ABSTRACT
Companies
utilize various types of pricing determinants in an effort to attract and
persuade customers. However the application of these pricing strategies is yet
to attain maximum satisfaction for customers in many paint companies. This
study, therefore examined the effect of pricing determinants on customer
satisfaction of selected paint manufacturing companies in Abia State, Nigeria.
Survey research
design was adopted for the study. The population of the study is 6,050
comprising the entire staff of five selected paint manufacturing companies in
Abia State. Taro Yamane formula was used to derive the sample size of 488. A
structured questionnaire was administered resulting in a response rate of
89.5%. A confirmatory factor analysis was done to establish validity of the
questionnaire. A coefficient alpha (Cronbach’s alpha) test ranging between
0.823 to 0.933 was done to access the internal consistency reliability of the
instrument. The data gathered was analyzed with the aid of Statistical Package
for Social Sciences (SPSS) version 21.0 software involving frequency
distributions and linear regression.
Findings
revealed that buying behaviour has a significant effect on customer complaint (r = 0.640, R2 = 0.409,
p = 0.000< 0.05);
operational cost has a significant effect on customer attitude (r = 0.701, R2 = 0.491,
p = 0.000< 0.05).
Also, the findings show that there is a significant effect of government policy
on service delivery (r =
0.753, R2
= 0.567, p = 0.000<
0.05);
and competitors’ action have a significant effect on customer loyalty (r = 0.692, R2 = 0.479,
p = 0.000< 0.05).
From
the study, it is evident that pricing determinants variables, namely,buying
behaviour, operational cost, government policy and competitors’ action, have a
significant effect on customer satisfaction variables: customer complaint,
customer attitude, service delivery and customer loyalty in the selected paint
manufacturing companies in Abia State. Based on the findings, the study
recommends that marketing management in manufacturing companies need to adopt
an effective pricing determinants so as to reduce complaint from customers,
enhance a positive attitude from the customers, deliver quality services to
them and ensure loyalty from the customers that will indicate satisfaction from
the customers.
CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
In
the competitive environments, investing in customer satisfaction is a means of
creating a sustainable advantage, given that it serves as a link between
purchase and consumption with important post purchase development, such as
loyalty and word of mouth (Muogbo, 2013). Today, firms especially the paint
firms have realized how important it is to understand, meet and predict
customers’ needs. Customers have also become increasingly conscious of their
value to these firms. Due to the highly competitive nature in the manufacturing
sector, paint companies have become more interested in assessing their
customers’ satisfaction, being aware that the higher the customer satisfaction,
the greater the inelasticity of demand for their products. Thus, paint
manufacturing companies need to determine the factors that affect customer
satisfaction, in order to assess the balance between customer expectations and
the paint manufacturing companies’ services offered and identify their major
advantages and disadvantages (Guilaninia, 2008).
Strategic
management is the process of decision making, coordinating, planning, and
taking actions by the top managers of a firm in order to achieve certain goals
and objectives. According to Dauda, Akingbade and Akinlabi (2010), strategy is
a detailed plan for a business in achieving success and since business involves
a lot of risk, an ill planned strategic move could result in loss of millions
of Naira, bankruptcy of business or even loss of thousands of jobs (Dauda, et
al., 2010). One of the strategies to compete effectively in the business world
is the pricing determinants. Thus, this calls for strategic management in order
to develop an effective pricing determinants (Dess, Lumpkin, & Eisner,
2007). This implies that top managers should allocate the necessary resources
in order to bring the intended strategies to reality (Dess, et al., 2007).
Furthermore,
there is a rapid change in recent business environment which has made the
competition among industries to increase (Muogbo, 2013). To compete
successfully, firms need to develop some strategies and take some actions which
may include: enhancing product quality and productivity, reducing cost of
production, promoting product innovations and improving the speed at which the
product is delivered to the market and to the customers. Firms also need to
strive to meet up with the changes that are occuring globally, gain competitive
advantage position and improve performance relative to their competitors
(Muogbo, 2013).
According
to Guilaninia (2008),pricing determinants involve segments,
ability to pay, consumer behaviour, market conditions, government policies,
competitor actions, trade margins and input/operational costs, amongst others.
Price is among the four (4) P’s of marketing namely: Product, Place, Promotion
and Price, five (5) P’s of marketing which are: Product, Positioning, Place,
Promotion and Price and seven (7) P’s of marketing Product, Place, Promotion,
Price, People, Process and Physical Evidence (Guilaninia, 2008). Price can be
seen as the amount of benefit a consumer pays for having or using the product.
