PROJECT REPORT ON

The Effect of Price and Price

changes in Sale of Goods
Submittted To :-
Consumer Submitted By :-
Dr. Manish Sood

Asst. Prof. Commerce

Arjun Paswan
Roll no. 1403CM063

B.Com 6th Univ. R. No.

3114XYYZ170098
Sem.
1
 DECLARATION
I, Arjun Paswan hereby declared that i have prepared this
project report “The effect of price and prices changes to
sale of goods” in partial fulfillment award of Bachelor of
Commerce (B.Com.) from Swami Vivekanand Govt.
Degree College Ghumarwin (HPU Shimla), under the
guidance of Asst. Prof.(Ghumarwin) Dr. Subhash Chandra
& Dr. Manish Sood . This project is compiled and submitted
by me and its my orginal framework. The findings in the report
are based on the data collected by me while preparing this
report. I am not copy the data form any previous report.

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 CERTIFICATE

GOVT. DEGREE COLLEGE GHUMARWIN

Distt. Bilaspur , Himachal Pradesh

To whom it May concern

This is to certify that B.Com. 6th Sem. Project entitled “The effect of
Price and Prices changes to sale of goods” submitted in partial
fulfillment of the Degree of Bachelor of Commerce from Swami
Vivekanand Govt. Degree College Ghumarwin(HPU Shimla)
under the guidance of Dr. Subhash Chandra & Dr. Manish Sood
Asst. Prof. of Govt. Degree College Ghumarwin is record of final
project carried out by Arjun Paswan under my supervision and
guidance, no part of this project report has been submitted to any other
Degree/Diploma and this report may be taken for evaluation.

The assistant and help during the course of investigation has been fully
acknowledged.

Supervised By :-

Dr. Manish Sood

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 ACKNOWLEDGEMENT

I am like to available this opportunity to express my deep sense

of gratitude and indebtedness to all those who have helped
and encouraged me towards the successful completion of the
project .
I am also thankful to Asst. Prof. Ghumarwin Dr. Subhash
Chandra & Dr. Manish Sood (Project Guide) for his valuable
suggestions , guidance in solving the intricate problems
throughout our present Endeavour of this manuscript . Also ,
without his initiation I would not have a chance to undertake
this study work and could not explore the new sphere of
knowledge .

Last but not the least , I express my gratitude to all those who
directly and indirectly directed me for successful completion
of this project.

Sincere regards,

Arjun Paswan

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 ABSTRACT

The study investigated the influence of price change on consumption of

fast moving .This is because price is one of the most flexible of the four
elements of themarketing mix. One frequent problem is tha businesses
are too quick to reduce prices in order to get a sale rather than
convincing buyers that their products are worth ahigher price. Another
common mistake is applying pricing that is too-cost oriented rather than
customer-value oriented. These, among others, form the main concern
of
this study. The specific objectives of the study were to determine the
influence of sales oriented pricing on consumption of fast food at fast
food restaurants, Eldoret, tidentify the influence of competition on
pricing at fast food restaurants, to establish the influence of sales
promotion on consumption of fast food at fast food restaurants, and to
assess how the quality of the products affects onconsumption of fast
food at fast food restaurants. The researcher employed a descriptive
research design. This study was carried out at the fast food restaurants.
The sample population consisted of 10 employees and 40 current and
past customers’. Data collection techniques included questionnaire,
participatory observation and interview schedule . The data was
organized, presented, analyzed and interpreted usindescriptive methods
of data analysis. The study concluded that it is clear that the firm sets
prices to break-even on the cost of making
and marketing a product or setting prices to make a target profit.
The organization determines the prices at which it will break-even or
make the target profit it is seeking. Based on the findings, the study
recommends that there is need to apply or use more than one pricing
strategy to increase sales volume in the company.
The study further recommends that the hotel should
continuouslyimprove the quality of their consumer goods for fair prices
as the end result. Suggestions for further research are made on factors
determining pricing strategies in organizations are also recommended.

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 Table of Contents

Chapter No. Particulars Page No.

Declaration 2
Acknowledgement 4
Abstract 5
1. Introduction / Background 7 - 12
2. Literature Review 13 – 21
3. Data Analysis Presentation 22 – 28
4. The impact of product price change on the 28 – 43
Turnover of small and medium Enterprices
5. Conclusion 44 - 45

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 INFLUENCE OF PRICE CHANGE ON
CONSUMPTION OF FAST MOVING
CONSUMER GOODS: A SURVEY OF FAST
FOOD RESTAURANTS
INTRODUCTION

1 Background of the study :-

In recent years, the world has experienced a remarkable rise in the prices
of vital commodities, including energy and agricultural products. For
example, between 2006 and 2008, the average world price for oil rose
by 110 percent, rice by 217 percent, wheat by 136 percent, maize by 125
percent, and soybeans by 107 percent. The resulting economic impact
on firms, households, and entire economies has renewed attention to the
scarcity of natural resources and the best way of managing them in the
twenty-first century.
The price is the amount of money charged for a product or service or
the sum of the values that consumers exchange for the benefits of
having or using the product or service. The right price should meet the
objectives of the buyer and seller. If you hit the optimum price, the
theory suggests, the customers are happier, your profit is higher, and
your bottom line will be healthier. In reality, pricing is far from simple.
Setting the optimum price is one of the most difficult decisions
managers ever make. Most companies are so bad at it that they leave
money on the table. Pricing is about more than setting prices. Pricing
represents a strategy to increase sales volume at a profit while
incorporating and communicating critical messages about the value the
offering delivers to the customer.
The importance of price decision to Marketing Managers is that when a
firm’s costs are lower than the competitors, low price that can be used to
win customers. More so, Price cutting as a way to build or maintain
market share is a strategy that has been used by firms. Consumers rely
heavily on price as an indicator of a product’s quality, especially when
they must make purchase decisions with incomplete information.

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Fast food restaurant is one of the leading restaurants. It has many
customers within Eldoret town and visitors who use its products (food).
A part from fast food service, it also offers conference rooms for
meetings, meeting joints to watch DSTV channels, especially football,
and recreation service for customers’ children, especially during public
holidays. Pricing strategies are used in a way that it matches those of the
competitors (other hotel/ restaurants) or better still, a little bit lower
than that of the competitors. Pricing is one of the most important
ingredients of the marketing mix thatany organization should
concentrate on to ensure it attracts more customers.

1.2 Statement of the problem :-

The price is the one element in the marketing mix that produces
revenue. All other elements represent costs. Price is also one of the
most flexible elements of the marketing mix. Unlike product features
and channel commitments, price can be changed quickly. At the same
time, pricing and price competition is a number one problem facing
many marketing executives. Another common mistake is pricing that is
too cost oriented rather than customer-value oriented.
There has been a decrease in customers patronizing fast food restaurant
due to increased competition from various hotels which have been
opened in the same locality, including India hotel among others that
offer the same services and fast food at low prices like those charged at
fast food restaurant, hence making them preferred choices due to
different or lower prices charged. More so, there have been price
fluctuations among different hotels and restaurants so as to attract more
customers. Since quality is difficult to measure in the industry due to
their homogeneity, pricing is quite challenging. Most of the fast food
restaurants have experienced problems in its pricing since it has
sometimes to lower its price to attract and retain customers and
sometimes it has to increase the price of its offering to reflect costs.
This has led to customers staying on or turning away, depending on the
price charged. This has affected the restaurants since it cannot guarantee
specific customers. These, among other factors formed the basis of this
study, to determine the influence of price changes on consumption of
fast moving consumer goods, using the case of fast food restaurants.

