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EFFECT OF MARKETING MIX STRATEGIES ON PERFORMANCE OF SELECTED

DAIRY CO-OPERATIVE SOCIETIES IN SOUTH RIFT, KENYA

BY

GEORGE ALAKIM

REG. D53/KER/PT/23042/2012

A PROPOSAL SUBMITTED TO THE SCHOOL OF BUSINESS IN PARTIAL


FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF
BUSINESS ADMINISTRATION OF KENYATTA UNIVERSITY

SEPTEMBER 2015

DECLARATION
I declare that this research proposal is my original work and that it has never been presented to
any University for examinations purpose for a ward of degree.
Signature

Date

Students Name: KENNEDY SOITA


Registration: D53/KER/PT/23042/2012

This proposal is submitted for oral defenses with my approval as the university supervisor

Signature .

Date

DR. CHRIS SIMON KIPKORIR


For and on behalf of Kenyatta University

Signature

Date

DR. STEPHEN MUATHE


Chairman, Department of Business Administration
Kenyatta University

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ACKNOWLEDGEMENTS
I thank the almighty God for answering my prayers to have an opportunity to study for a master
degree course, for giving me life, strength, wisdom and courage to face that challenge involved
in the study. My sincere appreciation goes to my wife Jacinta for the encouragement and moral
support she gave me since I started the course.
Special thanks go to my course lecturers Dr. Chris Simon Kipkorir, for guiding me through this
project. I also thank the management of Shirika Sacco society for the credit facilities advanced to
me for fee payments in time.
Lastly let me recognize the contributions made by my course lecturers, my classmates, friends
and my work mates especially Mr. Otii for the moral support.

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DEDICATION
I wish to dedicate this project to my daughters Esther and Sarah for inspiring me to study for a
Master Degree course. Special dedication goes to my uncle Mr. Zablon Maruti Mola (deceased)
for the encouragement.

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ABBREVIATIONS AND ACRONYMS


EAC: East Africa Community
KCC: Kenya Cooperative Creameries
PWC: Price Waterhouse Coopers

OPERATIONAL DEFINITION OF TERMS


Marketing Mix refers to tactical marketing tools of product, price, and promotion.
Performance is a measure of marketing high volumes of products given scarce resources.
A co-operative society is a business organization that is formed, operated and controlled by
owners who are also the patrons.
Dairy cooperatives are cooperative societies dealing with milk and milk products.
Management committee is the board of management that is vested with the authority to run the
co-operative society on behalf of the shareholders.
Effects refers to the effect of strategies on overall performance of dairy cooperatives
South Rift as used in the study refers to Kericho and Bomet County
Strategy: Strategy is a specific statement which a cooperative plans to attain its product and
price objectives.

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TABLE OF CONTENTS
DECLARATION ............................................................................................................................ ii
ACKNOWLEDGEMENTS ........................................................................................................... iii
DEDICATION ............................................................................................................................... iv
ABBREVIATIONS AND ACRONYMS ....................................................................................... v
OPERATIONAL DEFINITION OF TERMS ............................................................................... vi
TABLE OF CONTENTS .............................................................................................................. vii
ABSTRACT .................................................................................................................................... x
CHAPTER ONE ............................................................................................................................. 1
1.0 Introduction ......................................................................................................................................... 1
1.1 Background of the study ..................................................................................................................... 1
1.2 Statement of the problem .................................................................................................................... 7
1.3 Objectives of the study........................................................................................................................ 8
1.3.1 General objective of the study ......................................................................................................... 8
1.3.2 Specific Objectives .......................................................................................................................... 9
1.4 Research Hypotheses .......................................................................................................................... 9
1.5 Significance of the study ..................................................................................................................... 9
1.6 Scope of the study ............................................................................................................................. 10
1.7 Assumptions of the study .................................................................................................................. 10
1.8 Limitations of the Study.................................................................................................................... 10

CHAPTER TWO LITERATURE REVIEW ............................................................................... 11


2.0 Introduction ....................................................................................................................................... 11
2.1 Theoretical Review ........................................................................................................................... 11
2.1.1 Product Life Cycle theory .............................................................................................................. 11
2.1.2 The theory of Constraints ............................................................................................................... 14
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2.2 Empirical review ............................................................................................................................... 16


2.2.1 Review of literature on effect of product strategy on performance of co-operative societies ....... 22
2.2.2 Review of literature on effect of price strategy on performance of co-operative societies............ 25
2.2.3 Review of Literature on effect of promotion strategy on performance of co-operative societies.. 27
2.2.4 Review of literature on performance of business organizations .................................................... 28
2.3 Conceptual Framework ..................................................................................................................... 29

CHAPTER THREE RESEARCH METHODOLOGY ................................................................ 32


3.1 Introduction ....................................................................................................................................... 32
3.2 Research Design................................................................................................................................ 32
3.3 Target population .............................................................................................................................. 32
3.4 Sampling design ................................................................................................................................ 33
3.5 Sample size ....................................................................................................................................... 33
3.6 Data collection .................................................................................................................................. 35
3.6.1 Validity .......................................................................................................................................... 36
3.6.2 Reliability....................................................................................................................................... 36
3.7 Data analysis ..................................................................................................................................... 37
3.8 Ethical considerations ....................................................................................................................... 38

REFERENCES ............................................................................................................................. 39
APPENDICES .............................................................................................................................. 51
Appendix I: Questionnaires .......................................................................................................... 51
Appendix III: Budget .................................................................................................................... 57
Appendix IV: Time Schedule (2015) ............................................................................................ 58
Appendix V: Krecjie And Morgan Table .................................................................................... 59
Appendix VI: Dairy Cooperatives ................................................................................................ 60
LIST OF FIGURES AND TABLES
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Figure 1. Conceptual framework......30


Table3.1 Distribution of population by County..33
Table 3.1 Distribution of sample by County...34

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ABSTRACT
This research will focus on the effects of marketing mix strategies on performance of selected
dairy cooperatives in South Rift. It covers the product strategy, price strategy, and promotion
strategy. The study will be of benefit to the government for purposes of policy formulation as
well as a source of knowledge to other stakeholders in the co-operative sector. In particular it
will benefit the leadership of dairy co-operatives in areas of good performance. This research is
grounded on Product Life Cycle theory by Raymond Vernon which will be used to develop the
conceptual framework. The study will adopt cross-sectional research design. The study targets a
population of 360 committee members from 40 dairy cooperatives in Kericho and Bomet
Counties. Out of this 186 will be selected using the simple random sampling technique. Data will
be collected using structured and unstructured questionnaires. Content validity will be
determined by experts and through piloting while the reliability of the instrument will be
determined using Cronbachs alpha method. Data will be analyzed using inferential statistics
and presented using frequency distribution tables, graphs and charts. Findings will be organized
around the statement of the problem.
Key words: Marketing mix, Product strategy, Price strategy, Promotion strategy, Performance
of Dairy cooperative Societies.

CHAPTER ONE
1.0 Introduction
This chapter comprises the background of the study, statement of the problem, purpose of the
study, specific objectives, research hypotheses, significance of the study, scope of the study,
assumptions and the limitations.
1.1 Background of the study
Survival in a competitive business environment entails finding a right mix of marketing
strategies (Juma 2011). According to Bootwala et al (2009) marketing mix is a set of controllable
variables and their levels that the firm uses to influence the target market. Kumar (2010) supports
this and points out that it is the combination of methods employed by a business in order to
achieve its objectives by marketing its products and services effectively to a specific target
group.
Kitchen (2010) argues that the theory of marketing mix has evolved from a notion of mixer of
ingredients a term introduced by James Culliton (1948) during the study of marketing costs
conducted in 1947 and 1948. The principle of mixer of ingredients consisted of analyzing
various business processes and marketing efforts looked at as ingredients individually in order
to find the best combination for the improvement of the business. The concept of marketing
mix itself was introduced by Neil Borden during 1950s an initially implied different means of
cooperation (Borden, 1964). Initially there were 12 elements within the marketing mix concept
introduced by Borden: product planning; pricing; branding; channels of distribution; personal
selling; advertising; promotions; packaging; display; servicing; physical handling; and fact
finding and analysis (Goi, 2009). Suggestion was made by Frey (1961) to divide these elements
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into two groups: offering and methods and tools. Accordingly, offering group contained product,
packaging, brand, price and service, whereas the elements of methods and tools group were
distribution channels, personal selling, advertising, sales promotion and publicity.

