EFFECTIVE PRICING STRATEGIES FOR
PURCHASING OF NEW PRODUCTS (A CASE STUDY
OF ROYALUZ BY HARDIS AND DROMADES LTD, IN
This study focussed on effective pricing strategies for
purchasing of New products a case study of Royalux by
Hardis and Dromades. The objectives of the study are as
- To determine the methods used by Hardis and
Dromades in setting prices for their new product –
- To determine how prices of Royalux affect its
demand, position and market shares.
- To find out how customers respond to different prices
of different quality of products.
The scope of the study was limited to Enugu
Metropolis. In sourcing for the required informtion, the
researcher used both primary and secondary data which
collected through oral interviews and administration of
three sets of questionnaire one for the management and
relevant staff of Hardis and Dromades, others for
consumer and distributors. Bowloy’s formular was used to
determine the sample size of consumers while Topmans
formular was used for Distributors whist a census survey
was used for the management/ relevant staff of Hardis
and Dromades. Data were organized, analysed, interpreted
and summaried using tables, percentages, pie chart and
histogram, and chi-square statistics were used to test the
three hypotheses formulated.
Based on the analysis, the following finding were
- That Hardis and Dromades products become a
household name in Enugu.
- That the firms cost of production was given the
highest consideration in setting price for Royalux.
- The high cost of transportation and handling cost
contributed to increase in price of Royalux
- That the wholesales and consumer of Hardis product
were encourage to a reasonable price to buy Royalux.
TABLE OF CONTENT
Table of content
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Formulation of hypothesis
1.5 Scope of the study
1.6 Definition of term
2.0 Literature review
2.1 Overview of pricing
2.2 Objective of pricing
2.3 Pricing strategies
2.4 Factor influencing price (Determination)
2.5 Impact of pricing on the purchasing of New product
2.6 Pricing strategies Adopted for purchasing new
2.7 Pricing strategies for the purchasing of Royalux.
3.0 Research methodology
3.1 Sources of data
3.2 Research instrument used
3.3 Population of study
3.4 Determination of sample size
3.5 Sampling techniques
3.6 Method of data analysis and treatment
3.7 Questionnaire administration
3.8 Limitations of study
4.0 Data presentation, analysis and interpretation
4.1 Presentation and analysis of data
4.2 Test of hypothesis
5.0 Summary of findings, recommendation & conclusion
5.1 Summary of findings
1.1 BACKGROUND OF THE STUDY
Purchasing operates within a dynamic environment
and today’s companies are wreathing with customer
values and orientations; economic stagnation,
environmental decline, increased global competition, and a
host of other economic political, social and pricing
challenges which if Ignored will be detrimental to the
company. Purchasing is concerned with getting the right
product to the right customer at the right price.
Price for a product is one of the factors that
determine the demand for the product, that is why
economic theory states that price is determined by the
interaction of demand and supply cost and price usually
affect demand and these three are in continuous inter
play. For economist, it is a key factor describing the level
and movement of demand. The basic assumption made
about demand is that all things being equal, price plays a
decisive role in determination of the rate of purchase by
the consumers. Price presents a thorny but interesting
phenomenon under our current economic system.
Traditionally, price occupies the second position of
the internal or important variables of the purchasing mix
otherwise known as 4ps.
Product, price and promotion, place pricing decision
aspect of a firms purchasing programme arises partly
from the fact that of all the elements of the purchasing
mix, price is the only one that generates income and
revenue while the next represent lost to the firm (Adirika,
Ebue and Nwachukwu 1996:59). Price is also one of the
flexible elements of other elements of the purchasing mix
unlike, product features and channel commitment, price
can be changed quickly and if price is well blended with
way in achieving better result. Price is a very sensitive
issues facing a company of which a company cannot do
without because of that, it can make or mar a company’s
image. Price communicates to the market the company’s
interview value/positioning of its products/services.