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1.2Research Objectives :-The study was guided by the following
objectives:

1) To determine the influence of sales oriented pricing on consumption

of fast food at fast food restaurants.
2) To identify the influence of competition on pricing at fast food
restaurants.
3) To establish the influence of sales promotion on consumption of fast
food at fast food restaurants.
4) To assess how the quality of the products affects on consumption of
fast food at fast food restaurants.

1.2 Purpose of the study :-

The main purpose of this study was to determine the influence of price
change on consumption of fast moving consumer goods at fast food
restaurants in India.

1.3 Research Questions :-

The questions that the study answered are:

1) What is the influence of sales oriented pricing on consumption of fast

food at fast food restaurants.
2) What is the influence of competition on pricing at fast food
restaurants.
3) What is the influence of sales promotion on consumption of fast food
at fast food restaurants.
4) How the quality of the products does affects on consumption of fast
food at fast food restaurants?
Significance of the study :-

The study is of significance to a number of stakeholders , including the

researcher, the University of Nairobi and other institutions of higher
learning, as wells as managers and business owners in the fast-moving
consumer goods industry.

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The findings and recommendations of this study is useful to the
management of fast food restaurants as well as other businesses, since it
can lead to developing suitable mechanisms of determining prices of
products so as to apply an appropriate price increase that does not
impact negatively on sales.
The University of Nairobi, being an academic institution has a library
where completed studies are kept for reference by students and faculty
members are stored. The study will benefit students enabling them to
learn more about effects of price on consumption of fast moving
goods, that is, the study will contribute to the existing pool of
knowledge, useful to all other institutions of higher learning as well .

1.4 Limitation of the study :-

The study focused on the influence of price changes on consumption of

fast moving consumer goods of a firm which may not be the only
factors in determining the firm’s growth or failure because some factors
such as production, technology, financing, and level of skilled labor and
sources of suppliers contribute to growth. Some of the sources of
information by employees was mainly based on memory status and
therefore subject to
omission of other important facts. Low response from respondents due
to suspicion thatuseful information could leak to competitors .

1.5 Delimitation of the Study :-

The study focused on influence of price change on consumption of fast

moving consumer goods at fast food restaurants in India. The key
respondents were managers, supervisors, employees and the customers.
The study was conducted between May to July 2013 in India.

Types of Pricing : -

1.Dynamic pricing :-
Dynamic pricing as a strategy in which prices vary over time, consumers,
and/or circumstances. It can also be referred to as adjusting prices
continually to meet the characteristics and needs of individual customers

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and situations distinguish between two dynamic pricing models: price
posted mechanisms and price-discovery mechanisms.
2) Predatory pricing : -
This is a pricing policy in which a firm deliberately charges lower price
with the intention of driving out competitors from the market while
remaining the dominant or even monopoly firm in that industry after
which it will start the actions characteristic of a monopoly . Sometimes
prices are pitched below the cost of production .
3) Differential pricing : Differential pricing involves selling the same
product to different buyers under a variety of prices which means
different prices are used for different segments . It is the same as
discriminatory pricing policy especially when the cost of production and
selling of the product are essentially the same.

4) By-product pricing: It is setting a price by products in order to

make the main product's price more competitive.

5) Bundle pricing: Bundle pricing has to do with including several

products in a single package that is sold at a single price (Farese,
Kimbrell and Woloszy 2003). Brassington and Pettitt (2006) see it as
assembling a number of products in a single package to save the
consumer the trouble of searching out and buying each one separately.

Definition of significant terms as used in the study:-

Fast food : term given to food that can be prepared and served very quickly.
While any meal with low preparation time can be considered
Price : Amount of money for which an item is offered or sold.
Pricing strategy : Is a method applied to marketers in order to come
up with a price that is equal to service offered .
Strategy : Criteria or basis of doing things .
Market skimming :- This involves setting prices of a new product to
skim maximum revenue layer for segments willing to pay high prices the
company makes fewer but more profitable sales.
Market penetration :- setting low initial price in order to penetrate the
market quickly and run a large market share .

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 1.6 Organization of the study :-

This project provided the basis of this study. It specifically covered the
background ofthe study, statement of the problem, objectives of the
study, research questions, purpose, significance and limitation of the
study. Chapter two presented the literature review to identify and
examine what has been done by other scholars and researchers and also
assist the researcher to limit the problem to define it better.
Methodology and procedures and modalities in data collection covers
research design, determination and identification of the population
sample size, sampling design, sampling procedure, the instruments of
data collection, validity and reliability of data collected was presented in
chapter three.
Chapter four contains the data analysis, presentation and discussion of
the findings. The conclusion and recommendations will form the
chapter five of this .

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 LITERATURE REVIEW
2.1 Introduction :-

The main purpose of this literature review is to identify and examine

what has been done by other scholars and researchers in relation to
effects of price change on consumption of fast moving consumer goods.
This review also assisted the researcher to limit the problem to define it
better. A detailed knowledge of what has been done helps the
researcher to avoid unnecessary and unintentional duplication of other
projects, demonstrates familiarity with the existing body of knowledge
from a framework within
which the research findings are to be interrupted and finally to
overcome limitations of previous studies. This chapter covers previous
studies undertaken on the subject of the study by various researchers
and scholars across the globe. The main sources of literature were
textbooks, publications. Newsletters, thesis and the Internet search
engines .

2.2 Influence of sales oriented pricing on consumption :-

Price is the value placed on a good or service by a customer at some

point in time. Pricing is a problem when a firm has a set of prices for the
firsttime.
This happens when the firm develops or requires a new service. It
introduces its regular product into a new geographical area and when it
enters bids on new contract work. The firm must decide where to
position its quality and price. Deciding the price of a product is not just
a matter of recording production costs, adding the experiences of
operating the business and providing a seasonal profit.
The following factors are important to consider when setting price .
The products fashion and seasonal appeal, competition and supply and
demand Costs and experiences: the manufacturers and distributors of a
product involve many
costs and experiences; these include expenditure for product materials,
employees’ wages, shipping charges, advertising, selling and business
taxes.

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Individual food choices are influenced by a wide variety of
environmental and individual variables. Three main dimensions related
to food choices are taste, perceived value (which includes price and
portion size) and perceived nutrition. Foods vary along each of these
evaluative dimensions. Individuals also vary in terms of the importance
placed on each dimension. For example, individuals of lower
socioeconomic status may place
greater importance on perceived value, whereas those who are mainly
concerned about health and nutrition may place greater importance on
the nutritional quality of foods. In general, people may possess
knowledge about healthful food choices, but when considered in
tandem with the choice dimensions of price and taste, they may choose
the
tastier and cheaper, but less nutritious, food. An important question for
public health promotion efforts in the area of healthful food choices is,
“Can people be influenced to purchase and consume more healthful
foods if the foods are increased in attractiveness through lowering
prices?”

