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1.0 INTRODUCTION
1.1. Background of the Study
The continuous existence of a business organization depends largely
on the profit it makes. And for business organization to make profit and
survive it must is rendering to its customers or potential client. Thus it is
important to discuss the determinants of profitability or otherwise of a
business. Traditionally in a competitive market environment, prices are
determined by interactions between buyers and sellers. Pricing in modern
times have experience a change in modern times have experience a change
ion trend from the traditional approach.
Pricing according to Corey (2000) is the act of translating into
quantitative terms, the value of a product to customer at a point in time.
From this definition it can be observed that price serves as a measure for
social value and benefit of a product or service.
Marketers view that the best way to entering into a market is by
setting an appropriate price that suits that particular market Segment and as
well allow for the achievement of the marketing and pricing objectives.
Setting a good price can be viewed as a tool for attracting and maintaining
customer’s patronage and loyalty to a particular product or brand.
Organizations have various reasons for setting price which include
customer’s patronage. It is only when customers exercise their right to
obtain and use a well-priced product, then profit making can be achieved by
company.
Price can be viewed as the most visible and only element of
marketing mix that produces revenue and profit. Price rate and level of
customer’s patronage are the number one problem facing marketing
executives in business organizations, yet many companies do not handle
price and customers well enough. One frequent problem is that companies
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are too quick to reduce price in order to get sales or increase market share
rather than convincing the buyers that their product is worth the prices set.
Buyers of commodity view price “As what we must be given up to
obtain benefits of product or services”. While sellers view price as a
concomitant to revenue to be generated from each product sold and thus is
an important factor in profit determination of business organizations. Setting
prices follow different procedure depending on the size of the organization.
In small companies for instance, price is a decision of top management
rather than marketing or sales department, while in large companies’ price
determination is typically in the hands of divisional and product line
management.
Traditionally, every organization depends largely on the price they
charge as source of revenue. Therefore management needs to establish
specific pricing tactics within the content of a chosen pricing strategy.
Pricing systems are classified into two (2) categories namely;
1. Psychological Pricing System and
2. Discount Pricing System
The psychological pricing system is one that takes into consideration
the psychology of the buyer before setting the price. Psychological pricing
systems can be: -
i. Price lining
ii. Prestige Pricing
iii. Odd-even Pricing
iv. Promotional Pricing
Discount pricing systems uses a form of rebate discount and
allowances which are offered to dealers and customers as special incentives.
Discount pricing are of five types namely: -
i. Quantity discount
ii. Cash discount and allowances
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iii. Functional discount

iv. Seasonal discount and
v. Promotional discount
Setting prices have become a more challenging task for marketing
executives of business organization. This is because of the various factors
that must be taken into consideration. Prices are set to achieve a number of
objectives in which if these objectives are not achieved such prices are
susceptible to alteration in view of ensuring that organization goals are
achieved.
Pricing decision is a crucial decision every organization has to make,
because this will eventually affect their corporate objectives, either directly
or indirectly (Monroe 2003). For every business entity, irrespective of their
line of business and objective, cost minimization and profit maximization -
are the general factors to be considered and for non-profit making
organizations, there will always be the need to reduce cost at all means and
to maximize output. A business whether small or big, simple or complex,
private or public, is created to provide competitive prices (Ayozie 2008).
According to Hilton (2005), setting the price for an organization’s product
or service is one of the most crucial decisions a manager faces, and one of
the most difficult, due to the number of factors that must be considered.
Some of the factors that influence pricing decision are demand, competitors,
cost, political environmental, legal and image-related issues. Horngren, et al
(1996), buttresses this point by stating that managers are frequently faced
with decisions on pricing and profitability of their products.
Some of the objectives of business enterprises vary from
maximization of profit, minimization of cost, maximization of shareholders
fund, to becoming a market leader,. From the various objectives of business
organizations, the primary objective of any business enterprise is to
maximize profit and minimize cost, except for charity organizations that are
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set up primarily not to make profit, but there will be need to minimize cost
by all means, therefore the need to set prices, which therefore connotes that
pricing decision arises in virtually all types of organizations,
Choosing a pricing objective and associated strategy is an important
function of the business owner and an integral part of the business plan or
planning process. It is more than simply calculating the cost of production
and adding a markup (Roth 2007). Therefore, assigning product prices is a
strategic activity and the price or prices assigned to a product or range of
products will have an impact on the extent to which consumers view the
firm‘s products and determine its subsequent purchase. However, it is less
clear how pricing activities can be guided by the marketing concept.
Certainly, customers would prefer paying less, in fact, they would even
prefer to pay nothing but it is simply not feasible to give products without
price (Sagepub.com 2009). An organization that does that will run dry and
out of business and would not be able to create value for the customers.
For growth and continue existence of a company, the management
concern is making profit from prices and level or rate of customers
patronage.
All organization both profit and non-profit making organizations are
faced with setting prices for the products and services. Many companies
have pricing strategies that define such things as price image that the
company want, its market positioning, market share are meeting competition
price. It is generally believed that any price that is being considered must be
comparatively with the company’s pricing politics.
In setting a price that must meet the expectations of customers, the
organization must take into account the following: -
i. What price should be set on a product in order to attract
customer?
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ii. How should prices be set on several interrelated items in a

product line in order to gain acceptance in the market?
iii. When should the company respond to competitors change ion
price in order to retain customers’ patronage and ensure profitability of
business?
1.2. STATEMENT OF PROBLEM
Apart from the challenges faced by marketing executives in setting
prices, price setting becomes a problem in the following situation:
Pricing becomes a problem when competitions initiate a price
change. The company has to decide whether to change its own price. This is
because an increase or a decrease in competitors’ price will affect the
company’s level of customers’ patronage, this affecting business
profitability.
Pricing can be viewed as a problem when introducing a new product
to the market. The company must consider the prevailing price of similar
product offers, pricing policies and objectives of the firm, number of
potential customers and other important determinants of price.
Pricing is equally a problem to an organization of the company
produces products that have inter-cost and demand. The management must
then appropriately set their prices to reflect their value and as well properly
position their products. This is a hard task for management to perform and
this became a problem.
Pricing can also be a problem when it is not achieving the desired
level of customers’ patronage or trial of their products. Price will be forced
to alter when such prices cannot affectively achieve their set objectives, thus
making pricing a problem.
Pricing can equally be a problem when prices set cannot achieve
business profitability i.e. where sales revenue exceeds cost of production.
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The company must endeavor to establish what it is trying to achieve

in the way of overall marketing objectives before it sets the price for its
product. The financial performance of the business will be dependent upon
how effective a company can price it goods and services.
The aim of any business is to bringing the customer back. It also
about making customers has unique customer experience that makes them
produce a positive feedback about the organization and also repeat the
transaction they do with the organization. Customer patronage is achieved
when the anticipations of customers are fulfilled. Excellent customer service
does not only make customers patronize the products, but they also spread
positive word-of-mouth to other people, which is an avenue for creating
profits for the Business. In effect, if customers change their ways of
patronizing, it will have a great impact on the long term revenue of the bank.
Many business organizations do not recognized the impact of customer
satisfaction, royalty and continuous patronage to the continuous growth and
profitability of their business. Hence this study seeks to address these issues
to ensure continues existence of small and medium scale enterprises in
Makurdi metropolis.
1.3. OBJECTIVE OF THE STUDY
In the course of the study, the researcher hopes to examine the
relationship between price policy and customers patronage and emphasize
the effect of price variation and customers’ patronage on profitability of
small scale business. The study is also aimed at achieving the following
specific.
i. To determine the pricing strategies adopted by company and its effect
on their profitability.
ii. To determine the level of customers patronage as influenced by
prices set.
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iii. To ascertain the extent at which prices of goods and level of