According to McCarthy (1960) and Perreault and McCarthy (1999), a firm develops its
marketing strategies by first identifying the target market for its products or services. It then
develops a marketing mixa particular combination of product, price, promotion, and place
(i.e., distribution and delivery functions in the supply chain) designed to enhance sales to the
target market. A unique mix of these elements in a given industry allows firms to compete more
effectively, thus ensuring profitability and sustainability. For example, by coordinating various
product offerings and associated price discriminations with sales promotions and effective
logistics, a firm can increase its sales and profit. Since the industry has a significant impact on
the makeup of this marketing mix, dairy cooperative should develop strategies that take the
unique nature of their marketing into account.

Peter & Olson (2010) have argued that most successful companies in the world have excelled by
designing marketing strategies and ensuring that they remain committed to developing quality
products and services which they sell at a price that gives consumers high value.
Peter & Olson (ibid) further argue that companies are making changes to serve consumers better.
They point out that the dramatic success of Japanese companies, such as Toyota and Sony that
focus on providing consumers with value-laden products has spurred other companies to follow
suit. They further point out that previously many U.S. companies could sell almost anything they
were able to produce. That previously the consumers in the US had no problem with the level of
quality of goods and services produced in their home country until they discovered the superior
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quality and lower prices offered in many Japanese products hence the shift to foreign-made
goods. Their affirmation is evidenced by the fact that several U.S. companies had to redesign
their organizations to serve consumers in order to survive and compete not only in the U.S. but
also in world markets. Furthermore they acknowledge that many firms have adopted marketing
strategies and are now world leaders in their industries, while others have failed to do so and are
no longer strong competitors in their industries.
However, the researcher contents that the product mentioned by Peter & Olson (ibid) are
vehicles and electronic devices while the product considered under the study is milk whose
pricing strategies are also different.
A survey done in South Africa by Price Waterhouse Coopers Limited under the auspices of The
Africa Business Agenda, July 2012, indicated that South African marketing managers are not
using marketing strategies and tactics compared to developed countries. However, the results
showed that a huge number of these managers have given up on marketing and instead they have
become glorified sales people.
Juma (ibid) acknowledges that the East Africa Community (EAC) has reduced barriers and
increased regional trade by 50 percent leading to stiff competition especially in the dairy sector.
He therefore argues that this action makes it mandatory for companies to adopt marketing
strategies. He further argues that through marketing strategies, the opportunity for growth in
Kenya still exists. He concludes that some of the Kenyan organizations including dairy cooperatives have already taken full advantage of the marketing strategies to become the key
industry players.
The scholarly argument advanced by Juma (ibid) focuses on marketing strategies in relation to
competitiveness in general terms while the study concentrates on marketing strategies on
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performance of dairy co-operatives in the South Rift. Kaustin (1994) also acknowledges that
there is a challenge to organizations regarding the understanding, measurement criteria of
marketing strategies and more so the corresponding success of the strategies. Zou & Cavusgil
(2002) mention that there are ultimately four strategic perspectives which include price, product,
place and promotion. Contrary to this, a research carried out by Karuppur (1994) established that
there are mainly three strategies: standardization, multi-domestic, and various strategies that fall
between the two. Similarly contradiction is provided by Kaustin (ibid) who describes that global
marketing strategy approach can be divided into two options: modified marketing strategy or
standardized marketing strategy. Moon (2005) acknowledges Karuppurs (ibid) research that
despite the fact that his view on marketing strategies are collapsed into two pairs
(production/price and place/promotion).
The researcher asserts that due to the argument advanced by Kaustan (ibid) there is need to
undertake the study on the basis of success of the marketing strategies. The researcher opines
that the concept of production as mentioned by Moon (ibid) automatically leads to creation of the
product. He therefore argues that the paired product/price is hard to separate especially when the
product is milk. It is on this basis that the topic of research was coined. He further argues that
what is learnt from Karuppur and Moon (ibid) is that marketing strategies are generally not
linked to any variable(s). However, he points out that the marketing strategies considered under
the study are linked to performance.
. Sales promotion has effects on various aspects of consumers purchase decisions such as brand
choice, purchase time, quantity, and brand switching (Nijs, et al., 2001). Thus, sales promotion
becomes an integral part of the marketing strategy for reaching the target market and it is the
responsibility of marketing managers to combine elements of promotional strategies, which is
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promotional mix into coordinated plans. The importance of the excessive promotion in a
competitive market environment has generated a lot of interest in marketers and firms to develop
numerous and comprehensive promotional approaches (Adaramola, 2010).
A research done by Ailawadi et al (2001) yields that promotion and advertising are marketing
tools for customer retention. However, a study by Alsem et al. (1996) confirms that creating
long-term relationships with customers is considered as the main company marketing focus of
approximately 60% of the companies surveyed. Promotion involves any purposeful
communications employed by channel members to inform, remind, and/or persuade prospects
and customers regarding some aspect of their market offering. In channel relationships,
promotion is a portfolio of persuasive tactics that can be wielded with the purpose of informing,
changing preferences and attitudes, positioning and/or repositioning products, and, ultimately,
stimulating sales. But the contemporary view also posits promotions as a means of relationship
building.
Blythe (2006) viewed sales promotion as any activity intended to generate a temporary boost in
sales. This includes several communications activities pursued in an attempt to provide added
value or incentives to consumers, wholesalers, retailers, or other organizational customers to
stimulate immediate sales. Such efforts are usually geared towards stimulating product interest,
trial, or purchase. It is specifically designed to boost quick sales and ultimately create loyalty.
Aham (2008) is of the opinion that sales promotion emerged as a reaction by manufacturers
marketers, and marketing strategies alike to find a short term solution to the problems of excess
stock of goods which are available in variables manufacturers warehouses but are not demanded
by consumers and organization. Sales promotions are comparatively easy to apply, and are likely
to have abrupt and considerable effect on the volume of sales (Hanssens et al, 2001). According
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Kotler and Armstrong (2002), consumer promotion is a category of sales promotion including
free samples, winning contests, different price packs, and sweep stakes. Sales promotion is
projected to increase the sales of final ultimate consumers of the product.
Sommers & Barnes (2001) acknowledge that promotions are critical to influence the behavior of
retailers and others who resell or distribute the product. They further point out that there exists
three major types of promotion i.e. personal selling, mass selling, and sales promotions where
sales promotion efforts include free samples, coupons, contests, rebates, and other miscellaneous
marketing tactics. Keegan & Schlegelmilch (2001) contend that increased rebates attract more
intakes of the insurance products and that promotion creates advertisements that work in
different countries and cultures. Keegan & Green (1999) supports this argument and point out
that companies standardize the promotion, by creating advertising messages which are effective
all around the world. This is further supported by Onkvisit & Shaw (2004) who have argued that
standardization of the promotion means that same promotion is used in all countries in the world
without any changes.
Mulford (2013) established that Kenyan Government policies have influenced marketing
strategies and sales patterns in the dairy industry. He points out that the liberalization of the dairy
sector in early 1990s marked the end of state-managed, Kenya Cooperative Creameries (KCC)
monopoly on milk processing and urban milk sales. Wambugu, Kirimi, & Opiyo (2011) supports
this position and argue that liberalization of the dairy sector in Kenya provided a window for
more than thirty private processors to enter the market, with three processors Brookside Dairy
Limited, New KCC and Githunguri Dairy Farmers Cooperative and Processors - accounting for
over 80% of the formal market. According to Wambugu, Kirimi, & Opiyo (ibid), the largest of
these, Brookside Dairy Limited, has a capacity to process 800,000 liters per day, and sources its
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milk from more than 185,000 smallholder farmers. This is further supported by Mulford (ibid)
who asserts that this is due to efficiency in all operation, from production systems to the entire
value chain process. The researcher appreciates this and points out that efficiency is an aspect of
performance. Ngigi, (2004) further argues that comparatively, unlike dairy cooperatives, private
processors provide demand and price stability via contract mechanisms.
On the basis of arguments and views advanced by many scholars, there is need to undertake the
study.
1.2 Statement of the problem
Dairy co-operative societies are by all intends and purposes supposed to be the panacea of the
plight of farmers especially in the developing countries. Well managed dairy co-operative
societies have been found to be an efficient way of marketing farmers produce, a system that
promises better payments, better services to the members and improved dairy products for the
consumer. However, poor performance in these dairy co-operatives still remains a big challenge
in the dairy sector. The decision by the Kenyan Government to liberalize the sector in 1999 only
resulted in stiff competition and the fight for market share (Wanyama, 2007). Inadequate dairy
handling equipments i.e. milk coolers, milk cans, quality testing equipments, and reliable means
of transport is a major challenge to the dairy co-operatives. Poor infrastructure in these dairies
i.e. lack of reliable source of water, power, and poor road network poses a big challenge
especially given that milk is a perishable product. Inadequate use of modern technology in most
of the dairy cooperatives hampers strategy implementation like new product design and
development and product differentiation. Most of these dairy cooperatives are managed by
committee members with low education background which hinders strategy implementation.