2.2.1 Literature Related to Price discrimination :-

Price discrimination exists when sales of identical goods or services are

transacted at different prices from the same provider. Otherwise, the
moment the seller tries to sell the same good at different prices, the
buyer at the lower price can arbitrage by selling to the consumer buying
at the higher price but with a tiny discount. However, market frictions
in oligopolies such as the airlines and even in fully competitive retail or
industrial markets allow for a limited degree of differential pricing to
different consumers. Price discrimination also occurs when it costs
more to supply one customer than it does another, and yet the supplier .
Price discrimination can also be seen where the requirement that goods
be identical is relaxed. For example, so-called "premium products"
(including relatively simple products, such as cappuccino compared to
regular coffee) have a price differential that is not explained by the cost
of production.

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2.3 Literature Related to Competition on pricing and
consumption :-

Competition from similar products: marketers are aware of dissimilar

goods and services and that customers might choose over their goods
and services. Also retailers compete with other retailers or discount
storesselling similar items at lower prices. If some retailers charge a
higher price for an item and sell for less at discount stores, they must
offer customers services usually not offered by a discount store that is
credit or gift warping .
The choice of a pricing strategy depends on the following:
corporate goals and objectives, consumer characteristic, intensity of
inter-firm rivalry and phase of the product life cycle. Corporate
objectives affect price decisions. While considering customer
characteristics it is important to research whether customers spend time
in searching for alternatives. This is because for some customers the cost
of this search is high but for others it is low. If the search cost is low for
the customer, then he or
she will be shopping for bargains and will look for discount sales. But
the same is not true for the first group of customers.
Intensity of inter firm rivalry within an industry also determines the
leverage a firm has in pricing its product. Low intensity in competition,
at times, results in a monopolistic market, encouraging a firm to produce
the product or the brand at premium. But if the intensity of inter-firm
rivalry is high, a firm has very little leverage and generally has no
alternative but to price at a level which ensures survival. Price strategies
also vary across
the product life cycle and for the marketer it is important to know where
his product is in its life cycle .

For example, increasing both the average consumer’s base utility for a
good and price sensitivity could keep the profit-maximizing price of the
good in a monopoly market unchanged. But the changed price
sensitivity would lead to an equilibrium where the chain charged a
different price in a duopoly market than it would have if both of these
parameters had been smaller.

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2.4 Literature Related to the influence of promotion on
consumption :-

Sales promotion is any initiative undertaken by an organization to

promote an increase in sales, usage or trial of a product or service (i.e.
initiatives that are not covered by the other elements of the marketing
communications or promotions mix). Sales promotions are varied.
Often they are original and creative, and hence a comprehensive list of
all available techniques is virtually impossible (since original sales
promotions are launched
daily!). There are three types of sales promotion strategies
Push strategy involves convincing trade intermediary channel members
to "push" the product through the distribution channels to the ultimate
consumer via promotions and sales promotion efforts. The company
promotes the product through a reseller who in turn promotes it to yet
another reseller or the final consumer.
Pull strategy attempts to get consumers to "pull" the product from the
manufacturer through the marketing channel. The company focuses its
marketing communications efforts on consumers in the hope that it
stimulates interest and demand for the product at the end-user level .
Combination strategy: If you pay attention to car dealers' advertising,
you will often hear them speak of cash-back offers and dealer incentives.
Car dealers often provide a good example of a combination strategy.
The promotion function depends partially on the nature of the product.
As a general rule, goods that are new and different, technically complex,
or expensive require more sales promotion effort. The salesperson plays
a key role in providing the consumer with information about such
products to reduce the risks involved in purchase an induce.
Before management selects and trains salespeople, it should have
understanding of the sales process. Obviously, the sales process will
differ according to the sizes of the company, the nature of the product,
the market and so forth, but there are some elements common to almost
all selling situations that should be understood. The term sales process
refers to two basic factors the objectives the salespersons is trying to
achieve whileengage in selling activities sequence of stages or steps the
sales .

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2.5 Literature Related to the influence of quality of the
products on consumption. :-

Order fulfillment and rapid delivery systems are as critical to e-loyalty

development as the other factors. A thoughtful logistics system that
guarantees a fast delivery after the checkout process contributes to
customer satisfaction, which in turn contributes to loyal behavior.
In addition to the speed of delivery, the logistics system should allow
different ways of delivering products. Customer service is another
crucial area for e-marketers .
Sometimes website designers cannot avoid a certain degree of
complexity in the architecture of a website. Therefore, it is necessary to
have a thoughtful customer service system. Links to Frequently Asked
Questions (FAQs) and links to online representatives are useful in order
to assist customers in the selection or buying process. A marketer should
not just
offer online assistance. In many cases, it is more convenient for
customers to call a company. Therefore, the use of a toll free phone
number for customers should be considered. A customer who buys
something on the Internet has one major disadvantage compared to a
customer in real space. Internet customers cannot touch, smell, or
experience the good before they buy it. This makes a shopper insecure
about buying a product. In order to minimize this insecurity, an e-
business should offer brands that are
well-known, good product quality, and, of course, guarantees.

2.5.1 Literature on Customer Retention :-

Customer retention is an imperative in modern business it is a strategy

whose objective is to keep a customer and to retain there revenue
contribution primary it aims to present customer from defecting to
alternative brands most manager know that it costs less to keep an
existing customer the acquiring new ones study cross a number of
industries have revealed that he cost of acquiring a new customer so
customer retention make powerful economic sense
http;//www.iclloyolty.com.

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Research confirms that consumers with higher satisfaction levels and
better price perceptions have longer relationships with firms. In a B2B
context, suppliers who have long-term relationships with customers are
able to achieve significant sales growth and higher profitability through
differential reductions in discretionary expenses. However, customer
retention and defection are complex processes .

2.5.2 Literature Related on attracting and Retaining

Customers :-
The key to building customers relation is to creating to supervise
customers’ value and satisfaction satisfied customers are more likely to
be loyal and loyal customers are more likely to give the company a large
share of their business. Highly satisfied customer produces several
benefits to the company. They stay loyal longer buys more as the
company introduce new products and upgrade the existing product talk
favorable about the company and its products play list. Attention to
competing brand and advertising and are les service to price offer
product or service ideate to the company and cost less to serve the new
customer because transaction are scrutinized they require less education
and are failure with the process. A company demands comes from two
groups new customers repeat customers traditionally marketers have
focused on attracting new customers and creating transaction with the in
today’s marketing environmental. However changing demographic
economic and competitive factors mean that there are fewer new
customers to go around the cost of attracting new customers are rising.
Although finding new customer remains very important the emphasis is
shifting toward rotating profitable customers and building lasting
relationship with them companies have also discovered that loosing a
customer means not only a single scale but also life time work of
purchase and referrals thus working to keep profitable customers make
good economic sense the key to customer relation is superior customer
value and satisfaction with this in mind many company are going to keep
their customer satisfied .