customers’ patronage can influence the profitability of Mikap Nigeria
Ltd, Makurdi.
iv. Determine the factors that affect price variation and customer
patronage of Mikap Nigeria Ltd Makurdi.
v. To make recommendations on how to achieve the best mix between
pricing policy capable of all acting customers patronage and which
ensure profitability.
1.4. Research Questions
The following are the research questions guiding this study
i. What is the pricing strategies adopted by the company and its effect
on their profitability
ii. At what level the customers’ patronage is influenced by prices set.
iii. At what extent the prices of goods and level of customers’ patronage
can influence the profitability of Mikap Nigeria Ltd Makurdi.
iv. What are the factors that have effects on price variation and customer
patronage of Mikap Nigeria Ltd Makurdi.
1.5. Statement of Hypothesis
Hypothesis is an assumption. It is a set of conditional and provisional
statement describing the expected or possible relations between two or more
variable of research which are subject to test.
Formulation of hypothesis usually involves the structuring of
questionnaires or question which the research should be meant to answer in
order to validate the research findings.
Hypothesis could be any of these two: -
i. Null Hypothesis: - this is denoted by H0, usually expressing
that no relationship occurred between the variables of research.
ii. Alternative Hypothesis: - this is denoted by H1 and it
expresses that relationship exist between the variables of research.
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The hypotheses were raised to guide the study in achieving its

objectives:
H0: Price variation and customers’ patronage does not have any
effect on the profitability Mikap Nigeria Ltd
H1: Price variation and customers’ patronage have a great effect on
the profitability Mikap Nigeria Ltd
1.6. Significance of the Study
First and foremost, it is hoped that this study will provide additional
knowledge and literature on the topic understudy. Similarly, it is hoped that
this study will unravel other issues that affect price variation, customer
patronage and the profitability of small scale business in Benue state, and
Nigeria in general. Finally, it is also hoped that this study will provide a
stepping stone for further research in similar direction
1.7. Scope of the Study
The study is limited to the effect of price variation and customer
patronage on the profitability of Mikap Nigeria Ltd in Makurdi metropolis;
the study consists of dependent and independent variables. The dependent
variable here is profitability and the independent variables include price
variation and customer patronage. The study covers a period of 12 month
from June 2017 to May 2018.
In analyzing the data collected. The research data was subjected to
statistical decision by the use of linear regression to test the level of
dependency of the dependent variable on the independent variable using a
statistical soft ware SPSS 2.0
Attempts was be made to highlight the activities of the company and
how price can be used to influence customers’ patronage which also
influence company’s’ profitability.
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1.8. Operational Definition of Terms

Small Scale Business
Small scale business, small scale industries and small scale
entrepreneurship are used interchangeably to man a small scale industry
firm.
Consumer: - An individual, group, organization that enjoys the utility in a
product.
Customers’ Patronage: - This is the level at which customers make
repeated purchases of the product of a particular producer.The level of
patron of a firm’s product or services.
Pricing policy: - This is the method by which a seller uses to establish his
price. The policy may be fixed mark-up, percentage mark-up e.t.c.
Product: - Product is what an organization or firm offer to his clients or
prospective clients for sales and satisfaction of needs. It is an outcome of
production process
Profit: - Profit is the amount by which the total revenue (derived operation
or running of an enterprise) exceeds the total cost of production (i.e. cost of
raw materials,
labour, land, overhead). Profitability is thus the rate at which total revenue
exceeds total cost.
Price: - Price is a monetary of economic value for which goods and services
are being exchanged for.
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2.0 LITERATURE REVIEW

This chapter essentially focused on reviewing the relevant aspects
related to study variables. Hence, attempts has been made here to review
and examine what various authors have said about the objectives of pricing,
pricing strategies, customers’ patronage and the resulting profit will also be
discussed in this chapter. A theoretical framework to the study is also to be
provided in this chapter.
2.1. Theoretical Framework
Theory of Price
The theory of price as stated by Weber (2001) also refers to as an
economic theory whereby the price for any specific good or service is based
on the relationship between supply and demand. The theory of price posits
that the point at which the benefit gained from those who demand the entity
meets the seller's marginal costs is the most optimal market price for the
good or service.
The goal is to achieve equilibrium in which the quantities of goods or
services provided match the corresponding market's desire and ability to
acquire the good or service. The concept allows for price adjustments as
market conditions change.
To achieve equilibrium, the goal is to locate a price point that allows
the number of items available, referred to as the supply, to be reasonably
covered by potential customers. If the price is too high, customers may
avoid the good or service, resulting in excess supply. In contrast, if a price is
too low, demand may significantly outweigh the available supply.
Economists use price theory to find the selling price that brings supply and
demand as close to the equilibrium as possible.
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2.2.0 Conceptual Framework

2.2.1 Price Variable
Price means different thing to different people. Price is the only
element of Marketing mix that produces revenue, all other elements
represent cost and. Thus, to the buyer, price refers to what must be given up
(Monetarily) to obtain benefits while to the seller; price reflects the revenue
generated for each product sold.
Price, according to Schewe and Smith (2006) “is what the buyers
gives up to receive a bundle of utility in exchange.” From this definition it
can be observed that something is proceeding from both the buyer and the
seller i.e. the buyer gives something to obtain a commodity for utility and
that thing is known as price (valuable consideration)
Stanton (2002) sees price “as an offer, a suggestion, or an experiment
to test the pulse of the market”. The point where the offer becomes
acceptable, therefore, constitutes the price of the product.
Preacher (2004) viewed price as “the exchange value of goods and
services in terms of money.” If there were no money, there will be exchange
but not a justifiable one because there were no prices. He goes ahead to say
that in some under-developed areas of the world and in time of depressions,
exchange is sometimes affected by exchanging one good or product another.
Suman-Gana (1995 page 269) opined that “pricing is the act of
stating the value of a product or items in a monetary terms”. It is an act of
setting amount at which a product is to be bought. As an offer it proposed by
one party, then price is fine but if rejected, a new offer can be proposed. In
most instances, it is the seller that usually proposed the offer of his product.
Morden (1999) defines price as a value, or sum of money, at which a
supplier of a product or service and a buyer agree to carry out an exchange
transaction”. Such an exchange transaction takes place at either fixed or
negotiable prices.
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The financial performance of the business will be determined by the

company’s effectiveness at pricing it goods and services. The most critical
function of executives is decision-making. Pricing becomes a critical
decision for marketers and executives because of the various objectives
attached to a successful price decision. The quality of price decision
depends upon the ability of the executives in understanding the target
market and reaching a price that achieves the organization.
Certain situations gives rise to or necessitate pricing decision. These
are: -
1- When a company wants to introduce a new product or enter a new
market with an old product.
2- Prices are forced to be altered when cost, competition, demand
inflation and other factors render old prices inadequate.
3- Prices are altered or fixed when the firm produces several products
that have interrelated demand and costs.
Pricing policies are intended to keep an organizational decision in
line with it objectives in making daily decisions.
2.2.2 Pricing Objectives: -
The adoption of a price must be for attainment of certain objectives,
thus, some firms consciously establish certain pricing objectives or clearly
state their specific pricing policies because they may find it difficult to
compete. Thus, they drop their prices in order to generate cash to run the
enterprise to serve as guidance. Some of these objectives are closely stated
by the management while some are just implied.
The firm must decide clearly what it is trying to achieve before it set
price on the firm’s product. This means that the price of the product should
not be arbitrarily set without the objectives being set without stating the
objectives first.
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The objective a firm should try to achieve in setting price as