This is further exasperated by poor human resource policies where recruitment of staff is not
done professionally.
Manyara (2004) in his research revealed that liberalization of dairy cooperatives gave elected
leaders freedom to dangerously abuse their power. He argues that liberalization witnessed an
increase in cases of corruption, gross mismanagement by officials, theft of cooperative resources
and favoritism in hiring and dismissal of staff, challenges that still face dairy cooperatives to
date. A similar research by Kuria (2013) point out that in cooperatives, members incur huge
losses through mismanagement hence the need to have micro insurance cover for members to
cushion them from such losses. Most dairy products are homogeneous in nature and prices are
almost the same hence seasonal price fluctuations are often key factors causing famers to move
between formal and informal markets to sell their dairy produce. This also presents a challenge
to regulators in the sector in terms of provision of the necessary policy direction to make the
sector more vibrant.
It is on these bases that there is need to undertake a study on the effect of marketing mix
strategies on performance.
1.3 Objectives of the study
1.3.1 General objective of the study
The main objective of the study is to determine the effects of marketing mix strategies on
performance of dairy co-operatives.

1.3.2 Specific Objectives


i.

To examine the effect of product strategies on performance of dairy co-operatives in


South Rift

ii.

To investigate the effect of price strategies on performance of dairy co-operatives in


South Rift.

iii.

To determine the effect promotion strategies on performance of dairy co-operatives in


South Rift,

1.4 Research Hypotheses


Ho1: There is no significant relationship between product strategies and performance of dairy
co-operative societies.
Ho2: There is no significant relationship between price strategies and performance of dairy
co-operative societies.
Ho3: There is no significant relationship between promotion strategies and performance of dairy
co-operative societies.
1.5 Significance of the study
The findings of this study will be useful to relevant key stakeholders of dairy cooperatives in
South Rift. The findings will be used to facilitate effective management among cooperative
owners. The study will also be useful to the government in formulation of key policies in the
dairy sector for increasing performance in the management of dairy co-operatives. Again, the
study will contribute towards filling the knowledge gap on effects of marketing mix strategies on
performance of cooperative societies in Kenya as whole.

1.6 Scope of the study


This study will be conducted in 40 selected dairy cooperative societies in Kericho and Bomet
counties, South Rift. The study targets a population of 360 committee members. Out of this 186
committee members will be selected using the simple random sampling technique. The study
will also be limited to the application of the key variables of product, price and promotion
strategies and their subsequent effect on the performance of dairy co-operative societies because
of the resources employed by members through their management committees.
1.7 Assumptions of the study
(i) It is assumed that the respondents will co-operate and avail information needed for
purposes of the study in time.
(ii) It is also assumed that the records necessary for the carrying out of the assessment will be
availed during the data collection and that they are properly kept by the concerned dairy
cooperatives.
1.8 Limitations of the Study
A study of this magnitude cannot be possible without limitations. Some of the respondents may
not be willing to reveal true information needed for the study. This will be solved through
explanation of the benefits of the study to the respondents. The study will rely purely on
responses from the respondents and this may not give the actual position of the strategies put in
place by the respective cooperatives. The researcher, however, will minimize this by collecting
information from the society leaders and their chief executive officers who are involved in the
management of the cooperative societies.

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CHAPTER TWO LITERATURE REVIEW


2.0 Introduction
This section deals with review of related literature. The section consists of theoretical review,
empirical review, review of literature on the marketing mix strategies and their effects on
performance of dairy co-operative societies, performance of business organizations, and
conceptual framework.
2.1 Theoretical Review
According to Mertens (1998) the theoretical framework of a research project relates to the
philosophical basis on which the research takes place, and forms the link between the theoretical
aspects and practical components of the investigation undertaken. This means that theoretical
framework, influences all the decisions made in the research process.The starting point in
developing a research proposal according to Crotty (1998) is to identify the theoretical and
methods that will be utilized in the research project to justify their choice. According to Crotty
(ibid) theory relates to the strategy, plan of action, process design linking the choice and use of
methods for the desired outcomes. Kothari (2003) argues that theoretical review is related to
some abstract idea or theory that allows the researcher to have a philosophical stand.

2.1.1 Product Life Cycle theory


The Product Life-Cycle theory (PLC) is an economic theory that was developed by Raymond
Vernon (1975) to explain the observed pattern of international trade. It is an important concept in
marketing. Most discussions of product life cycle portray - the sales history of a product as
following an S-shaped curve. The curve is typically divided into four stages i.e. introduction,
growth, maturity, and decline. Marketers manage their offerings through the various phases of
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the PLC by using the marketing mix variables in their decision-making. These variables include
competitive pricing, price penetration, product differentiation and product positioning. The PLC
concept allows marketing managers to forecast and conduct strategic planning to manage their
products and/or services through the various phases of their respective PLCs. As argued by
Herbst (2001) the concept is used to determine current phases of the organizations products, and
available instruments to use in the management of these products after commercialization. The
theory assumes that the duration of each of the stages is fixed such that the product completes its
entire life cycle i.e. the product passes through all four stages of its life in a chronological order
with no reintroduction, bypassing or overlapping of products at any of the stages.

In this study however, the dairy products that follow the PLC theory are the branded and new
varieties of milk products packaged through dairy cooperatives. New markets emerge when a
dairy branded product is created to satisfy an unmet need. The innovator usually designs a
product for the mass market. Competitors enter the market with similar branded dairy products
leading to market growth. Growth eventually slows down and the market enters maturity. The
market undergoes increasing fragmentation until some firm introduces a powerful new attribute
that consolidates the market into fewer segments. Because competitors copy the new attributes,
the market demand for the present product will begin to decline. A company must plan
successive strategies appropriate to each stage in the PLC.

Product is the first and most important element of marketing mix. Product strategy calls for
making coordinating decisions on product mixes, product lines, individual products, and service
products. Strategic product decisions include: product attributes (quality, features, and design),
branding, packing and labeling. Brand decisions can add great value to a product and is therefore
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an intrinsic aspect of product strategy. Branding should differentiate dairy products from one
dairy cooperative and another. Different branded products are offered at different prices
depending on the quality and features.

