Proposal on Effects of Pricing Strategies on Sales Volume
CHAPTER ONE
OBJECTIVE OF THE STUDY
The following objectives will be looked into
- To identify effect of price skimming on customer retention
- To determine the effect of market parity pricing on sale volume
- To ascertain whether pricing strategy affect consumer behavior
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual framework of Pricing Strategy
Pricing strategy is a marketing strategy (Varadarajan, 2010). The communication and signaling of an organization’s pricing strategy affects the distribution channel, which includes competitors and customers, as well as the internal sales force. However, the effects of pricing strategy on the sales force have been established only anecdotally (Lancioni et al., 1993; Strahle et al., 1996). Competitive market response to a pricing communication or signal may be retaliatory behavior involving a price war, or cooperative behavior in which the competitor raises prices to the new established referent price (Ramaswamy, Gatignon, & Reibstein, 1994; Palazon and Delgado-Ballester, 2009; Gu, Kim, Tse, & Wang, 2010). Considerable literature focuses on customer responses to a pricing strategy. Some examples of these responses include changes in perceptions of value (Munnukka, 2006; Sharma & Iyer, 2011), in perceptions of quality (Tellis, 1986; Jacobs, Ratliff, and Smith, 2010), and in demand (switching) (Holden & Nagle, 1998). An important contribution of this domain of literature is the awareness that the price of an item “enters either as an attribute in the evaluation stage of the choice process or as a constraint in the ultimate choice,” (Rao, 1984, p. 41). The significance of price and quality is emphasized across consumer choice strategies (Tellis & Gaeth, 1990). Moreover, price is also underlined in high quality brand choice strategy as consumers continue to maximize value by evaluating the quality against the price paid. In general, the typical pricing strategy has a long-term orientation and requires periodic choices between maximizing profit margins and increasing/protecting market share (Lancioni et al., 1993; Rao, 1984; Tellis, 1986). To increase market share, companies may choose the fast approach of buying market share through deeply discounting the price, or the slower approach of gaining and holding market share by adding value or service at no additional charge to the customer (Lancioni et al., 1993). Regardless of the approach, growing market share represents a trade-off against maximizing profit margins. On the other hand, a pricing objective of profit maximization includes activities that focus on identifying the market price or the highest price the customer is willing to pay, and then establishing and maintaining that price level (Nagle, 1983; Nagle & Hogan, 2007). With a profit maximizing approach, a company typically identifies similar customer groups and offers levels of pricing based on transparent customer buying thresholds (Nagle, 1983; Nagle & Cressman Jr, 2002).
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
In this chapter, we would examine the methodology adopted in this study to scientifically present and analyze the facts drawn from various sources. Research methodology is the specific procedures or techniques used to identify, select, process, and analyze information about a topic. In a research study, the methodology section allows the reader to critically evaluate a study’s overall validity and reliability.