identified by Suman-Gana (1995) are: -
i. Competitive advantage: - some firms consciously price their
product to meet or prevent competition. In some industries, there may be
definite price leader in setting prices. Under certain conditions, a company
may enter a market with extremely low prices in order to discourage
competition.
ii. Profit maximization: - in profit maximization pricing, the firm
wants to achieve maximum current profits. The intention may be to forestall
losses from a new product that is likely to be a failure in the market. It may
be also be used for a product at its decline stage.
iii. Sales growth: - one major sales objective of most firms is sales
growth. Most firs determine price after a careful consideration of the
projected sales growth. Sales growth and expansion however, bring
increased complexity, greater responsibility and more problems. Most
companies, price for survival because they may find it difficult to compete.
This they drop their prices in order to generate cash to run the enterprise.
iv. Market share: - market share is the proportion of the market in \
which the firm has exclaimed. Market share can be increased when a firm
price it product lower than that of the competitors and as such demand,
patronage and sales increases. The firm may achieve low return per unit of
goods sold but in the long run a profit increase due to larger sales volume.
v. Market skiing: - the firm can also decide to skim it largest market
through it product price. In market skimming, the firm tries to fix the office
of its products based on the demand or relevance of the product at any point
in time that is attaching a high price to a product when it is needed most.
E.g. refrigerators become more expensive in the hot or dry seasons when it
demands is usually high.
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vi. Maximizing current revenues: - this implies an increase in the

annual rate of return on investment i.e. an increase in the return yield by the
annual financial outlay by the firm. This can be achieved by the method or
strategy used to price their products.
vii. Product line promotion: - promotional pricing involves pricing a
popular product either at a high or low price to attract buyers who may
eventually purchase the product of the company.
viii. Achieving target profit: - target profit pricing is a situation where
the firm wants to achieve a certain rate of return on investment, which it
considers satisfactory when compared with the level of investment and risks
taken. Selling price fixed for achieving a satisfying return is also known as
target profit pricing.
From the explanation of the price objectives above, it can be seen the
pricing objectives above, it can be seen the price decision must be made
within the realm of the objectives in which it tend to achieve.
2.2.3 Pricing Strategy and Decision:
There are three basic strategies but some authors like Suman Gana
(1995 page 272) identifies the price strategies as four which are as follows: -
i. Coat-oriented pricing strategies.
ii. Demand-oriented pricing strategies.
iii. Competition-oriented strategies.
iv. Suppliers suggested retail prices.
Kotler (1999) defines pricing strategy “as the task of defining the
price range and price movement through time that would support the sales
and profit objectives and marketing positioning of the product in the target
market”. This task can be achieved by means of pricing tactics. Pricing
tactics, according to Kotler (1999), is the task of setting specific price levels
and terms and altering them within the general parameters of the price
strategy as conditions change.
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1. Cost Oriented Price Strategy: - This type of pricing strategy

explains that prices are set base on cost. The aim is to charge a price that
will be enough to cover the cost of material, labour, and overhead as a
profit. Example of cost-oriented pricing are: -
a. Mark-up pricing: - To mark-up, a producer must have determined
the cost involved in producing the product and then a percentage is added on
the cost to take care of selling expenses and profit. Mark-up represents the
proportion of selling price that signifies profit.
b. Cost-plus pricing: - This is done by first identifying the total cost of
producing each unit of a particular commodity, then a specified amount is
added to the cost base on the organization intended return of per product
unit.
c. Target Pricing: - Another cost oriented pricing approach is target pricing.
Using this approach, the firm tries to obtain a pre-determined percentage
return or a specified target rate of return on it total costs or capital used to
produce the product.
2. Demand Oriented Pricing: - In demand oriented pricing, prices are
set base on the consumer perception and demand for the product rather than
cost and return as in the case of the cost-oriented pricing strategy.
Firms that use demand oriented pricing may either want to influence
their profit through high demand or may want to stimulate demand through
their price. There are two types of demand oriented pricing namely.
a. Perceived Value Pricing: -
A number of companies base their price on the product’s perceived value.
They see the buyer’s perception of value not the sellers’ level of cost as the
key to pricing. They use the non-pricing variables of the marketing mix (i.e.
place, product and proportion) to build up perceived value in the mind of
buyer
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b. Demand Differential Pricing: -

Another form of demand-oriented pricing is the demand different pricing.
This is also referred to as price discrimination. In this regard, products are
sold at different price to different customers or allowing different discounts
to different buyers.
3. Competition-Oriented Pricing Strategies: -
This is when a company set its price mainly on the basis of what it
competitors are charging. Firms using this type of pricing seek to keep its
prices lower or higher than the competition by certain percentage.
a. Going Rate Pricing: -
This is where a firm tries to keep it prices at the average level charged by
the industry.
b. Sealed Bid Pricing: -
This arises in situation where firms compete for jobs on the basis of bids e.g.
supply of materials or products. The firm usually set it price lower than that
of other bidding firms.
4. Suppliers Suggested Retail Pricing: -
This comprises of market skimming and penetration which by most authors
are regarded as the basis pricing policies.
2.2.4. Pricing Policies
These are rules and guidelines which the firm follows when making
strategic and tactical pricing decisions for achieving the company’s
objectives.
1. The Skimming Policy: - according to Baker (2008) “high price
strategy is appropriate at mature or saturated markets which show a degree
of segmentation on the basis of quality, design and features or to the
introduction of a product which differs significantly from anything currently
available”.
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Using this approach, price is set at a high level with the objectives of selling
the product initially to the core markets. The price will however be adjusted
downward later to appeal to customer profit. This policy is usually used to
maximize profit. This policy is ideal in any of these scenarios: -
a. When there are price segments within the market.
b. When demand for the product is likely to be rather insensitive to
price.
c. When consumers know little about the costs of producing and
marketing the product.
d. When there is likelihood that competitor will enter the market
rapidly.
The skimming policy is used to: -
i. Develop a prestige image for the product since high prices often
signifies high quality.
ii. Limit demand until mass production capabilities are established.
iii. Maximizing profit.
2. Penetration Policy: - this policy calls for low prices and high
volume. In this approach, marketers believe that the attraction of a low price
will lead to such a high volume. The idea is to reach the entire market with a
low price thus generating the greatest demand. This policy is ideal in the
following situations: -
• Where product does not symbolize social status.
• Where the market is price sensitive and a lower price will really
attract the market rapidly the low price make such market less attractive.
2.2.5 Customer’s Patronage: -
This refers to the consistency of a particular customer or an individual in
purchase of the products of a particular producer.
Customers could be defined as the segment of buyers who will
always but from a particular seller or marketer on a continuous basis.
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Patronage is the act of making sales through buyers’ purchases.

