IMPACT OF MULTIPLE PRICING STRATEGIES ON CONSUMER PURCHASING BEHAVIOR

CHAPTER ONE

INTRODUCTION

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:

1. To ascertain the perception of consumers on if MTN and Globacom adopt multiple pricing strategies.

2. To find out the perception of customers on multiple pricing strategies of the products of MTN and Globacom.

3. To investigate if multiple pricing strategies influences the opinion of consumers on the credibility of MTN and Globacom.

4. To examine if multiple pricing strategies affect interest of consumers on the products of MTN and Globacom.

5. 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:

1. What is the perception of consumers on if MTN and Globacom adopt multiple pricing strategies?