If the customers accept it, it is appropriate, otherwise it would be changed
immediately (Guilaninia, 2008).
However, price is the most
flexible elements of marketing, unlike the other characteristics of the goods
that depend on the use of a distribution channel, price can be changed very
easily (Guilaninia, 2008). Furthermore, price setting and competition are the
problems which many executives in marketing face. Among several pricing
strategies, managers can choose their favourite type. The overall aim of
pricing is to enhance sales and profits worldwide (Kigan, 2001). Thus, any firm
that is concerned with the production and rendering of goods and services
respectively, has to initially answer the question of what to produce and for
whom to produce? Secondly, firms have to answer the question of how much the
actual and potential customers will be able and willing to pay for the goods.
This curiosity about price fixing and other different interfering factors such
as cost of producing goods, government factors, price of competitors, demand
for goods, environmental/social factors and so on, concerned in fixing prices
of goods and services, have proved to be a headache to many paint manufacturing
firms in Nigeria (Obigbemi, 2010).
Furthermore, decision concerning price is a
very important decision a firm has to make, because it will affect their
objectives, directly or indirectly (Obigbemi, 2010). A business whether big or
small, complex or simple, public or private, is designed to provide prices that
are competitive (Ayozie, 2008). Hilton (2005) stated that setting prices for
the products or services of an organisation is one of the essential decisions
managers have to face as well as one of the difficult decisions because of the
number of factors that have to be put into consideration. However, Lovelock and
Wirtz (2004) argued that the most important tactic to a successful pricing
determinants is managing firms’ revenues in a way it will support their goals.
This will lead to the question of how well can the firm supplement the
different factors that affect pricing decisions, in order to achieve their
objective, which is to gain customer satisfaction. Therefore,
the focus of this study is on pricing determinants and customer satisfaction of
selected paint manufacturing companies in Abia state, Nigeria.
1.2 Statement
of the Problem
The relationship between a company and a
customer in the past was purely based on the company producing the best quality
product in order to maintain the relationship, however, therelationship between the two parties has
recently taken a new turn making customers’ the main focus in maintaining
relationships (Gaiardelli, Saccani & Songini, 2007).
In the face of constant
technological and economic changes, today‘s consumer is more curious, more
educated and conversant with what they really want. The changes have also
affected the need of firms, thereby making marketing managers to face huge
problems in weighing the behavioral forces and in handling the marketing mix with focus on the resources, which they have to consider when developing
marketing programs to fit the needs of their firm (Muogbo, 2013). Philips
(2009) noted that customers would prefer paying less, sometimes, they would
rather prefer not to pay at all but
it is simply not feasible to give away products without price. An
organization that does that will go out of business and would not be able to
create value for the customer (Philips, 2009).These constitute problems that affect the organizations’
output.Consumers worldwide have various
views about products based on their prices, however, product pricing for
consumers is a strenuous task. This is true due to the fact that a high price
may cause a negative feeling about the product, and also a low price can be
deceptive as regards the quality of the product (Philips, 2009). Decisions
affecting the distribution, product and price for large markets are special as
well unique to every industry, this has constituted a great challenge to
managers who have not considered it to be able to have a negative influence on
customer buying behavior and this has led to complaints from unsatisfied
customers. Based on the above,
the effect of buying behavior on customer complaints is been investigated.
Pricing
has been identified as one of the difficulties a decision maker faces when
trying to place a price on a product or service (Rohani & Nazim, 2012).
Sije and Oloko (2013) noted that executives are complaining that pricing is a
big headache and one that is getting worse day by day. Markets have largely
been characterized by improper pricing, taking into consideration market
demand, costs and competition. In Nigerian market, the inability of firms to
freely set prices without considering the policies of their competitors
concerning price, has led to a decline in profit margin made by many companies
(Rohani & Nazim, 2012). If the price is too high, the firm’s product will
not be competitive in the market and if it is too low, the firm may not
break-even (meet operational cost). The operational cost of the paint
manufacturing firms has been high and this has led to the constant increase of
the prices of the firms’ products and has led to a negative customer attitude towards their product, which in
other hand has also resulted to the under productivity of the firms due to low patronage. (Rohani
& Nazim, 2012). Based on the
above, the effect of operational cost on customer attitude is examined.