When customers make repeated purchase for a product of a particular
manufacturer or from a particular manufacturer from a particular store or
seller such sales are regarded as customers patronage since such customers
has become a patron of the store, seller or product.
Customers repeated purchase for a particular product from a particular store
or producer can be backed up by the bundle of satisfaction and utilities
derived from the product and services offered by such seller.
2.2.6. Customer satisfaction and customer patronage
Satisfaction of customers with products and services of a company is
considered as most important factor leading toward competitiveness and
success (Dauda et al and Yu-Te etal, 2013). Customer satisfaction is actually
how customer evaluates the ongoing performance of a firm (Ehsan etal and
Dado et al, 2012). Therefore a firm should concentrate on the improvement
of Service Quality and charge appropriate fair price in order to satisfy their
customers who would ultimately help the firm to retain its customers.
According to (Sharma and Saleem, 2014) customer satisfaction is the
customer’s reaction to the state of satisfaction, and customer’s judgment of
satisfaction level.
Customer satisfaction is very important in today’s business world as
(Deng et al., 2009) have ascertained that the ability of a service provider to
create high degree of satisfaction is crucial for product differentiation and
developing strong relationship with customers. Customer satisfaction makes
the customers to continue to patronize one service provider or other.
Previous researchers have found that satisfaction of the customers can help
the firm build long and profitable relationships with their customers
(Srivastava et al, 2013; Harmeed, 2013; and Kelsidou et al, 2015). The
impact of Service Quality on customer satisfaction and customer patronage
was confirmed by Omotayo and Joachim’s study (2011, cited in Chun-Ting
 19

2011); the result revealed that Service Quality has a positive impact on
satisfaction and patronage. Caruana (2002), cited in Dado et al, 2012)
evaluated and analyzed service patronage over 1200 retail banking
customers in state of Malta. Study results show that customer satisfaction
had a mediating role in the effect of Service Quality on service Patronage.
(Henkel et al. 2006, cited in Sharma, 2014) have discussed in their findings
that satisfied customers in the cellular sector have high future intentions to
stay with the company and future repurchase intentions. Satisfaction is an
important predictor of customer patronage (Aziz, 2014). Satisfied customers
tend to use a service more often than those not satisfied (Sharma, 2014),
they present a stronger repurchase intention, and they recommend the
service to their acquaintances (Zeithaml et al., 1996, cited in Shara, 2014).
2.2.7. Service Quality and Customer patronage
In an organization’s capabilities and customers’ perception and
learning, service quality plays a significant role in customer patronage and
usage of a product or service, as have been established by several studies
such as (Lesue and Feick 2001; and Gerpott et al 2001: Luiza et al, 2009;
Sahin and Kitapçi, 2013;). Similarly, Boulding, Kalra, Staclin & Zeithaml
(1993) as cited in Oyeniyi, & Abiodun, (2009) found a positive relationship
between service qualities and repurchase intention and willingness to
recommend. Ranaweera and Neely (2003) studied some moderating effects
on the service-customer retention link and it was established that perception
of service quality has a direct linear relationship with customer purchase
intention. Kheng et al (2010) also studied The Impact of Service Quality on
Customer Loyalty and found that improvement in service quality can
enhance customer patronage and loyalty.
Sanayei, (2012); Bolton and Drew, (1991a) also suggest that there is
a direct link between service quality and behavioural intentions. Among the
various behavioural intentions, considerable emphasis has been placed on
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the impact of service quality in determining repeat purchase and customer

loyalty (Jones and Farquhar, 2003). As pointed out by Bolton (2007),
service quality influences a customer’s subsequent behaviour, intentions and
preferences. Besides, Cronin and Taylor (2006) also found that service
quality has a significant effect on repurchase intentions.
2.2.8. Customer Patronage Decision
A direct positive relationship between customer satisfaction and their
repurchase intention is held up through service research (Ahmad et, al.,
2010; Bolton & Lemon, 1999; Patterson & Spreng, 1997; Selnes, 2008).
While customer repurchase intention is the chief component, it is just one of
the many variables that can affect by customer satisfaction (Mittal & Lassar,
1999; Sharma & Patterson, 2000). Henkel, Houchaime, Locatelli, Singh and
Zeithaml (2006) proposed that satisfied customers in the service industry
have a high future repurchase intentions.
Fishbein and Ajzen (2009) agreed that the consumers’ purchase
intention is an essential index to predict consumer behaviour as a subjective
attachment to the product. Purchase intention can be translated as the
probability that the consumers will plan or be willing to buy a particular
merchandise or service in the future. (Dodds, William & Kent, 1991;
Schiffman & Kanuk, 2004). Consumers’ purchase intention also serves as a
mediator between their attitude towards a special product and their real
purchase behaviour (Fishbein & Ajzen, 2009). Measurement scales to
measure purchase intentions are; possible to buy, intended to buy and
consider buying. Engel, Blackwell & Miniard 2005) expanded that purchase
intention into unplanned buying, partially planned buying, and fully planned
buying. As the firms make every effort to retain a superior service to reach
customer satisfaction by working them to repurchase (Kandampully, 1999;
Zeithaml, Valarie & Mary Bitner, 1999). In fact, several subjects reported
that the service quality can consider as an earlier request to the customer
 21

satisfaction (Ruyter & Josee, 2003 Szymanski & Henard, 2001).

Additionally, Caruana (2002) assured that the atonement has a mediating
role play in the relationship between customer satisfaction and customer
repurchase intention.
2.2.9. Pricing
Every multinational business entity is set up with the primary
objective of making profits and several considerations underlying their
profit motive come to bear in determining the pricing of their goods between
associated parties. A business, whether small or big, simple or complex,
private or public is created to provide competitive prices. Most Nigerian
small business owners lack the knowledge and skills of basic marketing
ingredients, such as marketing research, market segmentation and market
planning and control, which thereafter leads to poor quality products,
unawareness of competition, poor distribution, and poor pricing methods.
The poor pricing methods thereafter lead to poor product pricing, which will
eventually affect sales (demand) and finally the profit of the business. In a
developing country like Nigeria, with low income and high level of poverty,
a company that wants to succeed should offer its product at the price the
consumers can bear. But often, small manufacturers set prices of their
products arbitrarily without regard to consumer characteristics in the
environment (Ayozie 2008:10-12).
2.2.10. Small and Medium Enterprises
In Nigeria and worldwide, there seems to be no specific definition of
small business. Different authors, scholars, and schools have different ideas
as to the differences in capital outlay, number of employees, sales turnover,
fixed capital investment, available plant and machinery, market share and
the level of development. These features equally vary from one country to
the other.
 22

1. In Nigeria, the Third National Development plan defined a small scale

business as a manufacturing establishment employing less than ten people, or
whose investment in machinery and equipment does not exceed six hundred
thousand naira.
2. The Federal Government Small Scale Industry Development Plan of 1980
defined a small scale business in Nigeria as any manufacturing process or
service industry, with a capital not exceeding N150,000 in manufacturing and
equipment alone.
3. The small scale industries association of Nigeria (2001) defined small scale
business as those having investment (i.e. capital, land, building, and equipment
of up to N60, 000 pre-SAP Value) and employing not more than fifty persons.
4. The Federal Ministry of Industries defined it as those enterprises that cost not
more than N500,000 (pre- SAP Value) including working capital to set up.
5. The Centre for Management Development (CMD) view of small industry in
the policy proposal submitted to the federal government in 2002, defined small
scale industry as, “a manufacturing processing, or servicing industry involved
in a factory of production type of operation, employing up to 50 full-time
workers.
Small and Medium Enterprises and Pricing
For an organization, to compete favorably with its peer in the same
industry, it must be able to meet the demand of the people, as well as set the
right price for the right product. Low cost and high quality infrastructure service
tends to improve price competitiveness (Beyene 2002). In the same vein, Uzor
(2004) noted that governmental policies should be directed to overall
production efficiency of the SMEs, which will in turn lower costs at the same
time increasing the purchasing power of the consumers, when the prices are
reduced. Besides reducing costs, increasing the efficiency will also position the
SMEs in the cluster to compete effectively in an open economy. The efficiency
gained in local market will project them as well towards an export oriented
 23

production system and possibly help to integrate them effectively into the
global economy.
2.2.11. Pricing and Organizational Objectives
Without a goal, it is said that a man will live like a goat, so also
without an organizational goal, a company will only be moving round the circle
without direction, and it is the overall organizational goal set by the
management of a company that serves as the driving force, towards which
everyone in the organization will drive towards. In every organization, there is
always the general organizational goal, as well as the departmental goal, and the
various departmental goals are framed in line with the overall organizational
goal. Various goals are set by the organization and these directly and indirectly
affect the pricing policy of the organization, which is expected to be tailored in
line with the overall goal. A nonprofit making organization will always look
forward to satisfying its customers only, therefore the pricing policy will be
towards minimizing cost and customer satisfaction. Some of the objectives and
goals set by organizations and the various ways in which they affect pricing
decision are as stated below:
• Increase Sales: Organizations that want to increase the turnover of their
product may need to fix price at a level that the consumer will accept it as being
commensurate with the benefits of the product.
• Increase Market: Organizations may set price because of the need to reach
out to a particular part of the market, thereby increasing their market size. When
this objective is set, price should be set in a competitive manner to attract new
customers and retain old customers.
• Profit Maximization: Profit maximization is the main organizational goal
for any profit making organization. To achieve this objective, price must be set
strategically in such a way that maximizes revenue and minimizes cost.
 24

