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EFFECT OF PRICE AND PRICE CHANGES ON THE SALES OF CONSUMER GOODS

 

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:

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

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

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