According
to Egwakhide, Nyor and Terzungwe (2012), the levying of additional taxes by the
government in order to subsidize the public service enterprises has had an
adverse effects on the manufacturing companies. This is because manufacturing companies have to pay
more in the form of additional taxes and their ability to break-even is
adversely affected. When the
government covers the losses of public service enterprises by giving subsidies
through taxation, it cripples the productive capacity of the manufacturing
companies by way of over taxation of their facilities. This will also
affect the quality of services rendered to customers (Egwakhide, Nyor & Terzungwe, 2012).Based on the
above, the effect of government policy on the quality of services delivery by
enterprises is evaluated.
Uslay (2012) proposed that firms’
inabilities to advance and protect their strategic positions often come at
great cost. Customers who are aware of the price of just one retailer are
“loyal” customers, whereas customers who know the prices of many retailers are
“switchers” and switchers give strength to competitors. Studies have shown that
there are higher number of switchers than loyalists in the market thereby making it
extremely difficult for organizations to decide on their pricing strategies.
The segmentation of switchers in pricingpolicyhasled
to disjoint between organizational goals and customer demands (Koca &
Bohlmann, 2008). Subsequently, with the introduction of
information technology which has made the world a global village, it is now
easy for customers to get price information of many firms as fast as possible
(Uslay, 2012). This has made competitions among firms stiffer, thereby making
pricing decisions to be a herculean task for managers (Koca & Bohlmann, 2008).
Based on the above, the effect of competitors’ action on customer loyalty in
the paint manufacturing companies is evaluated.
However,
the study identified four gaps namely: buying behaviour, operational cost,
government policy and competitors’ action which have prevented the management
of the selected paint manufacturing companies to attain maximum customer
satisfaction.
1.3 Objective of the Study
The
main objective of this study is to investigate Pricing determinants and
customer satisfaction of selected paint manufacturing companies in Abia state,
Nigeria. The specific objective are to:
1. assess the effect of buying
behaviour on customer complaints in the paint manufacturing companies in Abia
state;
2. determine the effect of operational
cost on customer attitude in the paint manufacturing companies in Abia state;
3. investigate the effect of government
policy on service delivery in the paint manufacturing companies in Abia state
and
4.
evaluate the effect of competitors’
action on customer loyalty in the paint manufacturing companies in Abia state.
1.4
Research Questions
The
proposed study seeks to answer the following research questions:
1. How does buying behaviour affect
customer complaints in the paint manufacturing companies in Abia state?
2. To what extent does operational cost
affect customer attitude in the paint manufacturing companies in Abia state?
3. How does government policy affect
service delivery in the Nigerian paint manufacturing companies in Abia state?
4.
What
effect does competitors’ action have on customer loyalty in the paint
manufacturing companies in Abia state?
1.5 Hypotheses
The
hypotheses for the proposed study are as follows: the hypotheses were tested
0.05 level of significant
H01: buying behaviour has no significant effect
on customer complaints in paint manufacturing
companies in Abia state.
H02: operational cost does not significantly affect customer
attitude in paint manufacturing
companies in Abia state.
H03: government policy has no significant effect
on service delivery in paint manufacturing
companies in Abia state.
H04: Competitors’ action have no significant
effect on customer loyalty in paint manufacturing
companies in Abia state.
1.6 Scope of the Study
This
study investigated Pricing determinants and customer satisfaction of selected
paint manufacturing companies in Abia state, Nigeria. The identified variables
of pricing determinants have been examined as well as that of customer
satisfaction. Abia State is made up of seventeen local (17) government areas
with two major cities namely Umuahia and Aba. All the paint manufacturing
companies are sited in these major cities which have five (5) local government
areas in it out of the seventeen (17) local government areas. Hence, because of
the wide scope of paint manufacturing companies in these two major cities, the
researcher therefore limited the research to the following five (5) major paint
manufacturing companies namely: Chemlap Nigeria Limited, Nicen paints limited, Saclux Industries Nigeria Limited,
Clover Paints Nigeria limited and Berger
Paints Nigeria Plc, which were selected from the five
local governments areas that make up the cities namely: Aba south L.G.A, Aba
North L.G.A, Osisioma Ngwa L.G.A, Umuahia South L.G.A and Umuahia North L.G.A.
This
study evaluated pricing determinants and customer satisfaction in Abia State.
Variables identified for pricing determinants have been examined alongside
those identified for customer satisfaction. Manufacturing industry was selected
because of their importance to the development of the nation and because there
is a high level of pricing determinants
employed by them to ensure customer satisfaction in their operations and
in getting their products out into the market through the middle-men to the end
users. Well-structured
questionnaire was used to obtain data for this study. Theuse of stratification to group respondents into locations such as Aba South, Aba North, Osisioma, Umuahia South and
Umuahia, was also employed. Then, the random sampling techniques was used to select the designated paint
companies for each region.