Product positioning entails developing graphic representations that reflect how firm's products or
services compare to competitors' on most important dimensions of interest in the market. It is
based on the idea that a single product item does not usually appeal to all consumers. Branded
dairy products are therefore branded differently to suite different needs of the consumers. For
this reason, marketing strategies typically focus their marketing effort on specific groups of
consumer rather than on the whole population. Marketing segmentation is the process of dividing
a market into groups of similar consumer and selecting the most appropriate groups(s) for the
organization to serve through market targeting. A market is selected on the basis of size, profit
potential, and how well it can be defined and served by the organization.
Price determine the total revenue and to a large extent the profitability of any business. The goals
of pricing strategy are: to determine how much consumers are prepared to pay for a product, to
ensure that the company covers all costs involved in manufacturing and marketing the products
(direct and indirect) and to ensure that an adequate profit is made, so as to earn a satisfactory
return on investment. The price strategy is directly affected by the factors that make up the
competitive structure of the industry. Thus, in making any pricing decision, the following factors
deserve consideration: pricing objectives, cost, competition, the customer, and government
regulations. This can be related to the pricing of different dairy brands. Different dairy
cooperatives brand their product differently and charge different prices for each brand.

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Organization seeks a competitive advantage and synergy through a well integrated programme of
marketing mix variables tailored to the needs and wants of customers in the market segment
through segmentation, targeting and positioning. The concept of the marketing mix variables for
physical products was formally defined by Neil Borden (Van Waters hoot & van Bulte, 1992)
and redefined over the years and are referred to as the traditional marketing mix. This traditional
marketing mix consists of the marketing mix variables (4Ps) product, price, placement and
promotion. This study however focuses on the product and price marketing strategies and how it
influence firms performance. New dairy branded product follows the product life cycle with
strategies applied at every level of growth. Competitive pricing strategy is employed in trying to
capture market that is already filled with similar products. This strategy will get the attention of
the market that is price sensitive. It is similar to price penetration strategy. Price penetration
pricing also occurs at the early stage of the product life cycle where the newly branded milk are
taken to new markets with relative lower prices than other brands to get the product known to the
market. Product differentiation and positioning strategies occur in the initial and growth stage of
the product life cycle. These strategies are applied to make the product distinguished from other
dairy products that are already in the market.
The researcher acknowledges that there is no mention about performance in the PLC theory.
However, he asserts that the objective behind strategy development and implementation along
the cycle is performance improvement.
2.1.2 The theory of Constraints
Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M.
Goldratt in his 1984 book titled The Goal, which is geared to help organizations continually
achieve their goal. Dr. Eliyahu Goldratt conceived the Theory of Constraints (TOC), and
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introduced it to a wide audience through his bestselling 1984 novel, The Goal. One of the
appealing characteristics of the Theory of Constraints is that it inherently prioritizes
improvement activities. The top priority is always the current constraint. In environments where
there is an urgent need to improve, TOC offers a highly focused methodology for creating rapid
improvement. The underlying assumption of this theory that organizations can be measured and
controlled by variations on three measures: throughput, operational expense, and inventory.
Another assumption of this theory is that everything within a system is connected by cause and
effect relationships. Identification of the causes leads us to converge onto an apparent core
problem/contradiction/conflict.
A common approach in capacity management is to focus on the performance of each machine
individually and try to maximize the number of hours the machines are working.
This approach causes the sub-optimization of the system. It does not increase the overall
performance of the system because it does not guarantee that the product will be completed on
time. The solution to this problem is to understand that the capacity of a system is determined by
the bottleneck of the system. The system cannot produce more than the bottleneck can. The
bottleneck machine determines the pace of the system. So, no matter how much the management
improves the performance of a non-bottleneck machine, this improvement will only decrease the
cost of running that specific machine, but it will not have a great effect on the whole system. Just
improving the performance of a non bottleneck should not be the aim of the management.
Management must focus on the overall plant performance, rather than on individual machines.
And this can be accomplished by focusing on the bottlenecks
One of the most important decisions that a manufacturing company should make is to determine
the product mix that will maximize profits. Given that a company has capacity constraints, it
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may not be able to produce every unit of product demanded by the market. The best action to
take in this case is to focus on the most profitable products for the company and to use all the
existing resources of the company to produce these products. In this way the company can
increase its profitability because it will use its existing resources to produce the most profitable
products (Gurses, 2001).
The product mix problem is one of the most well-known applications of linear programming.
The problem includes determining both the quantity and the identification of each product to
produce. The main structure of the problem is to maximize profit from the mix of manufactured
products subject to constraints on the available capacity of resources. Determining the best
product mix of a company correctly is an important requirement to increase the profitability of a
company. To make right decisions, management needs more accurate information about the
optimal product mix and the restrictive bottlenecks of a company (Gurses, 2001). The theory of
constraints philosophy (TOC) and mathematical programming can provide management with
more accurate information about the optimal product mix of a company and can help to identify
the right bottlenecks that should be focused on to improve the system. The researcher
acknowledges that this can be applicable to many sectors including the dairy sector.
Having reviewed the two scholarly theories above, the researcher has settled on the Product Life
Cycle Theory (PLC) as the pillar of the study as it addresses most of the variables.
2.2 Empirical review
In a study done by Rajendran & Mohanty (2004) on milk marketing in India, it was revealed that
producers bargaining power and the lack of proper infrastructure for transportation, distribution,
and storage are other constraints which make milk procurement difficult. Furthermore, other
challenges in milk marketing were concerned with quality, product development, infrastructure16

support development, and global marketing thereby recommending for strengthening of the dairy
co-operatives.
An empirical study by Sarker & Kumar (2010) on co-operatives in West Bengal, found out that
although the inter-market (and intra-market) price variation for liquid milk under the cooperative
marketing agency is not far from uniformity, it fails to provide much economic benefit, either to
the producer or to the consumer, because of the burden of much higher fixed cost per unit of
liquid milk. The study concluded that both producers price and consumers liquid milk price in
all markets in both cooperative and private marketing channels are almost uniform and that all
types of market middlemen in the private marketing channel receive higher profit performance
compared to the cooperative channel. They also concluded that the marketing cost per unit of
milk is much higher in the cooperative marketing channel than in the private channel though
marketing performance in all markets does not differ much. But review on earlier research by
Gol (2004) concluded that marketing of milk and milk products in India is dominated by the
unorganized sector, and the organized sector handles only about 14 % of total milk production.
Another review by Rangasamy & Dhaka (2008) on the marketing of dairy products in
Coimbatore district established that marketing performance for all dairy products in dairy cooperatives has been observed relatively less than that of private dairies, except toned milk. The
study has observed that value addition in dairy products should be done without compromising
the quality and consumer-oriented market research and development should be accorded greater
attention.
In a study done by Mwebaze &

Kjaer (2013) found out that liberalization enhanced the

competitiveness of the dairy sector business which has attracted a big number of middlemen
17

including processors, leading to a significant increase in milk production. They however


acknowledge that regulation has been relatively successful and the Dairy Development Authority
(DDA) had promoted performance in marketing of milk in Uganda. In a study done by Muriuki
et al (2000) on dairy development in Kenya, it was found out that infrastructure plays a great role
on boosting marketing performance. They acknowledge that as infrastructure develops, markets
become more efficient and that urban consumers develop stronger preferences for pasteurized
milk.
In a study done by Chu (2013) on quantitative analysis of influence factors on distribution
performance of agricultural products in China, it was concluded that the level of information and
logistics infrastructure greatly influence the distribution performance of agricultural products
while the Logistics transportation and the professional level of labourers do not promote the
performance of agricultural distribution system.
In a study done by Rit (2014) on marketing performance of agricultural products in India, it was
concluded that performance of the agricultural markets cannot be judged solely by the structure
conduct performance framework (correlation coefficient and co integration analysis) or by the
marketing margin analysis. Instead it needs to be backed up by some additional evidences of
competitive conditions like low inter-market price differentials, possibility of inter-market trade
etc.
In another study done by Vargas JGH et al (2015) on organizational innovation in the
cooperative societies of fish production, it was concluded that innovation in the productive
process is important for the company to be more competitive and efficient in the market where
the company develops and continues to offer their products. However there have been several
studies of the marketing of liquid milk in both cooperative and non-cooperative dairy plants.
18