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2.6 Literature on Consumption Values :-

Consumption values refer to subjective beliefs about desirable ways to

attain personal values. People achieve personal values (or goals) through
actions or activities, such as social interaction, economic exchange,
possession, and consumption (Sheth et al. 1991).
According to means-end chain models of consumer product knowledge
(Peter and Olson 1990), people may have ideas and preferences about
various actions that can help them achieve personal values. Therefore,
relative to personal values, consumption values are instrumental in
nature. For example, owning an elegant house and acquiring a
prestigious
car are for some people desirable ways of achieving self-fulfillment.
Attending football games (especially those of favorite teams) and taking
a vacation trip are favorable activities which lead to personal fun and
enjoyment. Furthermore, individuals may hold several personal values
by which they direct or evaluate consumption activities.
Therefore, the consumption values of these types of activities (or
possessions) are sophisticated and do not simply satisfy one single
personal value (Shet . 2001)
Customer Value and Consumer Values :-

Many marketing strategists and industrial-organization (I.O.) economists

emphasize that creating superior "customer value" is a key element for
companies' success (Day 2000).
However, what they mean by "customer value" is quite different from
the meanings of the "consumer values" we have discussed above.
"Value" to marketing strategists means a return for something in an
exchange (e.g., the value of the dollar is variable).
Therefore, the meaning of "customer value" is a level of return in the
product benefits for certain amount of customer's money (i.e., the price)
in a purchase exchange (e.g., to give the buyer good value at the right
price).
In addition, the concept of customer value has by
nature a normative perspective, since it is a fundamental concept
underlying the competitive analysis in the field of I.O., based on
economic principles and the customer's choice in the market.

19
2.7.1 Theoretical framework :-

The study adopted the Microeconomic .In which he said adherents of

neoclassical economics, the currently predominant school, employ the
theory of marginalize, which holds that the value of any good or service
is determined by its marginal utility, the utility of the "last" bought
consumption good measured by its price in satisfying a specific
consumer's wants. While Marx emphasizes profit maximization,
neoclassical economists view the maximization of utility at the individual
or societal level as the driving force of the economy. Proponents of the
LTV would reply that as capitalism only recognizes demand backed by
money - then the price of a good is not simply measured by its
usefulness but by the amount of money consumers own – it depends
on a pre-existing set of relations of distribution. Consequently the price
of an object depends not only on its usefulness but on the amount of
money different consumers have - their different effective demands. As
marginal utility theory does not
take account of the effect of these influences on price, it remains an
abstract theory. In microeconomics, this utility maximization takes place
under certain constraints, these are the available amounts of factors of
production, for instance, labor (as with Marx profit maximization takes
place under the constraint of available production techniques and the
wage rate). In fact, the ultimate restriction is time. Households divide
their time (24 hours a day) into leisure time and time for work. Time for
work is to make money to buy goods for consumption. The household
chooses that amount of leisure time and (via working time) that amount
of consumption goods which maximizes its utility level.
In other words, if empirically it was found out, that commodities
exchange according to their marginally necessary labor inputs, this
would confirm marginal theory. These exchange ratios are determined
by prices of production, which are generally different from the necessary
labor inputs, the labor values. Implicitly, Marx is thus denying, that
capitalism is in a state of Pareto optimality.

20
2.7.2.2 Competition oriented pricing
This is where organizations set their prices in relation to those of
competitors. Historically, sellers will ask for the highest price on their
products and customers would bargain to an acceptable price but today
most organizations set one price for all buyers.

2.7.2.3 Sales promotion

Marketers recognize that customers often actively process price
information, interpreting prices in terms of their knowledge from prior
purchasing experience, formal communications ;informal
communications friends, colleagues and family members and point of
purchaser or online resource. Sales-promotion objectives are to persuade
retailers or wholesalers to carry a brand, give a brand shelf space,
promote a brand in advertising, and or push a brand to final consumers.
Typical tactics employed in push strategy are: allowances, buy-back
guarantees, free trials, contests, specialty advertising items, discounts,
displays, and premiums.

2.7 Quality
The perception of value is one of the most important elements of
pricing. If customers don’t think they are getting value for money, you
have no pricing power – you can’t lift prices to maintain profitability
without losing many customers. However, if customers believe they are
getting value for money, they will remain loyal despite price increases .
Value is not just a single element (price); it encompasses a range of
attributes of your
goods and services for which customers are willing to pay .
2.8 Summary of Literature Review :-
From the literature review it is apparent that price needs to be addressed
in order to retain and attract customers. More so, price acts as a
determinant for effectiveness and performance of any business since it
is the basis for any competition. The literature emphasizes the
importance of price and its impact on the business and the customers in
general. An organization considers many factors in setting its product
price. The factors include,
selecting the price objectives, determining demand, estimating cost,
selecting pricing methods, analyzing competitors’ costs and offers and
selecting the final product price.

21
 DATA ANALYSIS AND PRESENTATION

3.1 Introduction

This chapter presents a quantitative and qualitative analysis of study

findings and discusses the influence of price change on consumption of
fast moving consumer goods at fast food restaurants. It is divided into
sections that address data preparation and screening, demographic
composition of the study sample, descriptive analysis of the data and
discussion of findings.

3.1.1 Questionnaire Return Rate :-

The study targeted 100 customers, 10 current and 80 former customers

and the 86 employees of Prime Chic Inn, Chicken Grill, Chicken Zone
and Queen chic fast food restaurants . From the sample of 246
respondents chosen to participate in the study, a total of 197
questionnaires were returned, representing a 80.1% response rate.
The questionnaires were then checked for missing values where all were
found to have been adequately marked. This can be attributed to the
high literacy levels of the respondents. The questionnaires data was then
coded and entered into the SPSS Version 17 computer programme
where it was subjected to further quantitative and qualitative analysis.
This operation was done on the data with the aim of reducing the
measures into single composite indices for ease of analysis .

3.2 Demographic characteristics of respondents :-

The demographic features of the respondents are vital to this study.

They provide a base for further analysis of the specific research
objectives and their findings using descriptive statistics, tables, frequency
and percentages. Demographic analysis is crucial since demographical
factors affect respondents’ social, economic, political behaviors hence
they are useful tools in analysis of research objectives.

3.2.1 Gender of the respondents :-

22
The gender of the respondents was sought. This was important as
masculinity and feminity affects respondent’s perception of issues in
relation to the effects of price change on consumption of fast moving
consumer goods. It was meant to determine if fast food restaurants
accords equal opportunities to both men and women.

3.2.2 Age bracket :-

The researcher found it important to collect data on the age of the

respondents since age plays a critical role in understanding effect of
price change on consumption of fast moving consumer goods, to larger
extent former employees or customers are more experienced and are
likely to relate issues more directly than relatively younger employees or
new customers.

3.2.3 Category of the respondent :-

The researcher wanted to find out the category in which the respondents
belong since it will create an understanding of what they know about
effects of price on fast moving consumer goods.

3.2.4 Working experience of the respondents :-

Employees or customers with longer period of service or consumption

are more experienced and can explain the relationship between price
and consumption of fast moving consumer goods in the organization.
The researchers therefore set out to determine how long the
respondents have worked or been in the organization.

23
 Working experience of the respondent

Time Frequency Percentage Cumulative

Perecent
8-10 years 25 32.5 % 32.5 %
10 & above years 18 23.5 % 56.0 %
5-7 years 16 21.7 % 77.7 %
Below 1 year 10 13.2 % 90.9 %
Source :-Survey Data

The results from the table indicated that 32.5% or 25 respondents have
worked 8-10years. The highest numbers of respondents have a good
experience as they have worked or served with the organization for
more than 5 years which shows that they are aware of the effects of
price on consumption of fast moving consumer goods.