• Market Penetration: When a producer wants to enter the market, he can

adopt this strategy, by setting price below or at par with the price of existing or
similar products, not considering the effect it may have on profit.
Company Image: An organization might want to build up its organizational
image, by setting price in such a way that it provides an insight into the quality
of the product.
2.2.12. Factors Affecting Pricing Decision
When pricing decision is to be made, some factors have to be put into
consideration, so that the decision will not affect the overall objective of the
company. Some of the factors which must be considered among other things
include:
• Cost of Production: For effective pricing, the total cost of production must be
fully ascertained, leaving no stone unturned. The fixed cost as well as the
variable cost must be determined and all the various costs that may be incurred
in the marketing process must be inculcated e.g. advertising expense,
transportation, etc. When cost is not fully ascertained, pricing decision becomes
faulty and when the price is wrong, it will definitely affect the income of the
company and eventually may affect the survival of the business, especially for
the new business and also the small and medium enterprises. Alongside with
the other factors that affect pricing decision, cost is a factor that must be looked
into critically.
• Nature of market competition: The nature of market competition must
also be considered when pricing decision is made. For a business that is in a
monopolistic market, competition may not really affect the pricing decision, but
a business in the oligopolistic market or a free market, where competition is
tense, this has to be considered before price is set. In a situation where the
market leader dictates the price and others follow, the price of the market leader
must also be considered and in a situation where the price of substitute goods
will affect the price of the product, this is very important.
 25

• Customers and market segment: When a producer knows his customers,

he will be able to set his prices accurately. The market segment must be
carefully identified and the amount they will be willing to pay for the product
identified. For the producers of cars, there are different models for different set
of people, thus producing varieties for different set of people. There are some
products which are mainly for the elites, while some are for the masses. A
producer of products for the masses will need to consider the per capita income
of the people before making his pricing decision.
• Demand: For a new product, there is need to price such product
strategically in such a way that it penetrates the market, even if it will be at par
with the total cost, while for a highly demanded product, an increase in price
may not really have a high effect on the demand for such products, so is the
need for management when making pricing decisions to consider the demand
for the product. Some companies who receive order from customers may decide
to reduce their price per unit or increase their discount, when it is noted that
demand from a customer is high, and this may be on the other way round,
depending on other factors considered by the management.
• Consumer behavior and perception: Consumers attitude and perception
about the product must be considered, when making pricing decisions. The
company should consider if an increase in price will lead to an increase or a
decrease in demand, and vice versa.
• Channel of distribution: The cost of distribution and the channel of
distribution must also be considered when the price of a product is to be set. It
must be considered if the product will be supplied directly to the final consumer
or has to pass through the various channels of distribution. For a product that
has to pass through the wholesaler, to the retailer and then to the final
consumer, the profit of these middle men as they are called must be considered,
so that the final price set by the retailer will not affect demand negatively. In
some situations, the producer may need to set a standard price, which is known
 26

by the wholesaler, the retailer as well as the consumer. For example the
Nigerian Bottling Company has set a standard price for the sale of a 35cl bottle
of Coca Cola in Nigeria to N40 as at this date, thus both the consumers and the
retailers are aware of the standard price.
• Macroeconomic trends: The macroeconomic trends of the country must
also be put into consideration when pricing decisions are made. In an unstable
economy, where cost of living increases, without a change in the income of the
people, an increase in the price of a product may affect demand for that product,
so also when there is an increase in the income of the people, increase in the
price of a product may not necessarily affect the demand for that product at that
point in time.
• Company Objective: When pricing decisions are made, they must be in line
with the overall company objectives, as this is what will inform what the
pricing objective really is, so that the pricing decisions made will not be against
the company objective.
2.2.13. The Relationship between Price and Customers Patronage:
Examining price and customers patronage has shown that there is a
relationship between these two variables. Previously in this chapter, it had been
explained that one of the objectives of price is market share which results from
sales derived from customers and consumers’ patronage. Also one of the factors
affecting customers’ purchase and patronage has been viewed to be price.
Thus this has shown that a relationship is obvious between price and
customers patronage. This relationship can be said to be in accordance with the
law of demand which states that “the higher the price, the lower the quantity
demanded and the lower the price the higher the quantity demanded”. This
shows that there is an inverse relationship between price and quantity demanded
so also is an inverse relationship between price and customers patronage in a
market which is sensitive to price like that of the Mikap Nigeria Ltd.
 27

The above diagram illustrates the sales of luxury product which have high
price i.e. P4 and records low sales i.e S2 unlike the conventional product that
have low price i.e. P2 which records more sales i.e. S6
In a price sensitive market, price of product distinctly affect the level of
customers patronage. It is obvious that organizations strive for growth and
survival through profit made but consumers’ needs and want must also be
considered in order to offer a reasonable price to ensure patronage and thus
profitability.
2.2.14 Profitability of Business: -
The profitability of any business is dependent upon how effective an
organization plan to meet up with current cost, expenditure and make gains
from their operations.
Profit is the excess earnings made from sales or business activities after cost
of production, marketing and distribution have been deducted from current
revenue.
 28

Profit as defined by Suman-Gana (2007) is the most amount by which the

total revenue (derived from operation or running of an enterprise) exceeds the total
cost of production (i.e. cost of raw material, labor, land, overhead).
Profit means different thing to different people. The word “profit” has
different meaning to businessmen, accountant, tax collectors, workers and
economist. It is often used in a loose potential sense that buries its real significance
(Joel Dean, 1999 p.3). In a general sense, profit is regarded as income accruing to
equity holders, in the same sense as wages accrue to laborers; rent accrues to
owners of rentable asset and interest accruing to money lenders. To the accountant,
profit means the excess of revenue over all paid out cost including manufacturing
and overhead expenses while to an Economist, profit is the return over and above
the opportunity cost.
For growth and survival of business, management needs to make profit.
Even in the non-profit making organizations, profit is often made to ensure the
smooth running of the organization.
2.2.15. Price Variable, Customers’ Patronage to Profitability of Business: -
Price does not just imply the monetary value of goods and services; rather it
is the profitable and satisfactory value of goods. Profitable to the organization in
such a way that the price fixed encourages or gingers customers’ patronage, sales
which thus lead to profit. Price can also be said to be satisfactory to the consumers
if such price reflects or equates the social value, benefits and bundle of utilities to
be derived from such product.
Price in most cases serves as organization tool or gear which pivots the
organization towards a satisfactory sales and profit level.
2.2.16. The Importance of an Effective Pricing Strategy:
Organization must be careful with regards to pricing decisions because of
its effects on business also if prices are set well; it stands as leverage to an
organization. Some of the importance is as follows: -
i. It is an image building tool for an organization.
 29

