavior, a case study of MTN and Globacom Nigeria. The specific objectives include the following:
- To ascertain the perception of consumers on if MTN and Globacom adopt multiple pricing strategies.
- To find out the perception of customers on multiple pricing strategies of the products of MTN and Globacom.
- To investigate if multiple pricing strategies influences the opinion of consumers on the credibility of MTN and Globacom.
- To examine if multiple pricing strategies affect interest of consumers on the products of MTN and Globacom.
- To determine if there is a relationship between multiple pricing strategies and consumer purchasing behavior of products of MTN and Globacom.
1.4 Research Questions
The relevant research questions related to this study include the following:
- What is the perception of consumers on if MTN and Globacom adopt multiple pricing strategies?
- Does multiple pricing strategies influences the opinion of consumers on the credibility of MTN and Globacom?
- Does multiple pricing strategies affect interest of consumers on the products of MTN and Globacom?
- Is there a relationship between multiple pricing strategies and consumer purchasing behavior of products of MTN and Globacom?
1.5 Significance of the Study
Considering the price war that has been in telecommunication market over time, the market has been so competitive and as a result, some operators are growing, some have been faced off the market and for some new operators it has been difficult to penetrate. The findings from this study of multiple pricing will help firms and organizations improve their marketing strategies by understanding issues such as: The role played by multiple pricing on consumers behaviors that in turn have positive or negative effect to operator and Pricing sensitivity phenomena in telecom market. Findings from the study will contribute to the body of Knowledge and serve as reference material to both scholars and student who wishes to conduct further studies in related field.
1.6 Scope of the Study
The scope of this study borders on the impact of multiple pricing strategies on consumer purchasing behavior. The study is however delimited telecommunication firms using MTN and Globacom walk-in centres in Lagos State Nigeria as case study.
1.7 Limitation of the Study
As every human endeavor is once faced with a constraint, the same was tenable during the period of this study. In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.
Summary, Conclusion and Recommendation
The general objective of this study is to investigate the impact of multiple pricing strategies on consumer purchasing behavior, a case study of MTN and Globacom Nigeria. The study ascertained the perception of consumers on if MTN and Globacom adopt multiple pricing strategies. It find out the perception of customers on multiple pricing strategies of the products of MTN and Globacom. It investigated if multiple pricing strategies influences the opinion of consumers on the credibility of MTN and Globacom.
The study adopted a survey research design and with the aid of convenience sampling method, the researcher selected 80 participant who are staff of Globacom and MTN was selected for the study. Self-Structured questionnaire was issued to the respondent of which 77 was retrieved and validated for the study. Data was analyzed in Simple percentage using frequencies and tables.
With the interactive experiences, observations, Documentary reviews, interviews conducted and Questionnaire results, the researcher concludes that multiple pricing can play a significant role in influencing the consumers purchasing behavior especially in the initial stage of implementation or if a company is trying to penetrate the market. However, it is not a sustainable strategy that a company might rely for long-term results. If the company needs to prosper this strategy can be used during initial stage or if the target is to changes consumer behavior and make them ready for introduction of new product or it can be used along with other pricing strategies or consumers loyalty schemes that will help the consumers to be more connected to the company by emotional attributes rather than physical attributes.
Base on the findings of the study, the following recommendation were made:
- Both operators needs to come out with new value propositions that will give them more competitive advantage because affordability will soon cease to be an advantage and the multiple pricing that they have been doing has led to revenue erosion.
- Globacom and MTN should have clear pricing strategies but rather they just formulate a tariff based on the current market need or to react on what has been done by other competitors in the market, Researcher recommends that it is important that both operator do decide on their short and long term pricing strategies based on research and rely on these strategies to achieve their targets.
- By using pricing strategies networks, marketers must learn how to engage with customers on their own terms, and pricing strategies platforms must provide consumers with valuable tools to connect, link, and interact with marketers
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Frequently Asked Questions
Is there a relationship between prices and buying behavior?
