EFFECT OF MARKET PENETRATION PRICING ON ORGANIZATIONAL PROFITABILITY CASE STUDY UNILEVER NIGERIA PLC
Abstract
This research is an academic attempt to identify the impact of penetration pricing on organizational profitability.the study employed a survey research technique using Questionnaires the main instruments used in collecting primary data for the study while secondary data were obtained from textbooks, journals and materials the internet. The primary data were used in analyzing the research questions and testing the research hypotheses formulated respectively. A descriptive statistical analysis carried out through the use of simple percentages and t-test was the statistical tool used in testing the research hypotheses. The major findings obtained from the analyses that unilever adopted market penetration price. It was also discovered from the findings that the goods and quality of services rendered to clients, the profitability objective of the firms was affected by the incident.
CHAPTER ONE
INTRODUCTION
Background to study
Price management is a critical element in marketing and competitive strategy and a key determinant of performance. Price is the measure by which industrial and commercial customers judge the value of an offering, and it strongly impacts brand selection among competing alternatives (Shipley and Jobber, 2001).Apart from world-class product development, pricing is key to success. Pricing is vital in attracting and capturing demand. Pricing is also fundamental in optimizing your product’s true worth out there in the real market place (Yeoman and McMahon, 2004). Furthermore, pricing is the only element of the marketing mix that generates revenue for the firm, while it is also the most flexible element of this mix in the sense that pricing decisions can be implemented relatively quickly (e.g. price changes) and be adapted easily to the conditions surrounding a company’s internal or external environment (Lewengart and Mizrahi, 2000). The objective functions of companies are multifaceted in that the viability of companies rests on a combination of different pricing objectives (Diamantopoulos, 1991). These objectives are flexible and change over time due to environmental or organizational conditions (Shipley and Jobber, 2001). Pricing objectives may be either supportive or conflictual. Thus, there are objectives that are compatible with each other e.g. market share increase and sales increase and objectives that oppose one another e.g. sales maximizations versus profit maximization (Myers, et al., 2002).MARKET PENETRATION
Penetration pricing strategy is a strategy in which prices of a product or a service are set at less than its normal, long range market price set in order to gain more rapid market acceptance or to increase existing market share. This strategy can sometimes discourage new competitors from entering a market niche if they mistakenly view the penetration price as long range price (Justin, et al. 2004). Companies do their pricing in a variety of ways. In small companies, prices are often set by the boss. In large companies, pricing is handled by division and product – line managers. In industries where pricing is a key factor, pricing departments are set to assist others in determining appropriate prices. This departmental report is then disseminated to the marketing department, finance department and even top management. Others who exert an influence on pricing include sales managers, production managers, finance managers and accountants. Executives do complain that pricing is a big headache – and one that is getting worse by the day. Many companies do not handle pricing well and throw up their hands with strategies such as this: “We determine our costs and take our industry’s traditional margins”(htt://www.mbaknol.com/marketing – management/factors to consider when setting prices). Other common mistakes are not revising price often enough to capitalize on market changes; setting price independently of the rest of the marketing mix rather than as an intrinsic element of market positioning strategy; and not varying price enough for different product items, market segments, distribution channels and purchasing occasions. Firms must therefore set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area and when it enters bids on new contract. The firm must decide where to position its product on quality and price (Kottler and Keller, 2009).MARKET PENETRATION
Pricing therefore refers to the process of setting a price for a product or service and more than any other element of your marketing mix, will have the biggest impact on the amount of profit you make. Price for any product or a service will inevitably fall somewhere between that which is too low to produce a profit and that which is too high to generate any demand. Strategy is the set of actions through which an organization by accident or design develops resources and uses them to deliver services or products in a way which its users find valuable, while meeting the financial and other objectives and constraints imposed by key stakeholders. Most successful strategies give an organization some property that is unique or at least distinctive and the means for renewing its competitive advantage as the environment changes (Haberberg and Rieple, 2008).MARKET PENETRATION
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EFFECT OF MARKET PENETRATION PRICING ON ORGANIZATIONAL PROFITABILITY CASE STUDY UNILEVER NIGERIA PLC