Sharma et al, (2007) in their study for example showed that there is great variation in the
marketing performance of different cooperative and non-cooperative milk producing firms in
different resource situations due to variations in marketing costs and marketing margins.
In a study carried out by Haring (2003) to analyze market performance and pricing strategies in
digital markets, the empirical results revealed evidence for lower prices and less price dispersion
which supports the hypothesis of enhanced market performance in electronic markets.
Furthermore, the results showed that an online shops virtual location influences its prices and
that price dispersion is partially driven by differentiation in retailer service.
A study done by Wanyama (2007) on the impact of liberalization on the cooperative movement
in Kenya found out that cooperatives in Kenya have survived the market forces and continued to
grow in number and membership and that market forces have triggered a structural
transformation that has seen the fading away of inefficient cooperatives. His study further points
out that those members in cooperatives were currently seeking better service provision hence the
need to diversify to record better performance.
In another study by Omore et al (1999), it was established that dairy cooperatives are the largest
players, while private dairy processors are thought to capture only some 12%. The study contents
that dairy cooperatives play an intermediary role by supplying both informal traders and dairy
processors, and that the market share of the dairy processors includes that share collected
through cooperatives which is then sold to the formal market (Staal et al., 1998).

19

Owango et al. (1998) found that between 1990 and 1995, the share of cooperative milk sales
going to dairy processors fell by more than half in some cases. The market policy change caused
dairy cooperatives to pursue the higher prices in the informal market.
Manyara (2004) pointed out that the performance of post liberalized dairy cooperatives lies
mainly on the management. These are evidences though failure to hold elections in cooperatives; favoritism in hiring and dismissal of staff; refusal by co-operative officials to vacate
office after being duly voted out; conflict of interest among co-operative officials and endless
litigations, all these affect the day to day running of the dairy cooperatives.
De Leeuw et al., (1999) argues that until infrastructural improvements occur, and because of the
readily available cheap human capital (labour) and the relative expense of financial capital,
smallholder dairy production and informal raw milk marketing are likely to predominate for the
foreseeable future. Consequently it is anticipated that the industrialized model of dairy
production, processing and marketing will remain a minor contributor in Kenya and elsewhere in
the region.
The researcher has reviewed the foregoing empirical studies on the topic under study. Sarker &
Kumar (ibid) contents that the middleman in the milk marketing enjoys high profits partly
because he is more efficient in the value chain as compared to both the co-operative and the
private milk marketing channels that are bogged down with high fixed costs. Rajendran &
Mohanty (ibid) only established some of the challenges in milk marketing as: poor bargaining
power and the lack of proper infrastructure for transportation, distribution, storage, quality,
product development, infrastructure-support development, and global marketing. De Leeuw et
al., (ibid) agrees and points out that until infrastructural improvements occur, and because of the
20

readily available cheap human capital (labour) and the relative expense of financial capital,
smallholder dairy production and informal raw milk marketing are likely to predominate for the
foreseeable future. This position is further supported by the scholarly work of Manyara (ibid)
who contents that dairy co-operatives are bogged down by a number of marketing challenges i.e.
failure to hold elections in co-operatives; favoritism in hiring and dismissal of staff; refusal by
co-operative officials to vacate office after being duly voted out; conflict of interest among cooperative officials and endless litigations which affect performance. The scholarly work of Chu
(ibid) supports this by pointing out that the level of information and logistics infrastructure
greatly influence the distribution performance of agricultural products. The scholarly work of
Haring (ibid) supports this by establishing that digitization increases performance. Muriuki et al
(ibid) further supports this position by pointing out that infrastructure plays a great role on
boosting marketing performance. Rit (ibid) however, differs with the scholarly work of
Rajendran & Mohanty (ibid) and contends that performance of the agricultural markets cannot be
judged solely by the structure conduct performance framework or by the marketing margin
analysis but it should be backed up by some additional evidences of competitive conditions in
the market i.e. price differentials, possibility of inter-market trade etc.
The scholarly work of Mwebaze & Kjaer (ibid), however, advocates for regulation to enhance
performance in dairy marketing. The scholarly work of Wanyama (ibid) differs with this view by
pointing out that liberalization in Kenya is self regulating and that the inefficient dairy cooperatives were to give way for the more efficient ones thereby advocating for diversification.
The work of Owango et al (ibid) also addresses the issue of liberalization of the dairy sector and
points out that the market policy change caused dairy cooperatives to pursue the higher prices in
the informal market.
21

The scholarly work of Manyara (ibid) revealed that dairy co-operatives are bogged down by a
number of marketing challenges i.e. failure to hold elections in co-operatives; favoritism in
hiring and dismissal of staff; refusal by co-operative officials to vacate office after being duly
voted out; conflict of interest among co-operative officials and endless litigations which affect
performance.
The researcher therefore asserts that the empirical review has basically yielded information on
factors contributing to poor performance in dairy co-operatives which is evidenced by poor
pricing as a result of high marketing costs. He therefore contents that there is a gap on the
strategies employed to address the same inefficiencies in the dairy co-operatives hence the need
for this study.
2.2.1 Review of literature on effect of product strategy on performance of co-operative
societies
According to Bennet (2002) product differentiation is the modification of a product to make it
more attractive to the target market. He points out that this involves differentiating a product
from those offered by competitors as well as the firms own product mix. He further observes
that the changes are usually minor such as a change in packaging or a change in the advertising
theme whose objective is to develop a position that appeals to potential customers hence
resulting in increases sales.
A research done by Bates, Bates & Johnston (2003) established that competitive advantage can
be achieved when a firm pursues a strategy of differentiating products that justify a premium
price that yields higher returns. This position is supported by Sharp and Dawes (2001) who holds
that a firm that achieves such a difference where its price premium exceeds the extra costs
through being unique is said to be an above average performer. Study by Kim, Nam and
22

Stimpert (2004) revealed that firms in most developing economies implementing the
differentiation strategy do not focus on a single dimension but emphasize several dimensions
such as image, customer loyalty, quality, innovation and level of service. Pearce & Robinson
(2005) points out that superior value is created through differentiation because the product is said
to acquire higher quality, technically superior in some way, comes with superior service, or has a
special appeal in some perceived way. This is supported by Carpenter and Moore (2006) who
argues that some of the differentiation strategies adopted by organizations to foster sales
performance evolve around interplay of various elements of the retail mix i.e. offering quality
products, wide selection, assortment, strategic positioning, after-sales-service, quality service,
convenient location, parking space, attractive design and layout, conducive atmosphere, sales
incentives, convenient operating hours, own branding/value addition and a one-stop-shop.
According to Acquaah & Yasai-Ardekani (2006), differentiation firms are able to achieve
competitive advantage over their rivals because of the perceived uniqueness of their products and
services. Hernant, Mikael & Thomas (2007) showed that differentiation builds competitive
advantage by making customers more loyal and less price sensitive to a given firms product.
Hernant, Mikael & Thomas (ibid) point out that consumers are less likely to search for other
alternative products once they are satisfied.
Gerry, Kevan, & Richard (2008) assert that this is true of manufacturing and service industries
alike while the generic of differentiation strategy involves creating a market position that is
perceived as being unique in the industry and that such differentiation can be based on design or
brand image distribution.

