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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?
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