ii. It has a multiplying effect on business through sales growth and profit.It
becomes a competitive advantage to an organization in the case of stiff
competition.
iii. It encourages purchase and become a driving force for business survival.
Organizations may fail to fix an effective price. This is as a result of the
common mistakes made in price selling: -
i. Prices are not varied enough for product items and market segments which
have different needs.
ii. Price is too often set independently of the rest of the marketing mix. It
should be set as an intrinsic element of market positioning strategy.
iii. Pricing is too cost-oriented. Companies therefore fail to take sufficient
account of demand intensity and customer cognition.
iv. Pricing is usually done without conducting market research sufficient
information on the market will help in setting appropriate product prices.
Prices are changed easily by organization just by capitalizing on changed
conditions in the market place.
2.3. Review of Related Empirical Study
A study carried out by Abideen Abdulsalam Usman (2015) on “Price
Variable, Customers’ Patronage On Profitability Of Business” (A Case Study Of
P.Z. Industry Zaria.) revealed that although prices and level of customers’
patronage on PZ Cusson’s product affect their profitability (usually positively) but
the organizations need to make adjustment in some areas of their operation. Below
are some of our findings.
1. This research shows that PZ Cusson’s’ industries strongly embark on consumer
orientation marketing and it continuously gives more priority to customer interest
before setting it product prices.
2. It was also discovered that the proportion of PZ profit on sales is too low. This
implies that despite a large increase in the company’s sales, profit made was not
commensurate with the sales volume.
 30

3. Low profit margin of PZ is as a result of increase in production and overhead

cost. This can be observed from company’s financial statement which shows that
74% of the company’s gross profit was expended in the profit and loss account.
Thus, reducing the company’s net profit.
4. This research also reveals that Low profit margin was also a result of low
product prices set compared to that of competitors in the industries. This is because
the company is accustomed with other pricing strategies other than the competitor’s
oriented ones.
5. Increasing turnover for PZ Products stems largely from low price and high
quality.
Imoleayo (2010).in his study on “The Impact of Product Price Changes on
the Turnover of Small and Medium Enterprises in Nigeria” using the survey and
empirical approach, the findings reviewed that the quantity demanded for a product
has a significant effect on the price of the product fixed by an organization, which
affects the profit and also the change in price has a significant effect on quantity
demanded.
Garga and Abdu (2016) in their study “The Impact of Service Quality on
Customer Patronage: Mediating Effects of Switching Cost and Customer
Satisfaction” using the survey method, with a sample size of 600 targeted at the
patron who visit and utilize the banks services regularly at least once every month
and involve in an exchange of money, time taken and the quality of services
rendered. The study findings revealed based on the literatures reviewed that,
customer patronage is positively and significantly mediated by customer
satisfaction and switching cost as it relates to the quality of service rendered. The
review also reveals that, Customer Patronage is the only economic and social
justification for the existence of any business and this existence is to create
customer satisfaction. The importance of the customer and customer patronage per
se is so profound.
 31

In an organization’s capabilities and customers’ perception and learning,

service quality plays a significant role in customer patronage and usage of a
product or service, as have been established by several studies such as (Lesue and
Feick 2001; and Gerpott et al 2001: Luiza et al, 2009; Sahin and Kitapçi, 2013;).
Similarly, Boulding, Kalra, Staclin & Zeithaml (1993) as cited in Oyeniyi,
& Abiodun, (2009) found a positive relationship between service qualities and
repurchase intention and willingness to recommend.
Ranaweera and Neely (2003) studied some moderating effects on the
service-customer retention link and it was established that perception of service
quality has a direct linear relationship with customer purchase intention. Kheng et
al (2010) also studied The Impact of Service Quality on Customer Loyalty and
found that improvement in service quality can enhance customer patronage and
loyalty.
Sanayei, (2012); Bolton and Drew, (1991a) also suggest that there is a direct
link between service quality and behavioural intentions. Among the various
behavioural intentions, considerable emphasis has been placed on the impact of
service quality in determining repeat purchase and customer loyalty (Jones and
Farquhar, 2003). As pointed out by Bolton (1998), service quality influences a
customer’s subsequent behaviour, intentions and preferences. Besides, Cronin and
Taylor (1994) also found that service quality has a significant effect on repurchase
intentions.
Other studies which support that repurchase intentions are positively
influenced by service quality include Zeithaml, Berry and Parasuraman (1996),
Choi et al. (2004, cited in Kheng et al (2010), Hafeez and Mohammed, (2012) and
Saleem and Raja (2014).
According to (Sharma and Saleem, 2014) customer satisfaction is the
customer’s reaction to the state of satisfaction, and customer’s judgment of
satisfaction level. Customer satisfaction is very important in today’s business world
as (Deng et al., 2009) have ascertained that the ability of a service provider to
 32

create high degree of satisfaction is crucial for product differentiation and

developing strong relationship with customers.
2.4. Summary of the Literature Review
In this chapter, various concepts such as The Impact of Service Quality on
Customer Loyalty and found that improvement in service quality can enhance
customer patronage and loyalty: Customer’s Patronage,- refers to the consistency
of a particular customer or an individual in purchase of the products of a particular
producer: Profitability of Business -The profitability of any business is dependent
upon how effective an organization plan to meet up with current cost, expenditure
and make gains from their operations.
The empirical review explains that the quantity demanded for a product has
a significant effect on the price of the product fixed by an organization, which
affects the profit and also the change in price has a significant effect on quantity
demanded.
3.0 RESEARCH METHODOLOGY
A Research work is incomplete without data collection and proper
understanding of the relationship between facts and events. For the purpose of this
study, this chapter verifies the source of data collection and the objectives of this
project. This chapter deals with the data collection technique, the population of the
study, sampling technique, sample size, justification of sample and method of data
analysis.
3.1 Research Design
Research design is a plan structure and strategy of investigation that guides
in collection and analysis of data on any kind of research. A research design thus
means the structuring of investigation aimed at identifying variables and their
relationship to one another Nnamdi Asika (2008)
The validity and effectiveness of research is based on a sound research
design. This research entails three variables which are price, customers’ patronage
and business profitability. This research topic concerns individuals’ opinions and
 33

judgment with regards to Mikap Nigeria Ltd product price and it effect on recorded
sales and profitability.
An ideal research design for this study is exploratory research which is
concerned with identifying the real nature of research problems and perhaps of
formulating relevant hypothesis for later test.
Exploratory research gives valuable insight, results in a firm grasp of the
essential character and purpose of specific research surveys. Surveys are systematic
ways of gathering information from a large group of people usually conducted with
the use of questionnaire interview and observations.
3.2. Study Area
Mikap Nigeria Ltd, is the producer of Nigeria’s premier locally produced
rice: Miva Rice. In production since 2011 Miva rice, as a rice brand, stands out
from the competition with its many distinguishing factors and unique attributes.
Miva Rice is completely produced in Nigeria where the purity and
wholesomeness of the rice is ensured through the advanced technologyused in
harvesting and milling the rice grains.
Only freshly harvested rice grains are used in production, making sure the
quality and excellence of the product is constant.
Miva Rice is farmed and processed to be an extremely nutritious food
source. It contains nutrients the body needs, and is great for working adults and
growing children too. It’s the healthy family’s choice.
The superior technology used in milling ensures that the rice is free from
impurities including chemical substances, insects and other substances.
Mikap Nigeria Limited is one of Nigeria’s largest agricultural and Agro-
chemical Companies. Mikap Nigeria utilizes the best Technology in crops and
livestock development, while contributing meaningfully to the state of agriculture
through grain development and progressive technology.
 34