The target respondent for the study consists
of the total number of management personnel as well as supporting personnel
working at the strategic level and operational level within the firms. The
total figure for the population arrived at, based on survey of few selected
firms, was six thousand and fifty (6,050) personnel. Information with regards to the
population number was sourced from the Human Resource Department (HRD) of the
firms. Using Taro Yamane (1967) formula for sample size determination, the
study was able to arrive at a sample size of four hundred and thirty three
(488) respondents including a provision for thirty percent non respondent. The
stratified sampling method was used because of the stratification variables
included in the scope of the study. The research is focused on paint
manufacturing companies that are operating in Abia State, Nigeria.
1.7 Significance of the Study
The
general understanding of this study would serve as a useful guide to
management, practitioners, executives, corporate managers in the manufacturing
industry. It would help them to understand how factors affecting pricing
determinants such as buying behaviour,
operational cost, government control/policies and competitors’ action, affect
and the extent of its effect on the attainment of customer satisfaction by the
companies.
The
study would also enable the selected companies and the manufacturing industry to
proactively respond to changes within their environment more effectively. It
would l also enable the management of these companies to realize the necessity
of implementing better pricing strategies in the industries. This study would
enable stakeholders in the manufacturing industry to understand that employing
all these resources together would enable them produce a unique capability that
is rare and distinct to the company.
It
would also enable the government to create better policies and regulation that
would enhance development and growth in the manufacturing sector of the
economy. Findings from this study would enable the society to be more informed
about the pricing determinants as they relate to customer satisfaction. It
would also provide more knowledge concerning pricing determinants and reveal
what makes it to vary from one company to another. Lastly, it is also hoped that these findings
would contribute to the body of knowledge and stimulate more researcher’s
interest in this field of study.
The
variables of this study are operationalized as follows:
1.10.5 Nicen Industries Limited
Y = f(X)
Y = Dependent Variable
X
= Independent Variable
Where:
Y
= customer satisfaction
X
= pricing determinants
Y = (y1, y2,
y3, y4)
Where:
y1 = customer complaint (CC)
y2 = customer attitude (CA)
y3 = service delivery (SD)
y4= customer loyalty (CL)
X
= (x1, x2, x3,x4)
Where:
x1 =buying behaviour (BB)
x2
=Operational cost (OC)
x3
=Government policy (GP)
x4=competitors’
action (CA)
The
working equations are:
y1= f (x1) ………………………………. Equation 1
y2= f (x2) ………………………………. Equation 2
y3= f (x3) ………………………………. Equation 3
y3= f (x4) ………………………………. Equation 4
Y=f (x1, x2,
x3, x4 + et) ………………………………. Equation
5
The
variables in Equation 5 are the working Equations to be evaluated in this
study.
y1 = a0 + ß1x1 +
et
y2 = a0 + ß2x2 +
et
y3 = a0 + ß3x3 +
et
y4 = a0 + ß4x4 +
et
1.9 Operational Definition of Terms
The
proposed operational definitions of terms for this study are:
Pricing
determinants: factors that determines the setting of
prices of goods in order to attain organizational goals and objectives through
prices on products and services. Almost
all companies, large or small, determine the prices of their products and
services on production, labour and advertising expenses but for this
study buying behaviour, operational cost, government policy and competitors’
action were examined to communicate to the target market.
Customer satisfaction:
a state in which a consumer of a product or service shows that his/her
expectations, needs or desires have been met.
Buying behaviour: The response or reaction of a consumer towards a situation or change made
by an organisation.
Operational
cost: expenses incurred while
carrying out production activities in the firm.
Government
policy: The act of setting laws by
the government to regulate or check the activities of various business
organisations.
Competitors’
action: activity oforganisations
that produce similar products or services, which are in contest for the
acquisition of highest number of customers.
Customer
complaint: An act of complaining by a customer to
show dissatisfaction towards a product or service rendered.
Customer attitude:The way a customer perceives and
behave towards a product.
Service
delivery: the act of providing a
distinctive characteristics, standard and quality service to customers.
Customer
loyalty: a state of being loyal or
having allegiance to an organisation. In other words, it is an act of not
switching from one organisation to another.
1.10
Historical Background of the Paint
Companies Selected for the Study
This
is the brief historical development of the firms selected for the study.