3.2.5 Respondents Level of education :-

The research sought to establish the level of education qualification of
the respondents since it is a very important aspect in any modern
organization. Academic qualification determines how efficiently and
effectively an employee delivers in the organization and also helps to
verify on customers understanding of their right of price and whether
the employees do know what is expected of them by the organization.

3.3.1 Influence of sales oriented pricing on consumption of fast

food :-

The researcher was keen to determine how the sales oriented pricing has
affected consumption of fast food.

24
3.3.2 Criteria for setting prices :-

The researcher wanted to find out the criteria used by the firm to
determine price of its goods, this was important because Price is
determined at that point where demand and supply both are equal to
each other. Quantity demanded and quantity supplied change with price.
The price which will tend to settle down is one at which demand bought
and
sold at this equilibrium prices is known as equilibrium output. Market is
said to be equilibrium when equilibrium price prevails in the market.

3.3.3 Influence of sales promotion on consumption of fast food at

fast food Restaurants :-
The study wanted to find out the influence of sales promotion on
consumption of fast food at fast food restaurants. This will show if the
procedure is the most effective.

3.3.4 Influence of quality of the products on consumption of fast

food at fast food restaurants :-

The researcher sought to know the how the quality of the products
affects on consumption of fast food at fast food restaurants. Many
economists assume that customers or “Price taker” and accept price at
“face value” or as given. Marketers recognize that customer often
actively process price information, interpreting prices in terms of their
knowledge from prior purchasing experience, formal communications
(advertising, sales calls and brochures) informal communications
friends, colleagues and family members and point of purchaser or
online resource.

3.3.5 Factors Affecting Pricing Methods :-

In business world, certain factors contribute to the final price of a

commodity/product or service. The researcher was keen to find out
major factors affecting pricing method in the company and the results
were tabulated as shown below .

25
3.3.6 Challenges faced by management in managing
strategies :-
The researchers sought establish the challenges faced by management in
managing pricing strategies since this will ultimately affect the overall
performance of the firm and more so its stability in the future.
Challenges faced by Management in managing Strategies
Challenges Frequency Percentage Cumulative
Percent
Substitute Product Price 85 43 43
High Competition 55 28 71
Reduce Inventory Cost 24 12 83
Government policies 18 9 92
Low Sale Turnover 16 8 100

The results showed that 8% said low sales turnover, 12% said reduced
inventory cost, 28% said high competition, 43% said substitute product
price and 9% said government policies. It is evident that the firm
should look for current economic situation. To endure a price strategy,
it is high, it gives the firm a greater degree of advantage but not so when
is low. Thus, customer’s characteristics play an important role in
stocking price
strategies.

3.4 Discussions of the findings

3.4.1 To determine the Influence of sales oriented pricing on

consumption of fast food :-

Based on the findings it’s clear that price do affect organization uses this
approach they will be certain about the price than demand and they do
not have to make frequent adjustments sales that are high price mean
low sales while low prices mean high sales.
This is because the marketer to communicate price changes. When an as
demand changes .
3.4.2 To identify the influence of competition on pricing :-
26
Based on the findings on the effect of competition on pricing it showed
that organizations set their prices in relation to those of competitors.
Historically, sellers will ask for the highest price on their products and
customers would bargain to an acceptable price but today most
organizations set one price for all buyers. More so, it is evident that the
firm should look for current economic situation. To endure a price
strategy, it is high, it gives the firm a greater degree of advantage but not
so when is low. Thus, customer’s characteristics play an important role
in stocking price strategies.
In the search for competitive advantage, one of the most important
steps to carry out is a customer value analysis. This determines the
benefits that customers in a market segment want and how they perceive
the relative value of competing offers, including yours.

3.4.3 Influence of sales promotion on consumption of fast

food at fast food Restaurants :-

Based on the findings it showed that sales promotion enhances two-way

communication. The ability to interact with the receiver allows the
sender to determine the impact of the message. Problems in
comprehension or objections can be resolved and in- depth discussions
of certain selling points can be provided immediately. Some of the
qualities that sales promotion must value most include empathy good
listening, honesty, dependability, and thoroughness and follow through.

3.4.4 To assess the influence of quality of the products on

consumption at fast food restaurants :-

It is clear from the finding that complains always accompanying price

changes, this because customers identify complaining as their solution to
price changes. Purchase decision one based on how customers perceive
prices and what they consider to be the current actual price-not the
marketer’s stated prices. They may have a lower price threshold below
which prices may signal inferior or unacceptable quality as well as an
upper price threshold above which prices is prohibitive and seen as not
worth the money. Also, Consumers’ evaluation of the fairness of a price-
changing firm depends on their information.
27
 The Impact of Product Price Changes on the
Turnover of Small and Medium Enterprises in India

Introduction

Organization that is involved in the production of goods and rendering

of services, after answering the question what to produce, and who to
produce for, there is need to answer the question how much will our
potential customers be willing to pay for the good? This difficulty of
price fixture and the other various intervening variables such as cost,
competitors price, demand, political factors, environmental factors,
involved in fixing price for goods and services, has posed a sense of
concern to most small and medium enterprises in India. This work is
aimed at finding an answer to some probing questions in the mind of
manufacturers and managers of small and medium enterprises about
how to set prices effectively, combining all the various factors, as well as
meeting the organizational overall objective, which is profit
maximization. Given the macroeconomic function of: max (π) =
f(x1,x2,…,xn), where π represents the profit and xi the exogenous
variables of the function of profit, which consists of effective pricing,
cost minimization, high turnover, amongst others. Pricing decision is a
crucial decision every organization has to make, because this will
eventually affect their corporate objectives, either directly or indirectly .
For every
business entity, irrespective of their line of business and objective, cost
minimization and profit maximization -are the general factors to be
considered and for non-profit making organizations,
there will always be the need to reduce cost at all means and to
maximize output. A business whether small or big, simple or complex,
private or public, is created to provide competitive prices . According to
Hilton setting the price for an organization’s product or service is one
of the most crucial decisions a manager faces, and one of the most
difficult, due to the number of factors that must be considered. Some of
the factors that influence pricing decision
are demand, competitors, cost, political, environmental, legal and image-
related issues. Horngren, at a buttresses this point by stating that

28
managers are frequently faced with decisions on pricing and profitability
of their products.

4.2. Statement of Research Problem :-

Decision is a choice between alternatives, having all the necessary

information about the various alternatives available. Pricing decision is a
decision that must be taken carefully, because of its nature and its effect
on the overall goals and objectives of the organization, which is mainly
profit maximization. Hilton reporting on the interview held with
President Stated that the President noted that pricing is a sticky wicket,
in which you keep an eye on the costs as well as the competitors. The
competition will always be driving the price down, and there will be
need to respond appropriately. You can’t sell the same product for more
than the other bloke does. But at the same time, there’s need to cover
costs of production. Nobody can indefinitely sell a product at less than
its cost of production, because it doesn’t work that way. The stage of the
product in its life cycle will determine the pricing decision for the
product at hand. For new products, the target costing approach is used,
in which the company estimates what they think
consumers will pay for a new product, and then back out the cost that is
in excess of it in order to sell at that price. This aspect of an
organizations activity (pricing decision), is handled with mere guess work
by most SMEs in India, with little consideration for some factors, which
thereafter Brand. Broad Research in Accounting, Negotiation, and
DistributionISSN 2067-8177, Volume 1, Issue 1, 2010
influences their decision making without weighing the cost and benefit
of the decision made on pricing. This paper is aimed at looking at the
various factors that influences pricing decisions, theireffect on price and
what the end result will be on profit appropriately.