Since 1990, the company has grown in scope, and relevance with production
of grains, poultry, orange farms, fishery and ventures in real estate, dredging,
education and transportation.
Mikap Nigeria is determined to invest in the future of Nigeria. The company
is using its strong and wide reaching network collaborations, partnering with
various government and agricultural technology providers to ensure they meet their
goal of creating superior agricultural products.
The company has an outstanding base, both in terms of its market share in
key crops and its property products and expertise.
2.3 Population of the Study
For any researcher to collect information for a given research work, the
researcher must specify the entire group that should embrace the information
(Nworgu, 1991).Research population according to Osuala (2000) refers to the
whole object from which the sample is drawn. Silverthorne, Fisher and Fort (2003)
defined population as the totality of any group, person or project which is defined
by some unique attribute. The study covers entire staff Mikap Nigeria Ltd which
has 84 skilled staff and 24 unskilled staff. Hence the specific population of study is
108.
3.4 Sample and Sampling Technique.
A sample is the representative of a population or a number of people or
object (fewer than the aggregate) taken from a population for close examination.
In order to achieve high degree of accuracy the researcher employed the
Stratified sampling.
Stratified Sampling: If a population from which a sample is to be drawn
does not constitute a homogeneous group, stratified sampling technique is
generally applied in order to obtain a representative sample. Under stratified
sampling the population is divided into several sub-populations that are
individually more homogeneous than the total population (the different sub-
populations are called ‘strata’) and then we select items from each stratum to
 35

constitute a sample. Since each stratum is more homogeneous than the total
population, we are able to get more precise estimates for each stratum and by
estimating more accurately each of the component parts; we get a better estimate of
the whole. Stratified sampling results in more reliable and detailed information.
Hence the researcher divided the entire population in to two stratum: the senior
staff which comprises of the Management/ Administrative staff, the junior staff
were made up of security, laboures, drivers. Thus 54 samples were selected based
on the ability of the respondent to provide relevant information to the topic under
study.
3.5. Instruments of Data Collection
The researcher is quite aware of the intricacies involve in the research work.
Thus employed the following techniques: -
a. Personal observation
b. Personal Interview
Personal observation implies that the researcher witness or experience an
event or a phenomenon at first hard in order to collect information needed to make
an informed decision.
Personal interview is a data collection technique which involves the
investigator (i.e. interviewer) that directs questions at the subject (interviewee) and
records the obtained responses.
Questionnaire: - The questionnaire is a device for obtaining answers to
research relevant questions from which the respondent fills by his/herself. Through
personal observation, the researcher would be able to observe the attitude and
behaviour of customers towards Mikap Nigeria Ltd product price. It will also
enable the researcher to gather an instantaneous result. The personal observation
plays a vital role in confirming the objectives of investigation and in validating
information from respondents.
 36

3.5.1. Validity of the Instrument

The data used for the analysis is both primary and secondary data. Primary
data were sourced through field survey by interacting with the respondents using
the questionnaire, thereby collecting needed data.
According to Obasi, (2005) primary data is a data gathering instrument that
enables a researcher to have an in depth knowledge of the study through interaction
with the respondents. These interactions may be oral interviews, Questionnaires
and personal observations. Primary data has the advantage of being original and
more reliable because data is gotten directly from respondent which represent their
opinion and attitude towards a particular variable under study.
3.5.2. Reliability of the Instrument
1. It is free from the bias of the interviewer; answers are in respondents’
own words.
2. Respondents have adequate time to give well thought out answers.
3. Respondents, who are not easily approachable, can also be reached
conveniently.
4. Large samples can be made use of and thus the results can be made more
dependable and reliable.
3.6. Method of Data Collection
Data for this study is collected from primary source where the researcher
made use of written questionnaires to gather information, oral interview (for people
that can barely read or write) which is translated to the questionnaire during the
interview. The questionnaire distributed cut across the people in the study area. The
questionnaires were respondent to and collected immediately to avoid any lost.
3.7. Method of Data Analysis
In analyzing the data collected, the researcher made good use of the tables
and simple percentages. Data collected were shown in tabular form and
percentages worked out for easier analysis. The hypothesis was tested using linear
 37

regression analysis to the relationship between the independents and the dependent
variables
 38

4.0 RESULT AND DISCUSSION

4.1 Data Presentation and Analysis
This chapter present the data collected and analyzed for the study. The
analyzed data were used for answering the research questions drawn from
study.
Table 4.1 Price Strategies Adopted by the Company
Response Total
Price Strategies Yes NO
Cost- oriented price Frequency 51 3 54
strategy (%) percentage 94.4% 5.6% 100.0%
Demand- oriented price Frequency 6 48 54
strategy (%) percentage 11.1% 88.9% 100.0%
Competition- oriented Frequency 6 48 54
price strategy (%) percentage 11.1% 88.9% 100.0%
Supplier suggested retail Frequency 2 52 54
price (%) percentage 3.7% 96.3% 100.0%
Total Frequency 65 151 216
(%) percentage 30.1% 69.9% 100.0%
Source: field survey 2018, SPSS output.
The result in table 4.1 shows that the major price strategy adopted by this
enterprise is cost-oriented price strategy where 94.4% the respondents align with
this however 11.1% of the respondent say that they also adopt demand – oriented
price and competition oriented price strategies. Means that the company depends
on cost of production to fix the price for their product, however they can yield to
change in the demand for products and competition to fix prices of products. Thus
the result implied that cot oriented price strategy is best for Small and medium
enterprise because it considered the cost of production before setting price to
maximized profit and minimized lost.

Table 4.2 Effect of Price Set on Profitability

 39

Effect of Price Strategy on Total

Profitability
positive negative Unknown
Price Set

Very high price Frequency 25 25 4 54

(%) percentage 46.3% 46.3% 7.40% 100.0%
High price Frequency 35 18 1 54
(%) percentage 64.8% 33.3% 1.85% 100.0%
Moderate price Frequency 47 7 0 54
(%) percentage 87.0% 12.7% 0.00% 100.0%
Low price Frequency 10 24 20 54
(%) percentage 18.5% 44.4% 37.0% 100.0%
Total Frequency 117 98 25 216
(%) percentage 54.2% 45.4% 11.6% 100.0%
Source: field survey 2018, SPSS output.
Table 4.2 shows the effect of the price set on the profitability of the
company and the result from the table indicate that moderate price has the high
percentage of positive effect on the profitability of this company with 87.0 %
followed by high price 64.8%, very high price 46.3%, and low price recorded the
least percentage of 18.5% positive effect on profitability of the company. This
implies that moderate price achieves customer satisfaction as they are able to see
the value of their money, Therefore increase customers purchasing power and
attracting high patronage, hence the business witness quick turnover in the short
period of time
 40

Table 4.3 level of costumer patronage as influence by price set

Level of customer patronage as Total
Price set influence by price set
Very High Low Very
high low
Low price Frequency 48 3 2 1 54
(%) percentage 88.9% 5.6% 3.7% 1.9% 100.0
%
Moderate Frequency 20 28 6 0 54
price (%) percentage 37.0% 51.9% 11.1% 0.0% 100.0
%
High price Frequency 6 20 20 8 54
(%) percentage 11.1% 37.0% 37.0% 14.8% 100.0
%
Very high Frequency 0. 0 0 54 54
price (%) percentage 0.0% 0.0% 0.0% 100% 100.0
%
Total Frequency 74 51 28 63 216
(%) percentage 34.4% 23.7% 13.0% 29.3% 100.0
%
Source: field survey 2018, SPSS output.
Table 4.3 shows the level of costumer patronage as influence by price set.
The result from the respondent as indicated in the table shows that 88.9%
respondents were of the view that a very high customer patronage is witness when
low price set is employed in the company. 37% of the respondents say moderate
prices attract very high patronage, high price attract11% of high patronage while
very high price do not attract any high patronage that is 0.00%. This implies that a
very high patronage witness during low price and a very low patronage witness
during high price is as a result of the purchasing power of the prospective
customer and the competition in the market. Hence the high the price the lower the
purchasing power and the lower the price the higher the purchasing power, also
many potential customer may go for close substitute available in the market
 41