23

Kotler & Keller (2009) acknowledge that positioning is the act of designing, establishing the
companys offer and image and communicating the products key distinctive benefits in the
market so that it occupies a distinct and valued place in the minds of the target customers. They
argue that positioning indicates how the business aspires to be perceived by the stakeholders in
relation with the competition and the marketplace.
According to Cravens & Piercy (2009) positioning is deciding the desired perception association
of an organization/brand by customers of the target market segment and developing the
marketing program with a view to meet (or exceed) the needs and requirements of the customers
of that marketplace. They argue that the objective of positioning is to locate the brand/product in
the consumers minds so that organization can secure maximize potential benefits. (Kotler &
Keller (2009) acknowledge that an effective positioning is helpful to guide marketing strategy by
clarifying the brands essence, what goals it helps the consumer achieve, and how it does so in a
unique way. Schiffman & Kanuk (2010) support this view and acknowledge that marketers
formulate different value propositions for positioning different brands for different market
segments.
The researcher observes that the literature reviewed above have basically defined the general
concept in relation to product differentiation and positioning strategies. The main focus has been
on product differentiation and product positioning strategies as the main strategies considered
under the study. However, it has been established that there exists a gap in the area of study due
to limited literature on product differentiation and positioning strategies adopted by dairy cooperative societies in the South Rift.

24

2.2.2 Review of literature on effect of price strategy on performance of co-operative


societies
Many empirical studies have been done on pricing strategies but none has really focused on the
relationship that exists between penetration pricing strategy and the performance of enterprises.
In a study done by Ruiliang (2009) on pricing strategies and firm performances under alliance
brand through game-theoretic model it was established that optimal pricing and brand
management strategies exist for firms in a competitive market. Ruiliang & John (2010)
conducted a study on service level, pricing strategy and firm performance in a manufacturering
retailer supply chain, using a profit-maximization model and demonstrated that optimal service
level and pricing strategy exist under different market structures in a manufacturering retail
supply chain. Anna et al. (2012) conducted a study on the relationship between customer value
and pricing strategies by use of washing machine models and concluded that the alignment
between price and value for the customer is limited. In a related study, Chalita et al. (2013)
established that mobile operators have introduced several innovative price plans to attract and
retain their consumers. Howard and James (2013) also carried out a similar study on the effect of
decision context on perceived risk in pricing strategies on attribution theory and found out that
uncontrollable environmental factors influence pricing strategies adopted by managers.
According to Vikas (2011) penetration pricing strategy is one of the most effective marketing
strategies available to a business organization. He points out that penetration involves setting a
low entry price for a new product or brand in order to gain a competitive adage in a highly
competitive market. He asserts that the strategy can be used when introducing a completely
novel product in the market or when tapping a new market segment for an existing product. He
further argues that a company employs penetration pricing with the expectation that eventually
25

the price will be raised once the initial marketing objectives are fulfilled. According to Oliver et
al. (2001) penetration pricing is the dominant strategy for all vendors and normally firms initially
execute low prices to speed up adoption of the product in the market. A review of the work by
Kortge & Okonkwo (2002) indicated that price has a direct impact on company profit as it
influences the perception of the customer. They argue that price assigned to a product is meant to
meet two main objectives i.e. profit and return on investments. They further argue that traditional
cost-based approaches only go to meet the interests of the seller against that of the buyer hence
contenting that pricing approaches should be based on customers perceptions of unique value.
Harmon & Raffo (2007) also showed that competitive pricing leads to better decisions for
improved sales. They argue that value based pricing gives a firm a competitive edge. While
contributing to this discussion, Harmon & David (2007) argue that in todays competitive
markets the historical cost-driven approach to pricing has become less useful and strategic
pricing capability need to have the core role in setting the firms pricing direction. Harmon &
David (ibid) therefore advice that the marketing team needs to build social capital both internally
with other functional groups and externally with the customer thereby asserting that the ability to
build and manage long-term relationships results in better understanding and communication of
customer value expectations. Jim (2012) acknowledges that penetration pricing is often used to
support the launch of a new product, and works best when a product enters a market with
relatively little product differentiation and where demand is price elastic such that a lower price
in comparison to that by offered by the serves as a competitive weapon.
The researcher contents that literature reviewed in this context has only focused on the general
effect of price in relation to competition. However, the main area of focus for this research is to

26

assess the effect of competitive price strategies on performance of dairy co-operative societies in
the South Rift.
2.2.3 Review of Literature on effect of promotion strategy on performance of co-operative
societies
Brown (2002) investigated on the problems created by a promotional culture, and opined that the
pressure to run promotions can have an impact on overall marketing performance. He indicated
that a review by major consumer goods companies yielded that a great deal of time was required
to design, implement and oversee sales promotion efforts. He further argued that this accounted
for 25% of sales forces time and 33% of brand managers time and that a company can achieve
promotion objectives through certain methods i.e. personal selling, mass selling, and sales
promotion.
According to Berkowitz et al. (2000), advertising is said to be any paid form of non-personal
communication about an organization, good, service or idea by an identified sponsor. It is a
persuasive medium that permits the seller to repeat a message many times. It provides
opportunities for dramatizing the company and its products through artful use of print, sound and
colour. Kristina (2006) recommends that promotional strategies should be designed as per the
nature of services to be promoted. He asserts that the advertisers should seek a narrative
approach to communicate the service experience rather than a logical, argumentative approach.
He further points out that location convenience, speed of service, competence and friendliness of
personnel are also the most important points with maximum value in services. Cannon, Perreault
& McCarthy (2008) acknowledge that each promotion method has its own advantages and
disadvantages as seen from the name that personal selling is about having face-to-face or one onone interaction with the customers through salespeople. They argue that the main advantage is an
27

immediate feedback from the customers, while personal selling requires a lot of effort and
money. Banabo & Koroy, (2011) contents that a combination of the above variables defines a
firms promotional programme that hopes to influence consumers to patronize and become loyal
to the organizations offering. Okoli (2011) explains that the essence of setting up a business
organization is to make profit without which a business is bound to fail.
The researcher argues that there exists a gap as no none of the literature reviewed has yielded
substantial information on the effect of promotional strategies on performance of dairy cooperatives in the South Rift.
2.2.4 Review of literature on performance of business organizations
Hooley et al. (2001) holds that performance, which relates to the optimal use of resources to
achieve the desired output is the best mode of measuring performance thereby asserting that
performance outcomes result from success or market position achieved which can be determined
in form of financial, market, customer service or overall performance. Bounds et al, (2005) &
Robbins, (2000) have acknowledged that common measures of the organizational performance
are effectiveness and performance for managers, suppliers and investors. A review of the work
done by Richard (2009) indicated that organizational performance is a priority in both private
and public sectors as it is directly associated with the value creation of the entity. However,
Richard (ibid) asserts that due to many approaches for conducting valuation of entities,
management still find it a challenge to make adequate assessment of their organizational
performance. While contributing to this discussion, Chavan, (2009) argues that effectiveness is a
better determinant of performance in organizations as the main focus is attainment of vision,
mission and goals. The researcher acknowledges the assertions as true in the dairy sector where
product differentiation comes as a result of branding dairy products. The researcher points out
28

that given that all the information is available to consumers, they may learn through experience
that, in this market, equal-priced products offer comparable values and a higher price indicates a
higher quality.
The researcher acknowledges that Richard (ibid) only links performance with value creation
while Chavan (ibid) has only advocated for effectiveness as a better yardstick of assessing
organizational performance. However, the two approaches taken by Hooley et al (ibid) and that
of Rosen (ibid) have attempted to address the performance more deeply in relation to the area of
the study by laying more emphasis on optimal use of resources in achieving strategic market
positions. However, in this study, the term performance is used to mean a measure of marketing
high volumes of products given scarce resources.
2.3 Conceptual Framework
The researcher points out that the conceptual framework is derived from the theoretical
framework consisting of product, promotion and price strategies applied in stages of product life
cycle theory. The conceptual framework is designed based on product price and promotion
strategies.