4.3. Objectives of the Study :-

At the end of the work, it is expected that the following objectives,

which serves as the driving force behind the topic at hand will be
achieved.
1. Evaluate some of the factors that influence the product pricing policy
an organization will adopt.
29
2. Evaluate the role of quantity demanded for a product on the pricing
policy adopted by an organization
3. Evaluate the role cost play in the pricing of products .Some of the
questions posed by the researchers in this study include; will change in
product price lead to a significant change in sales turnover? What is the
effect of change in price on profitability? This paper is structured such in
a way that section two that follows introduction presents the literature
review and the theoretical framework. Methodology is section three;
sectionfour presents the survey results and the discussion of the results
while section five is conclusion and recommendations.

2 . Literature Review and Theoretical framework

4.1.0. Pricing

Every multinational business entity is set up with the primary objective

of making profits and several considerations underlying their profit
motive come to bear in determining the pricing of their goods between
associated parties. A business, whether small or big, simple or complex,
privat or public is created to provide competitive prices. Most India
small business owners lack the knowledge and skills of basic marketing
ingredients, such as marketing research, market segmentation and
market planning and control, which thereafter leads to poor quality
products, un awareness of competition, poor distribution, and poor
pricing methods. The poor pricing methods thereafter lead to poor
product pricing, which will eventually affect sales (demand) and finally
the profit of the business. In a developing country like India, with low
income and high level of poverty, a company that wants to succeed
should offer its product at the price the consumers can bear. But often,
small manufacturers set prices of their products arbitrarily without
regard to consumer characteristics in the environment .

4.1.1. Basic Concepts in SMEs :-

There is no universally accepted definition of Small and Medium

Enterprises, as a term, many scholars and researchers have defined the
term Small and Medium Enterprises from different

30
angles and perspective. The definitions even change with time
depending on the level of development of the country (Akinbinu
2003:8). The State Bank of India (SBI) defines a small scale enterprise as
an enterprise whose total cost, excluding cost of land but including
working capital, is above N1.0 million but does not exceed N10.0
million (Aregbeyen 1999:7; SBI:1996:7). The Small and Medium
Industries and Equity Investment Scheme (SMIEIS) defines Small and
Medium Enterprise (SME) as any enterprise with a maximum asset base
of N200 million excluding
land and working capital and with the number of staff employed not less
than 10 or more than 300. Small and Medium Enterprises (SME) have
been defined along a broad range of size and type. In terms of size,
measures used to classify SMEs include employment, assets and
revenue. Below is a summary of the various definitions from different
organizations and on different basis of classification .

4.1.2. Importance of Small and Medium Enterprises :-

Historical facts show that prior to the late 19th century, cottage
industries, mostly small and medium scale businesses controlled the
economy of Indian Independence, the business climate was almost
totally dominated .These companies primarily engaged in bringing into
the country Indian made products, thus rendering our resources idle,
and those who use the materials export them to their various home
countries for production. The industrial revolution changed the
statusnnquo and introduced mass production, while the twin oil shocks
during the 1970s undermined the mass production model, which
triggered an unexpected reappraisal of the role and importance of small
and medium sized enterprises in the global economy. It is worthy of
note that the introduction of the Structural Adjustment Programme
(SAP) during the ground for self employment, after which many
industries and companies sprang up in every sector of the economy, thus
marking a new beginning in the industrialization of Indian. The role
SMEs play in development of countries is acknowledged universally.
Findings by economists over the years show that small firms and
entrepreneurships play amuch more important role in economic growth
and development .

31
• Employment Generation :- The problem of unemployment has
reduced, as a lot of youths, retired workers and out of school graduates
are now gainfully employed, thus becoming a job creation avenue. The
introduction of the entrepreneurial development program in
School has also sensitized most students of the need to have their own
business and not rely solely on the white collar jobs.

• Rural Development :- The need for space and nearest to source of

raw materials, has led many business owners into the rural areas, which
thereafter results into the development of the host community. SMEs
constitute major avenues for income generation and participation
in economic activities in the lower income and rural brackets of
developing societies especially in agriculture, trading and services, and
the employment opportunities offered apparently reduces rural-urban
migration and allows for even development.
• Economic Growth and Industrialisation :- SMEs are the vibrant
tool for the economy, as national economic development prospects
hinge on entrepreneurial energy of vibrant SMEs as most big business
enterprises grew from small scale to become big icons, and as they grow,
they protect nations from the geographical cost-benefit permutations of
a few multinationals who are ever prepared to close up their businesses
and relocate at the slightest provocation or appearance of economic
downturn.

• Better Utilisation of Indigenous Resources: There are many

untapped human and physical resources, which can only be harnessed
through the establishment of small and medium enterprises. The
considerable low capital outlay required for setting up SMEs enables
them to convert minimal resources into productive ventures, they also
offer veriTable outlets for technological advancement especially in
businesses with rudimentary technology requirements.

4.1.3. Challenges faced by Small and Medium Enterprises in India

:-
SMEs in India have faced a lot of challenges, which despite their
potentials and the benefits they have to offer has impaired their growth
and development. These challenges vary from keen competition, to high
cost of infrastructure, demand, which has thereafter led to the closure of

32
some of these companies. Before the Structural Adjustment Programme,
the problem was mainly finance, but after the introduction of SAP and
various programmes by the government to sensitise
the people on the need for industrialization, the challenges changed
considerably, from finance to demand and other problems. Specifically,
successive governments in India have in the last three decades shown
much interest in ensuring adequate financing for Small and Medium
Enterprises (SMEs), by establishing various schemes and specialized
financial institutions to provide appropriate financing to the subsector.
The failure of most of these schemes revealed that the problem of SMEs
in India is not limited to lack of long-term financing, but also inadequate
management skill and entrepreneurial capacity . As part of the effort of
the India government, to help the Small and Medium Enterprises in
India, the Industrial Development Centres (IDCs) were established to
provide consultancy and extension services for small and
medium industries in the country. Industrial Development Centres
provide basic functions, which include giving marketing counsels
regarding pricing, packaging, sales strategy, advertising and marketing
methods for the promotion of sales of their products. The first IDC was
established in 1962 by the Eastern India governments’ Ministry of Trade
and Industry.

It was later taken over by the federal government in 1970. Today, there
are over 21 IDCs in the country, with just about six of them operating
minimally . Institutions such as the Industrial Training Fund (ITF), Raw
Materials Research and Development Council (RMRDC), Federal
Institute of Industrial Research (FIIRO), Project Development
BRAND. Broad Research in Accounting, Negotiation, and
DistributionISSN 2067-8177, Volume 1, Issue 1, 2010
Agency (PRODA), and Centre for Management Development (CMD)
have in their activities supported the promotion of SMEs in the country
through technical, training and extension services programs.
Taking a close look at some of the challenges faced by SMEs in India, it
was deduced that finance is not the main problem, but poor
management of the available funds .