No company will want to incur loss through the sales
of its products. Inspite of this firms want to achieve
certain level of customer satisfaction translated in price
terms, that is why both manufacturers and marketers use
price to accomplish multiple objectives price may be use
as a clue to product quality while conveying to the
customers that a seller has high quality goods and
services. Price wears many hats, stated by (Mark 1979) of
the authors in pricing strategies and this emphasizes the
crucial role of pricing in the survival of a company. At the
same time price are pricing competition is the number one
problem facing many purchasing executives. Yet, many
companies do not handle pricing well. The most common
mistake are: pricing that is too cost oriented; prices that
are not revised often enough to take the rest of the
purchasing mix into account; prices that are various
enough for different products, market segment and
Historically prices usually were set by buyers and
sellers bargaining with each other sellers would asked for
a higher price than they expected to get and buyers would
offer less than they are expected to pay. Through the
bargaining process, the would arrive at acceptable price
individual buyer pay different prices for the same
products, depending on their needs and bargaining skills.
Historically, price has been the major factor affecting
choice. This is skill trade in poorer nations, among poorer
groups, and with commodity products. However, non-price
factor have become more important in buyers – choice
behaviour in recent decades.
A company may decided to divert into a particular
market at a specific price level as it develops a product
accordingly, this is called pricing strategy. The
organization aim at the most valuable price level that is
ripe for exploitation or that meet its market objective at a
profit, once the price level has been established necessary
variation in price structure from day to day and from time
to time are tactical.
But if you have a good product, do not spoil it by
trying to sell it too cheaply because Nigerian Consumers
associate high price with quality product even though it is
a price consumed community.
From the above, “Price” constitute an important or
essential area of study, because price of a product is not
seen by the purchaser simply in terms of what is the
cheapest price rather and element in the total bundle of
satisfaction which constitute a product in the consumers
Therefore, it is a means of increasing primary
demand per a product, a firm may like to fix a price that is
likely to increase wider consumer acceptance and
consequently increase the volume of a product. Both the
manufacturers, the purchasers and likewise buyers look
at price differently.
The manufacturer and the retailers view the price
relating to how good his accounting method are how much
profit he may be capable of making price is expressed in
terms of Naira and kobo or any other monetary medium of
exchange and it tells the purchaser what the cost will be
to him. Although cost is not necessary regarded purely in
terms of immediate ash payment in order to own a
Therefore, pricing function is handled different ways
by different organization. In small organization, price
decision is made by top management while in large
organization it s handled by lower manager and
purchasing department in accordance with top
management pricing objective, policies, strategies and
A purchasing firm should, therefore adopt such
pricing strategies that will lead to the realization of not
only the pricing objective but also the normal corporate
goals of the firm.
Schewe and Smith (1980: 134-137) identified two
broad pricing strategies which purchasing can adopt in
setting the prices of new products. These are setting an
initial high price for the product (Skinghind Pricing
Strategy) and/or setting an initial price (penetration
pricing strategy) aimed at facilitating consumer
Hardies and Dromades Nigeria Limited was
incorporated in Nigeria as a private liability company in
October 11th 1993 with its registration number as 232241.
On October 10 1996, it was duly registered to be Mixing,
compounding, manufacturing, preparing Dispensing and
selling of drugs, poisons dispensing lotion, soaps etc at
the provision of pharmacist council of Nigeria. Its
functions amongst other business were to carry on
manufacturing of hygiene household products.
The company is located at Emene in Enugu with
branches in almost all the big cities in Nigeria. This
research work centers on the company’s effective pricing
strategies for purchasing of a New Product – Royallux.
Pricing can determine especially at the introductory stage
of a new product the success or failure of the product in
Hardis and Dromades manufacturing firm adopts
both low pricing strategy and high pricing strategy in
purchasing its new product – Royallux. The low pricing
strategy their new product – Royallux as fast as possible
in order to generate substantial sales volume and a larger
market share while the high pricing strategy makes it
possible for the firm to recover its product cost and other
expenses as quickly as possible (Stanton 1984:79). This
decision is influenced by a number of factors such as
customers demand schedule, the cost function, the
competitors prices/reaction and the firms pricing
objectives and existing government regulation regarding
pricing generally. Vernon and Lamb (1986 : 60) stated the
importance of these factors in determining the prices of
varies from one company to another.
Because of the important of price in the purchasing
of new product that the researcher takes a critical look at
the effective of pricing strategies for purchasing of new
product with emphasis of Royallux.