The researcher further affirms that product positioning strategy, product

differentiation strategy, penetration price strategy, competitive pricing strategy as well as


advertising and sales promotion strategy are generated from product, price and promotion that
are the main variables in the marketing mix concept.

29

Independent variables

Moderating Variable

Dependent Variables

Product Strategies
Positioning
Differentiation

Government policies/
Legislation
Performance of Dairy
cooperative
Sales revenue
Profitability
Bonus/dividend
payment

Price Strategies
Competitive pricing
Penetration pricing

Promotion strategy
Advertising
Sales promotion
Conceptual Framework of the Study discussion
Figure 2.1. Source: Researcher, 2015
The conceptual framework shows the relationship between the various product, promotion and
price strategies and the performance of dairy cooperatives. Proper product strategies in the
market affect the sales revenue. Implementation of price strategy has effects on profitability of
the product. This strategy is associated with customer retention in case of possible switching to
alternative products being introduced in the market by competitors. Promotion through
advertising affects the number of customers buying the product and ultimately affects the
revenue.

The moderating variable has some effect on both the independent and the dependent variables as
well. This variable concerns government legislations and policies likely to affect the dairy sector.
The variable cannot be controlled by the researcher but could have some effect on performance
30

of the dairy cooperatives. In this study, the researcher will control the moderating variable by
getting the respondents opinion on the extent to which the variable will affect the performance
of dairy cooperative society. The outcome of this question will be factored in making final
conclusions.

31

CHAPTER THREE RESEARCH METHODOLOGY


3.1 Introduction
This chapter presents the research design, the target population, sample design, sample size,
sampling techniques, the data collection instruments, data collection procedures, pilot test,
validity and reliability of data and finally data processing and analysis.
3.2 Research Design
The research design in this study will be cross-sectional research design. Gay, (1993) argues that
research design seeks to ascertain respondents opinions on a specified subject in a
predetermined structured manner. Smith et al (2008) describe this design as taking a snapshot
of a group of individuals. It employs the survey strategy. Oso & Onen (2005) argue that crosssectional research design is suitable in carrying out research because it seeks to obtain
information that describes existing phenomenon by asking individuals about their perceptions,
attitudes and behaviours. The study will use the cross-sectional research design because it is user
friendly and that it yields precise information hence facilitating possible drawing of valid
conclusions without asking for long term cooperation from the respondents.
3.3 Target population
A population is a group of individuals, objects or items from which samples are taken for
measurement (Kombo and Tromp, 2006). Kasomo (2006) describes the target population as the
aggregate of all cases that conform to designated sets of specifications to which the study will
generalize the results. The study targets a population of 360 committee members the 40 dairy
cooperative societies in Kericho and Bomet counties, South Rift.

32

Table 3.0 Distribution of population by County


County

Number of

Population of respondents

Cooperatives

Committee members

Kericho

14

126*

Bomet

26

234*

Total

40

360

Source: New KCC- Sotik Milk Suppliers Register, (2015)


Note: Calculation of population for committee members- Kericho
149=126
Calculation of population for committee members- Bomet
269=234
3.4 Sampling design
Kothari (2003) has defined sampling as the process of selecting a representative of a total
population in order to produce a small cross section or a small proportion of the target population
selected for analysis. According to Kerlinger (1986), sampling is selecting any portion of a target
population or universe. In the study, counties will be stratified into two stratus (counties);
Kericho and Bomet. From each county/strata respondents (committee members) will be selected
using simple random sampling technique.
3.5 Sample size
The size of the sample should be neither too large nor too small (Kothari, 2007). The sample
comprises 186 respondents drawn from the 40 dairy co-operative societies in Bomet and Kericho
Counties. The sample is determined according to Krejcie & Morgan (1970) table at 5% margin
33

of error. Krejcie & Morgan (ibid) as cited by Amin (2005) recommend that for a population of
360, a sample of 186 is adequate since a large sample will not make any difference in the study
results as shown in Table 3.1 below.
Table 3.1 Distribution of sample by County
County

Dairy

Committee

cooperative
County

Population

Name

Per county

Population

Sample

Kericho

14

126

65*

Bomet

26

234

121*

Total

40

360

186

Source: Researcher (2015)


Formula: Proportion for Kericho Committee: Tk/Tbk* Tc
=126/360*186 =65

Proportion for Bomet Committee:

Tb/Tbk*Tc

126/360*186=121

Where,
Tbk- Total number of committees in Bomet and Kericho Counties,
Tb- Sample of Bomet county committees.
34

Tk- A sample of committees members in Kericho County.


Tc - Total sample of the committee .
(Source: Researcher, 2015)

The 186 committee members will be selected based on the proportion of numbers of dairy
cooperatives in respective dairy cooperatives within the county. These committee members are
the top five management committees of the cooperative societies
3.6 Data collection
As described by Nganga et al (2009), data collection is the process of gathering
and measuring information on variables of interest, in an established systematic fashion which
enables one to answer stated research questions, test hypotheses, and evaluate outcome.
According to Mugenda (1999) it is the process of acquiring subjects and gathering information
needed for a study. Data will be collected using structured and unstructured questionnaires
which will be self-administered to 186 respondents from 40 dairy cooperative societies. The
questionnaire will be structured to cover the details of the expected effect of marketing strategies
being investigated in the study.
The questionnaire will also provide the rating Likert scale responses out of the total study sample
response per item in which percentages will be calculated. Quantitative data will be analyzed
using descriptive statistics and presented using frequency distribution tables and charts to enable
for easy inferences. The data that will be collected will be qualitative data and quantitative. The
researcher will issue the questionnaires to all the respondents with the help of research assistant
and the respondent will be expected to self administer and return the completed questionnaires in
a span of one week.
35

3.6.1 Validity
Validity of the instruments is critical in all forms of researchers and the acceptable level largely
depends on logical reasoning, experience and professionalism of the researchers who should
have good understanding of the various quality control techniques (Oso, 2005). Nachmiasis &
Nachmiasis (1996), also noted that validity is the extent to which the instruments capture what
they purport to measure. Items will be randomly chosen for the content that will accurately
represent the information in all areas being investigated. The content validity of the data
collection instruments is the extent to which the data provides accurate and adequate coverage of
the objectives of the study (Cohen et al, 2000). The instrument will be interrogated by my
supervisor, peers and piloted for content validity. Secondly, by examining earlier creditable
literature, the variables and parameters used in capturing and measuring achievability of the
study objectives and content validity will be established as used by other scholars.
3.6.2 Reliability
The tendency toward consistency found in repeated measurements is referred to as reliability
(Carmines & Zeller, 1979). Reliability of a research instrument is a measure of the degree to
which the instrument yields consistent data after repeated trials (Mugenda & Mugenda, 2003).
Orodho (2005) gives reliability as the consistency of research instruments in eliciting similar
data from the same respondents after administering the instruments for two or more times within
a considerable time lapse apart in between the two or more distinct times of the instruments
administration. To establish the reliability, Cronbachs alpha, KR-20 will be used to check the
internal consistency of measurements. It is equivalent to performing the split half methodology
on all combinations of questions and is applicable when each question is either right or wrong.