33
4.1.4. Small and Medium Enterprises and Pricing :-For an
organization, to compete favorably with its peer in the same industry, it
must be able to meet the demand of the people, as well as set the right
price for the right product. Low cost and high quality infrastructure
service tends to improve price competitiveness . In
the same vein noted that governmental policies should be directed to
overall production efficiency of the SMEs, which will in turn lower
costs at the same time increasing the purchasing power of the
consumers, when the prices are reduced. Besides reducing costs,
increasing
the efficiency will also position the SMEs in the cluster to compete
effectively in an open economy. The efficiency gained in local market
will project them as well towards an export oriented production system
and possibly help to integrate them effectively into the global economy.
4.2.1. Pricing and Organizational Objectives :-

Without a goal, it is said that a man will live like a goat, so also without
an organizational goal, a company will only be moving round the circle
without direction, and it is the overall organizational goal set by the
management of a company that serves as the driving force, towards
which everyone in the organization will drive towards. In every
organization, there is always the general organizational goal, as well as
the departmental goal, and the various departmental goals are framed in
line with the overall organizational goal. Various goals are set by the
organization and
these directly and indirectly affect the pricing policy of the organization,
which is expected to be tailored in line with the overall goal. A nonprofit
making organization will always look forward to satisfying its customers
only, therefore the pricing policy will be towards minimizing cost and
customer satisfaction.
• Increase Sales: Organizations that want to increase the turnover of
their product may need to fix price at a level that the consumer will
accept it as being commensurate with the benefits of the product.
• Increase Market: Organizations may set price because of the need to
reach out to aparticular part of the market, thereby increasing their

34
market size. When this objective is set, price should be set in a
competitive manner to attract new customers and retain old
customers.
• Profit Maximization: Profit maximization is the main organizational
goal for any profit making organization. To achieve this objective, price
must be set strategically in such a way that maximizes revenue and
minimizes cost.
• Market Penetration: When a producer wants to enter the market, he
can adopt this strategy, by setting price below or at par with the price of
existing or similar products, not considering the effect .
Company Image: An organization might want to build up its
organizational image, by setting price in such a way that it provides an
insight into the quality of the product.

4.2.2. Factors Affecting Pricing Decision :-

When pricing decision is to be made, some factors have to be put into

consideration, so that the decision will not affect the overall objective of
the company. Some of the factors which must be considered among
other things include:
• Cost of Production: For effective pricing, the total cost of production
must be fully ascertained, leaving no stone unturned. The fixed cost as
well as the variable cost must be determined and all the various costs
that may be incurred in the marketing process must be inculcated e.g.
advertising expense, transportation, etc. When cost is not fully
ascertained, pricing decision becomes faulty and when the price is
wrong, it will definitely affect the income of the company and eventually
may affect the survival of the business, especially for the new business
and also the small and medium enterprises. Alongside with the other
factors that affect pricing decision, cost is a factor that must be looked
into critically.

• Nature of market competition : The nature of market competition

must also be consideredwhen pricing decision is made. For a business
that is in a monopolistic market, competition may not really affect the
pricing decision, but a business in the oligopolistic market or a free
market, where competition is tense, this has to be considered before
price is set. In a

35
situation where the market leader dictates the price and others follow,
the price of the market leader must also be considered and in a situation
where the price of substitute goods will affect the price of the product,
this is very important.

• Customers and market segment: When a producer knows his

customers, he will be able to set his prices accurately. The market
segment must be carefully identified and the amount they will be willing
to pay for the product identified. For the producers of cars, there are
different models for different set of people, thus producing varieties for
different set of
people. There are some products which are mainly for the elites, while
some are for the masses. A producer of products for the masses will
need to consider the per capita income of the people before making his
pricing decision.

• Demand: For a new product, there is need to price such product

strategically in such a way that it penetrates the market, even if it will be
at par with the total cost, while for a highly demanded product, an
increase in price may not really have a high effect on the demand for
such products, so is the need for management when making pricing
decisions to consider the
demand for the product. Some companies who receive order from
customers may decide to reduce their price per unit or increase their
discount, when it is noted that demand from a customer is high, and this
may be on the other way round, depending on other factors considered
by the management.

• Consumer behavior and perception: Consumers attitude and

perception about the product must be considered, when making pricing
decisions. The company should consider if an increasee in price will lead
to an increase or a decrease in demand, and vice versa.

• Channel of distribution: The cost of distribution and the channel of

distribution must also be considered when the price of a product is to be
set. It must be considered if the product will be supplied directly to the
final consumer or has to pass through the various channels of

36
distribution. For a product that has to pass through the wholesaler, to
the retailer and then to the final consumer, the profit of these middle
men as they are called must be considered, so that the final price set by
the retailer will not affect demand negatively. In some situations, the
producer may need to set a standard price, which is known by the
wholesaler, the retailer
as well as the consumer. For example the Indian Bottling Company has
set a standard price for the sale of a 35cl bottle of Coca Cola in Nigeria
to as at this date, thus both the consumers and the retailers are aware
of the standard price.

• Macroeconomic trends: The macroeconomic trends of the country

must also be put into consideration when pricing decisions are made. In
an Table economy, where cost of living increases, without a change in
the income of the people, an increase in the price of a product may
affect demand for that product, so also when there is an increase in the
income
of the people, increase in the price of a product may not necessarily
affect the demand for that product at that point in time.

• Company Objective: When pricing decisions are made, they must be

in line with the overall company objectives, as this is what will inform
what the pricing objective really is, so that the pricing decisions made
will not be against the company objective.

4.2.3. Pricing Strategies :-

The pricing strategies to be adopted by a company differ and are
influenced by some of the factors stated earlier in this study. Some of
the pricing strategies that may be adopted when pricing decision is made
include among others:

• Market penetration strategy: This is the process of setting a

considerable price, which will be affordable for the customer, thus there
may be need for price reduction in order to gain acceptance and thus
create speed for the product in the market.

• Market skimming: This involves setting a product price high initially

and later reducing the price to improve sales. It is used mostly for newly

37
introduced products so that consumers will not react negatively to an
increased price to meet cost or make profit. When the price is reduced,
consumers may see it as an advantage for more patronage. However,
this strategy may not work for some products where increased price is
attributed to greater prestige and products with numerous substitutes in
the market.

• Loss leader pricing: Where a product is sold at a lower price

probably at a loss in order to attract customers who might then buy
other items at normal price. It is used when consumers resist prices
charged by sellers.

4.2.4. Pricing Decision and Cost :- In any organization, profit

making, nonprofit making, private enterprise, public enterprise,
manufacturing or service rendering, before the price of a product or
service is set, the cost of putting it in a sellable condition must be
considered.

4.2.5. Product Price and Competitors Price :-

Stated that when firms are engaged in strategic competition, a higher
speed of diffusion causes the individual firm to decrease the price, thus
competition either directly or indirectly has an influence on the price of
products, but vary from company to company,
depending on the nature of the product and the industry in which the
company operates. In an industry where there are few producers of the
product or few market leaders, competition may not be the main factor
to consider when setting price, but for small and medium enterprises,
who
operate in an industry where there are market giants already, their
pricing policy will be influenced by the competitors price. An example is
the case of Indian Bottling Company, amongst the producers of other
products in Indian, this company indirectly regulates the price of soft
drinks in
Indian, therefore the 7-Up Bottling company has to either set its price at
par or below the price per unit of the products of the Indian Bottling
Company, so also any company that wants to operate in that industry,
for them to remain in business.