1.2 STATEMENT OF THE PROBLEM
The research work is carried out to determine how
Hardis and Dromades apply their pricing strategies in
purchasing of the new product – Royallux. The question
is, does the customers see the company’s prices as being
in line with the value or quality of its offers from the
discussion held with customers of Hardis and Dromades.
Some complain that the price is high compared to the
product quality while some customers opined that the
price is in line with the quality of the product. Hardis and
Dromades incurred cost in the process of providing goods
for customers satisfaction, and one way of recovering
some of these cost is through effective pricing strategy.
Therefore, there is need for manufacturing firms to
adopt, pricing strategies that will enable them at least to
recover production overhead cost and make profit. Thus,
he determination of pricing strategies adopted by Hardis
an Dromades in Enugu in the pricing of their new product
– Royallux will form the central problem of this research.
Finally their problems include identification of the
factors which determines or influence the price elastiity of
demand experience – curve effects, competitors prices in
similar goods, which consequently, determine the choice
of pricing strategies by the firms and also in the
purchasing of Royallux.
1.3 OBJECTIVES OF THE STUDY
The objective of this study is to determine effective are the
methods used by Hardis and Dromades in settling prices
for their new product – Royallux.
- To determine how prices of the new product affect its
demand, position and market share.
- To find out how consumers respond to different
prices of different quality of products.
- To Know the pricing strategies necessary to achieve
the companies sales goal with regard to Royallux.
- To evaluate the pricing strategies of the company in
increasing patronage for Royallux
- To determine how prices can enhance the
profitability of the company’s product.
1.4 FORMULATION OF HYPOTHESES
The following hypotheses were formulated to help in
carrying out this study.
H01 – The pricing strategies adopted by Hardis and
Dromades for Royallux does not lead to
increased sales of the product.
H1 – The pricing strategies adopted by Hardis and
Dromades for Royallux had to increased sales of
H02 – The pricing strategies adopted by Hardis and
Dromades does not lead to repeat sales of
H2 – The pricing strategies adopted by the company to
increase repeat sales of Royallux.
H03 – The pricing strategies Hardies and Dromades for
Royallux have negative impact on the profit of
H3 – The pricing strategies adopted by the company for
Royallux have a positive impact on the profit of
1.5 SIGNIFICANCE OF THE STUDY
A product’s price is a major determinant of the
market demand for it. Price affects a firm’s competitive
position and its market share is imperative for purchasing
firm to understand and take cognizance of the pricing
practice of other competitors and effective prices for its
product. Therefore, this research will be useful to other
different brands product firms by enabling them to gain a
useful insight into the effective pricing strategies of the
purchasing firm whose operations and activities in one
way or the other, effect and influence their own (different
brand product firm) activities.
The consumer public will also benefit from this study
since they will come to know why marketers prices are
high or low, they will also be in a better position to know
the best company industrial or consumer product.
The readers will benefit from the study as the
information contained would widen their scope of
understanding and knowledge in the area of study which
will stir up further investigation.
Finally the study oil make the researcher to acquire
more knowledge in the field of researching
1.6 SCOPE OF THE STUDY
This study is centered on Hardis and Dromades Nig. Ltd –
Enugu which is located in Emene. The research examined
the pricing strategies used by the above-mentioned firm
for the purchasing of Royallux in Enugu metropolis.
1.7 DEFINITION OF TERMS
The following terms used in this study should be taken to
mean the following:
It is all important task of identifying, anticipating and
satisfying human needs and want through exchange
process as efficiently and as effectively as posible (Adirika
They are goals which management attempts to achieve
with its pricing structure and strategies (Adrika, Ebue &
It is anything or idea that can satisfy a need or a want
(Adirika, Ebue & Nnolic 1997: 114)
It is the major pattern of major objectives, purposes or
goals, essential policies and plans for achieving a company
goals in such a way to define what business the company
is in or is to be in (Philip Kotler 2003:118)
It is a systematic means by which purchasing manager
adopt in reaching the stated objectives, goals of an
organization with the maximum available resources (Philip
Kotler 2003: 286).
This is a setting an initial high price on a new product (Ani
This refers to a reduction from the base price of a product:
usually they are offers to buyers for buying in large
quantities, and paying services for the seller (Philip Kokler
Pricing is the moved or other considerations exchanges for
the ownership of the goods or services (Edoga and Ani
2000: 218 – 319).
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