36

The test statistic is

Where
k = number of questions

pj = number of people in the sample who answered question j correctly


qj = number of people in the sample who didnt answer question j correctly
2 = variance of the total scores of all the people taking the test = VARP (R1) where R1 = array
containing the total scores of all the people taking the test.
j= the nth number of respondent
Values range from 0 to 1. A high value indicates reliability; while too high a value (in excess of
0.90) indicates a homogeneous test. In this study, the researcher will only accept the value which
is at least 0.6. The advantage of Cronbachs method is that it can handle both discrete and
continuous variables. The KR-20 formula can't be used when multiple-choice questions involve
partial credit, and it requires detailed item analysis

3.7 Data analysis


A review done on the work of Bryman and Cramer (1997) showed that data analysis seeks to
fulfill research objective and provide answers to research question. The choice of analysis
procedures depends on how well the techniques are suited to the study objectives and scale of
measurement of the variable question (Kothari, 2004). Data will be analyzed using inferential
statistics i.e. regression analysis:
37

Y= + X1B1 + X2B2 + 3X3 +


X1- Product strategy
X2-Price strategy
X3- Promotion strategy
Data to be presented using frequency distribution tables, graphs and charts.
3.8 Ethical considerations
The study will seek the consent and permission of respondents through relevant authorities,
confidentiality will be ensured throughout the data collection process since the names of the
respondents will not be indicated in the research instruments. The respondents will be permitted
to pull out of the study at any time and that no inducements will be given to any individual in
order to solicit for information or participate in the study. Research assistants will be oriented on
the ethics of the research.

38

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APPENDICES
Appendix I: Questionnaires
The researcher is a Master of Business Administration student at Kenyatta University carrying
out research on Effect of marketing mix strategies on performance of dairy co-operative
societies in Kericho and Bomet Counties. This is to kindly request you to tick or fill in blank
spaces with your most suitable answer or response. The information provided will be treated in
confidence and only used for the purpose of academic.
SECTION A: ORGANIZATIONAL DETAILS
a) Name of your society
b) Name of Respondent (Optional) ..
c) Number of members ..
d) Average Intake of milk per day.
e) Average sales/ Turnover per month.
f) Rate of payments to farmers in Kshs .
g) Average Society commission per month ..
h) Average bonus paid per annum .

Section B: Demographic Characteristics of the Respondents


1. What is your age bracket?(please tick the appropriate box)
Less than 19 years
Between 20 29
Between 30-39
Between 40-49
51

Above 50 years
2. Gender :( please tick appropriate box)
Female
Male
3. What is your highest level of education? (Please specify)
Primary level
Secondary level
Tertiary level
University level
4. For how long have you been working with this dairy cooperative dairy co-operative society?
(Please tick the appropriate box)
Between 6 months 1 year
Less than 2 years
Between 3 -6 years
Between 7 10 years
Over 10 years
5. Does your organization formulate price promotion and product strategies?
Yes

I dont know

No

6. Has your dairy co-operative society changed business strategy since its formation?
Yes

I dont know

No

52

Section c

a) Effect of product strategies on performance of dairy co-operative societies


Please indicate your views on the answer which closely matches your opinion. Where 1=strongly
disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree
Your dairy cooperative society has created product strategies for 1
the past six ( 6 ) years

Product strategy review is often done

Product positioning and differentiation exist in your dairy 1

cooperative society
Product positioning strategy adopted by your dairy co-operative 1
society affects sales
Product differentiation strategy adopted by your dairy co- 1
operative society affects sales
Product strategies adopted by your dairy co-operative society 1
have to a great extent affected performance of your cooperative
society.

53

b) Effect of price strategies on performance of dairy co-operative societies


Please indicate your views on the answer which closely matches your opinion. Where
1=strongly disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree
Your dairy cooperative society has created price strategies for

Price strategy review is often done

Competitive pricing and price penetration exist in your dairy

Price penetration affects profits in your dairy cooperative society

Price strategies have to a great extent affected the performance

the past six ( 6 ) years

cooperative society
Competitive pricing affects profits in your dairy cooperative
society

of your dairy co-operative society

54

c) Effects of promotion strategies on performance of dairy co-operative societies


Please indicate your views on the answer which closely matches your opinion. Where
1=strongly disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree
Your dairy cooperative society has created promotion strategies

for the past six ( 6 ) years


Your dairy cooperative society has often conduct promotional
activities like advertising
Advertising affects bonus payments in your dairy cooperative
society
Promotional strategies affects performance of your dairy
cooperative society to a great extent

Government policies and regulations also affect the performance of your dairy co-operatives
society?
Strongly disagree

disagree

Neutral

Agree

strongly agree

Which type of trainings does your dairy co-operative society organize for the committees and
staff? Please enumerate

55

To what extend do you think these trainings have improved on the general performance of your
dairy co-operative society?
Great extent

Moderate

Less extent

Which major role does your milk processor play to cushion your dairy co-operative from
competition? Please elaborate.

Kindly give your considered opinion on what you think should be done to improve on the
volume of sales in your co-operative.

Thank you for your cooperation

56

Appendix III: Budget


ITEM

Research Assistants(2)

UNIT(KSH)

AMOUNT(KSH)

2500

5000
30000

Travel and Accommodation

15000

Stationary

10000

Equipments and Materials

20000

Consultancy/Data analysis/research assistant


Services (secretarial, photocopying, printing

20000

and binding)
Miscellaneous

9800

TOTAL

114,800

57

Appendix IV: Time Schedule (2015)

ACTIVITY
Development

August

Sept.

and

presentation of proposal
Developing and piloting of
instruments
Data collection

Data organization , analysis,


interpretation report writing
Presentation of project

58

Oct.

Nov.

Dec

Appendix V: Krecjie And Morgan Table

59

Appendix VI: Dairy Cooperatives


Population of Active Dairy Co-Operatives in Bomet and Kericho Counties Delivering Milk to
New KCC (Sotik):
Bomet County
1. Longisa Farmers Co-operative Society Limited
2. Ndarawet Farmers Co-operative Society Limited
3. Sigor Farmers Co-operative Society Limited
4. Tenwek Farmers Co-operative Society Limited
5. Chebunyo Farmers Co-operative Society Limited
6. Moche Farmers Co-operative Society Limited
7. Labotiet Dairy Farmers Co-operative Society Limited
8. Kanusin Farmers Co-operative Society Limited
9. Kiptulwa Farmers Co-operative Society Limited
10. Kipsonoi Farmers Co-operative Society Limited
11. Sukurusiek Farmers Co-operative Society Limited
12. Kapkures Farmers Co-operative Society Limited
13. Sarichiat Farmers Co-operative Society Limited
14. Chepkalwal Farmers Co-operative Society Limited
15. Kelelkele Farmers Co-operative Society Limited
16. Manaret Farmers Co-operative Society Limited
17. Sotik Farmers Co-operative Society Limited
18. Kamungei Farmers Co-operative Society Limited
60

19. Itembe Farmers Co-operative Society Limited


20. Mosop Farmers Co-operative Society Limited
21. Ndanai Farmers Co-operative Society Limited
22. Kipngosos Farmers Co-operative Society Limited
23. Kapolesero Farmers Co-operative Society Limited
24. Makimeny Farmers Co-operative Society Limited
25. Siongiroi Farmers Co-operative Society Limited
26. Olbutio Farmers Co-operative Society Limited
Kericho County
1. Cheborgei Farmers Co-operative Society Limited
2. Bokik Farmers Co-operative Society Limited
3. Litein Kipagenge Farmers Co-operative Society Limited
4. Kapkatet Farmers Co-operative Society Limited
5. Kabianga Farmers Co-operative Society Limited
6. Getengeret Farmers Co-operative Society Limited
7. Sosiot Farmers Co-operative Society Limited
8. Kapsoit Farmers Co-operative Society Limited
9. Mosop Farmers Co-operative Society Limited
10. Chepsir Farmers Co-operative Society Limited
11. Ruskebei Farmers Co-operative Society Limited
12. Londiani Farmers Co-operative Society Limited
13. Kipkelion Farmers Co-operative Society Limited
61

14. Kipsitet Farmers Co-operative Society Limited

Source: NEW KCC (SOTIK) Milk Suppliers Register (2015)

62