The findings show that there is a positive relationship between prices and consumer buying behavior.
What are the main factors that influence the buying process?
The main factors that have immense impact on the buying process and final decision of consumers are cultural, social, personal, and physiological. … . Distribution of participants according to marital variable Marital Status … . Odd pricing strategy … . Bundle Pricing strategy … . Discount Pricing strategy … Content may be subject to copyright.
What are the different methods of price customisation?
Once this is done and customers are divided into segments, managers can choose among five innovative techniques to implement price customisation (multi-dimensional pricing, multi-person pricing, price bundling, multi-product strategies and normal or Dutch auctions).
How does the price affect purchase intentions?
The price can have a greater impact on purchase intentions when other extrinsic tips such as the brand-value (or product-value) or intrinsic tips related to the physical properties of the object are not clearly defined. Well-known brands, such as a strong extrinsic tip, have a symbolic level that positively affects their perception of value.
What are the factors that influence the buying situation?
Above figure also shows that buying center & buying decision process are influenced by the internal, interpersonal, organizational, external & individual factors. Here, we’ll discuss the three major types of buying situation. Straight rebuy: In the straight rebuy situation, some people regularly order for products without any modifications.
What influences the business buyer behavior?
As a social being, business buyers also react to both reason & emotion. Today’s marketers find out that emotion plays an important role in the business buying decisions This figure shows that four factors influence the business buyer behavior – environmental, organizational, interpersonal & individual.
Why do consumers purchase something?
Why do consumers purchase something? Are these just random choices or based on certain factors? Although we may not do it intentionally, but while making a buying decision, we are influenced by a number of cultural and social factors. Marketing provides the four major factors influencing the buying decisions of consumers.
How does culture influence consumer buying decisions?
Culture is one of the key factors that influences a consumer’s buying decisions. These factors refer to the set of values, preferences, perceptions, and ideologies of a particular community. At an early age, buyers learn to recognize acceptable behavior and choices when selecting products.
What are the traditional methods of product pricing?
These are the traditional methods of product pricing. The major factors which influence the product price are the fixed cost, variable cost other overheads incurred in manufacturing the products. Let us now go through the different cost-oriented pricing models below: Cost-plus pricing is one of the simplest ways of price determination.
What is customized pricing?
Customized pricing refers to altering the price of goods or services based on customer factors. This is a strategy used by some organizations to appeal to the consumer by offering a low price based on their particular circumstances while also making a profit.
How does mass customization affect the price of a product?
When every product is unique, then the method of creating it will also vary, which will increase the production cost whose impact will reflect on the price of the products. Therefore, it is important to plan carefully before introducing mass customization concept to justify the increased price in your business.
What are the types of mass customization?
One popular type of mass customization is adaptive customization. In adaptive customization, the basic product is produced through mass production, and customized features are added once the order is placed. There are fewer chances of loss in mass customization as the customer pays before they can ask for the customization to be made.
Does price affect the purchase intention of customers?
Thus, although price value is a factor which can affect purchase intention, it does not make such a huge impact on any change in quality will cause. 6. Feedback – To maintain the purchase intention of your products among customers, you should invite in more reviews.
What are the factors intended to purchase intention?
Many factors intended to purchase intention which is customer knowledge, perception of consumers, product packaging or design and celebrity endorsement etc. The study conducted by Satish and Peter (2004) explains that knowledge about the product by the consumer plays an integral role during product purchase decision.
How do search and experience products affect purchase intention?
As predicted, the purchase intention was greater for the search product (computer desk: 3.92) than for the experience product (sunglasses: 3.40). As shown in Table 4, price factor was not significant and a multiple comparison test did not indicate difference in any pair of the three price levels.
What happens when you increase the price of your products?
Over time, after you have established a place for you in your niche and among the competitors, you may increase the price value of the products. This will not affect the purchase intention of the brand very much. But it could lose you customers who will no longer be able to afford the increases prices.