38
4.2.6. Ways of Changing Prices :-

There are various ways of changing price, with respect to changes in cost
of production and changes in other intervening variables, which may at
the long run affect the long term objectives of the company, if not
changed. Most organizations only pay attention to the amount of money
to be
received from the customer, without taking a close look at the quantity
of goods delivered. One way to change price is to change the quantity of
money or goods and services to be paid by the buyer. Another way is to
change the quantity of goods or services provided by the seller . This a
major approach adopted by most of the producers of biscuits in India.
When the cost of production increased, an attempt was made to increase
the price of a pack of biscuit, from N5 to N10, and after discovering
that the attitude of buyers changed negatively, these producers resolved
to reduce the quantity of biscuit and thereafter introduced new products
that sold for N10. The third way is to change the quality of goods and
services provided.

• Underselling: To set realistic prices, you need to be aware of all costs

involved in producing your product or service. This includes easy to
track costs such as the price of parts and supplies, as well as less tangible
costs associated with the skills and knowledge you bring to the Table.
Some entrepreneurs set prices that do not account for all of these
expenses. They may forget to add in overhead such as utilities or rent, or
have difficulty
putting a price tag on the value of their time. One approach service-
based businesses use to determine a fair rate for their offerings is to set
an hourly wage to charge for services. They then multiply this figure by
the total number of hours it takes to complete a job to determine a
project's overall price.

• Following the competition: Basing your pricing structure on the

competition's can be dangerous because the costs competitors use to
calculate prices may have little relation to your own. They may pay
suppliers less or more than you do, buy different technology, and have
larger or smaller marketing budgets. That said, it does pay to know how
much competitors charge so you can confirm that your prices are

39
realistic for the market. If you BRAND. Broad Research in Accounting,
Negotiation, and Distribution 1, Issue 1, 2010
notice your figures are much lower than competitors', check to be sure
you haven't leftsomething out of the pricing equation.

• Competing on price: Setting prices solely to beat the competition is a

shaky proposition. You're bound to attract buyers this way, but they are
unlikely to be loyal customers. If low cost attracted them to your
business, they may abandon your company when a less expensive option
comes along. A better approach is to differentiate your business from
competitors in other ways, such as superior customer service, enhanced
product features, or finer quality.

• Waiting too long to raise prices: Increased demand or the rising cost
of supplies may put you in the position of having to decide whether or
not to raise prices. Some business owners avoid increases because they
fear customers will react negatively. In many cases it's a better strategy to
make regular, small price increases than to hit customers with one large
increase.
In other words, a 10 percent price increase is likely to draw more
negative attention than two 5 percent increases.

• Dropping prices without changing delivery: Some clients may try

to negotiate a better deal from your company. This can put you in a
difficult position, especially if you run a service-based business.
Delivering an agreed-upon order for a lower price can inadvertently send
the message that your initial prices were too high, and all future business
is open to price negotiation. A better approach is to agree to a lower
price, but change the delivery terms slightly. For example, if you're
negotiating the price for a three-month long technical installation, you
might agree to a lower project cost if the number of weekly meetings is
reduced or monthly reports are streamlined. Another option that makes
sense for large orders is to position lower rates as volume discounts.

• Setting random prices: Some customers may insist upon having an

understanding of how your pricing structure is designed, so it is critical
to be able to justify the prices you charge. In addition, unless you have a

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clear sense of how costs relate to your prices, it will be difficult for you
to identify when the right time is to adjust the amount you charge.

4.3. Methodology

The main objective of this research is to find out the effect of change in
product price on the sales turnover of that product and the overall profit
of the organization, using Small and Medium Enterprises in India as a
study focus. In applying the general framework of the accounting pricing
theory, this study focused on providing answers to the following
research questions: will change in product price have a significant impact
on the sales turnover of the product? Is the change in the cost of raw
material the only factor responsible for change in product price changes?
What is the
effect of product price changes on the profitability of companies?

4.1. Measures

To measure the relationship between the change in product price and

the sales turnover, the questionnaire was structured to contain
respondents’ occupational level and position in the organization, as well
as the respondents’ involvement in price changes in the organization.
Also the
Financial report of the sample company was measured to examine the
effect of price change on sales turnover. Check for the validity and
reliability of the instrument was provided by ensuring that items that
most related to independent and dependent variables are built into the
instrument in line BRAND. Broad Research in Accounting,
Negotiation, and Distribution of the advices of several experts. The
respondents were made to indicate the degree of their agreement with
the statements on the questionnaire about themselves. Both open and
close ended questions were asked (hybrid) thus a hybrid type of
questionnaire was designed. Also close
ended questions was used to ask the respondents if they have changed
the price of their product before.

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Several items relating to both dependent and independent variables form
part of the contents of the instrument. The Student t-test analysis tool
was used in testing the null hypothesis.

4.2. The sample

A sample size of 200 respondents was randomly selected from the

population of the Small and Medium Enterprises in the Ogun and
Lagos State Nigeria was used. Our target was on managers who have
changed their product price before. A total number of 166
questionnaires were
found useful for the study.

4.3. Data Collection and Variables

The variables used for this study are variables relating to pricing decision
and sales turnover.
These variables include cost of sales, demand, sales turnover,
profitability, etc.

4.4 Discussions and Recommendation

In conclusion, it can be said that the price of a product will affect the
profit of organizations, either positively or negatively, depending on how
the price is fixed. A good product pricing will affect the profit of the
organization positively, and thus when pricing is not effectively fixed, it
will
Impair the profit of the organization. The following are some of the
recommendations proffered by the researcher: The Indian Government
should help the small and medium enterprises in providing advisory
services, which will also improve their level of productivity and the
nation at large, Small and Medium enterprises in India should take time
out to conduct market research, because this is a toll that can be used for
effective pricing, The organizational objective should be visited when
making pricing policy.

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 CONCLUSION

Based on the findings of this study of determining the influence of price

change on consumption of fast moving consumer goods, the researcher
made the following
conclusions:
1. Price does affect sales: a high price means low sales, while low prices
mean high sales .

2. The firm sets prices to break even on the cost of making and
marketing a product or set prices to make a target profit. The
organization determines the price at which it will break-even or make
the target profit it is seeking.

3. The organization uses a number of techniques o communicate price

changes to its customers.

4. From the data collected, it was evident sales promotion does affect
product marketing. This implied that sales promotion indeed does
increase the sale of a company. In addition, it implies that sales
promotion enhances open and honest communication, which is a key
organization building block for developing successful relationships.

5. From the data collected, it was evident that sales promotion

represents thecustomer main link of the firm. Moreover, through the
efforts of the successful salesperson, a company can build relationship
with customers that continue long beyond the initials sale.

6. Quality of products can be viewed as a strategic means to gain

competitive advantage in the market place for example most
organizations include service representatives as part of their sales team
to ensure that customer concerns with present products are addressed
and remedied at the same time new business is being solicited. Some of
the strategies adopted . Purchase decisions are based on how customers
perceive prices and what they consider to be the current actual price-not
the marketer’s stated prices.

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7 . The analyses above, it can be said conclusively that the null
hypothesis is rejected and the alternate hypothesis accepted, thus the
quantity demanded for a product has a significant effect on the price of
the product fixed by an organization, which affects the profit and also
the change in price has a significant effect on quantity demanded.

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