1.10.1Chemlap Nigeria Limited
Chemlap Nigeria Limited is a paint
manufacturing company and other products like resin, adhesives, plastics and polymerizing vinyl chloride
(pvc) gums. It was incorporated in 1983 and commenced manufacturing in 1985.
Chemlap Nigeria Limited is the first pioneer company in the manufacturing of
Resin in south-east Nigeria and later went into manufacturing of paints. It has
depots in eight (8) states of the federation which include Lagos,
Abuja, Kano, Jos, Benin, Uyo, Onitsha, Enugu, with its Headquarters at Aba, Abia state. This company
from inception has distinguished itself in achieving high quality products and
services which have earned it wide market recognition and patronage in Nigeria.
The company is purely indigenous with staff strength of
one thousand seven hundred and ninety eight (1798).
1.10.2 Saclux Industries
Nigeria Limited
Saclux Industries Nigeria Limited took its feet in the early 1970’s as a
trading concern with the name “Sammy Bros Nigeria” in line with his quest, passion
and drive to fashion a viable business, the Chairman/CEO, single-handedly
supervised and nurtured the outfit basically with the concern of dealing on
paints. By 1981, Sammy Bros Nigeria won the heart of discerning end-users of
paints as a major distributor to so many manufacturing companies in Nigeria.
Consequently upon its position in the surface coating, the need to establish a
paint company was muted. However, in 1986, production of Saclux paints
commenced under the business name Saclux Industries Nigeria Limited. In the
same 1986, Saclux Industries Nigeria Limited was incorporated as a Limited
Liability Company with RC. NO 79691.
Saclux Industries Nigeria
Limited is today a company and a major player in the Manufacturing sub – sector
of the Nigeria economy, with a staff strength of nine hundred and fifty nine
(959). In view of its expansion, the company in 2007 moved into its permanent
industry complex located at Ohokobe – Afaraukwu Ibeku along Old Aba Road
Umuahia, while at the same time retaining and maintaining its old factory at
Amuzukwu – Ibeku also in Umuahia.
1.10.3 Berger Paints Nigeria Plc
Berger Paints
Nigeria Plc, started operation in Nigeria on the 9 January, 1959. It has grown
to be a leader in the Coating and Allied Industry in Nigeria - a legacy
inherited from Lewis Berger, the German colour chemist who founded the Berger
Paints' dynasty in London, in 1760. Their other well-known brands such as Luxol
(Clinstay), Super Star, Classic, etc continue to enjoy extreme popularity across
Nigeria today.
Operating in 5
business segments; Decorative/Architectural finishes, Industrial coatings,
Marine & Protecton coatings, Berger/KCC Heavy Duty coatings,
Automotive/Vehicle refinishes, wood finishing and Preservers, with 16 depots,
Colour World centres and a countrywide distribution network of dealers and Mega
dealers in strategic locations spread throughout the country, the company is
well placed to serve the growing requirements of the Nigeria market.
In 2012, Berger
Paints Nigeria Plc entered into partnership arrangement with the biggest Heavy
Duty Coating manufacturing company in South Korea, KCC Corporation to jointly
serve the Nigerian Paints and Coating market. This partnership affords their
customers the quality and durability that marine and protective market have
found synonymous with the KCC marine and heavy duty brands. Berger Paints
Nigeria Plc is located at 137 Aba/Owerri Road, Umungasi, Aba
North, Abia, Nigeria.
1.10.4 Korama Clover Industries
Korama Clover Industries has a combined staff
strength of seven hundred and fifty four (754). The company which is an
indigenous privately owned paint and plastic manufacturing firm was
incorporated in October 1983. Korama Clover Industries Limited produces high
quality Clover Paints range of products for Household decorative and Hi-tech
coatings, industrial and marine paints, Sinclair Automotive and protective
coatings, as well as fillers, lacquers and wood finish. It has a good
distribution network, with twelve (12) sales depots strategically located
nationwide, which include Calabar, Port Harcourt, Owerri, Onitsha,
Benin, Lagos, Kano, Kaduna.
Nicen
Industries Limitedproduces high quality range of emulsion paints,
gloss paints, car paints and plastics products for household decorative and
Hi-tech coatings. It has
depots in several cities of the federation which include Lagos,
Abuja, Port Harcourt, Kano, Benin, Onitsha, etc, with its Head Quarters at Aba, Abia state. It has a
combined staff strength of six hundred and seventy five (675). Nicen industry
limited was incorporated in 1997 and commenced manufacturing in 1998.
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