Table 4.4 Factors Affecting Price Variation

Effect Total
Factors Affecting Price Variation very high low very
high low
Cost of Frequency 25 29 0 0 54
Production (%) percentage 46.3% 53.7% 0.0% 0.0% 100.0%
Nature of Market Frequency 10 41 3 0 54
Competition (%) percentage 18.5% 75.9% 5.6% 0.0% 100.0%
Customer and Market Frequency 5 1 46 2 54
Segment (%) percentage 9.3% 1.9% 85.2% 3.7% 100.0%
Demands Frequency 17 37 0 0 54
(%) percentage 31.5% 68.5% 0.0% 0.0% 100.0%
Consumers Behaviour Frequency 0 6 46 2 54
and Perception (%) percentage 0.0% 11.1% 85.2% 3.7% 100.0%
Channel of Frequency 5 38 10 1 54
Distribution (%) percentage 9.3% 70.4% 18.5% 1.9% 100.0%
Microeconomic Trend Frequency 7 47 0 0 54
(%) percentage 13.0% 87.0% 0.0% 0.0% 100.0%
Company Objectives Frequency 20 33 1 0 54
(%) percentage 37.0% 61.1% 1.9% 0.0% 100.0%
Total Frequency 89 232 106 5 432
(%) percentage 20.6% 53.7% 24.5% 1.2% 100.0%
Source: field survey 2018, SPSS output.
Table 4.4 shows the factors and their effect on price variation, the result
indicate that among the factors, Cost of Production have a very high effect
46.3%on customer patronage follow by Company Objectives, 37.0%, demand for
products 31.5%,others were Nature of Market Competition,18.5%, Channel of
Distribution and Customer and Market Segment 9.3%.This result indicated that the
Cost of production, Company objective and demand from the product was the
major determine factors for price variation because the major objective of any
business is to make profit, and the profit can only be made when price for goods
and services are set considering the aforementioned factors. Also the demand for a
product can detect how the price can be set,
 42

Table 4.5 Factors Affecting Customer Patronage

Effect Total
Factors Affecting Customer Patronage VERY HIGH LOW
HIGH
Cost of products Frequency 20 34 0 54
(%) percentage 37.0% 63.0% 0.0% 100.0%
Quality of products Frequency 22 22 10 54
(%) percentage 40.7% 40.7% 18.5% 100.0%
Customer care service Frequency 0 54 0 54
(%) percentage 0.0% 100.0% 0.0% 100.0%
Customer satisfaction Frequency 0 54 0 54
(%) percentage 0.0% 100.0% 0.0% 100.0%
Channel of distribution Frequency 0 54 0 54
(%) percentage 0.0% 100.0% 0.0% 100.0%
Macroeconomic trend Frequency 0 54 0 54
(%) percentage 0.0% 100.0% 0.0% 100.0%
Demand for the Frequency 28 26 0 54
products (%) percentage 51.9% 48.1% 0.0% 100.0%
Total Frequency 70 298 10 378
(%) percentage 18.5% 78.8% 2.6% 100.0%
Source: field survey 2018, SPSS output.
Table 4.5 show the result from respondent on their views on factors that
affect customer patronage, the result indicates that 40.7% of respondents indentify
quality of the product as a very high factor affecting customer patronage , followed
by cost of product 37.0, the study identify three major factor that affect customer
patronage which are demand for the product, quality of the product and cost of the
product respectively, this implies that a consumer demand come first that all the
customer buy product because of their demand for such product, also most
customer patronize some product because of the quality irrespective of price,
notwithstanding the price of the product can also determine the level of patronage.
 43

4.2 Test of hypothesis

H0 : Price variation and customers’ patronage does not have any effect on
the profitability Mikap Nigeria Ltd

Table 4.6 Regression Model Summary

Model R R Adjusted Std. Change Statistics
Square R Error R F df1 df2 Sig. F
Square of the Square Change Change
Estimate Change
1 .889a .790 .788 .200 .790 401.314 2 213 .000
a. Predictors: (Constant), price strategies , customers patronage as influence by price set
Source: field survey 2018, SPSS output.
Using regression analysis, the researchers examined whether the
independent variables including Price variation and customers’ patronage
predicated profitability of Mikap Nigeria Ltd Table 4.6 shows results of regression
analysis. Regression results presented in table 4.6 reveal that Price variation and
customers’ patronage predicted 78% Profitability of Mikap Nigeria Ltd (Adjusted
R Square = .788, sig. =.000). Hence the H 0 is rejected and alternative hypotheses
which state that Price variation and customers’ patronage have a significant effect
on the profitability of Mikap Nigeria Ltd is accepted
4.3 Discussion of Findings
The finding in the study reveal that the profitability of Mikap Nigeria Ltd
depends on price variation and customer patronage, a regression analysis was use
to test whether the independent variables including Price variation and customers’
patronage predicated profitability of Mikap Nigeria Ltd, and the result find
Adjusted R Square = .788, sig. =.000, this indicate that price variation and
customers’ patronage predicted 78% profitability of Mikap Nigeria Ltd. The
company also adopted cost-oriented price strategy where 94.4% of its price set
depend on the cost of production this is to say that price change with any change in
the cost production that is the higher the cost production, the higher the price of the
 44

product and the lower the cost of production, the lower the selling price. However
the company sometimes adopts other price strategies such as demand – oriented
price and competition oriented price strategies when the need arises.
The effect of price set on the profitability of the company was also determine in the
study and the finding reveal that moderate price has the high percentage of positive
effect on the profitability of this company with 87.0 % . This may be because
moderate price considered both the cost of production and the probability of
returning high customer patronage to achieve the company objective of making
profit and as way as satisfying their costumer. The level of customer patronage as
influence by the price set show a very high percent patronage of 88.9% when the
prices are low, because most of the customer my will have high purchasing power
since the price are low.
Cost of production was considered by the respondent as the major factor affecting
price variation in the company, represented by 46.3% of the total respondent
followed by 31.5% and 18.5% of demand for product and nature of market
competition respectively. This is because cost oriented price strategy adopted by
the company hence the cost of production can be easier affect the price variation.
The study also revealed that demand for product increases the level of patronage
hence 51.9% of the respondent align its as the major factor affecting customer
patronage other facts include quality of the product 40.7% and cost of production
37.0.
 45

5.0 SUMMARY, CONCLUSION, AND RECOMMENDATIONS.

This chapter also aimed at giving the summary of the study, conclusion,
limitation, recommendations and suggestions for further studies.
5.1 Summary of Findings:
In the course of this study, the researcher has established an understanding
of the relationship existing between price variable, customers’ patronage and
profitability. Pricing has been identified as an important marketing mix that have
considerable and significant impact on the level of the of customers’ patronage and
profitability of a business organization.
The finding in the study reveal that the profitability of Mikap Nigeria Ltd
depends on price variation and customer patronage, a regression analysis was use
to test whether the independent variables including Price variation and customers’
patronage predicated profitability of MIKAP Nigeria Ltd, and the result find
Adjusted R Square = .788, sig. =.000,.
The company also adopted cost-oriented price strategy as major price
strategy, but sometimes resort to demand – oriented price and competition oriented
price strategies when the need arises. The effect of price set on the profitability of
the company was also determine in the study and the finding reveal that moderate
price has the high percentage of positive effect on the profitability of this company.
Cost of production was considered by the respondent as the major factor affecting
price variation in the company. The study also revealed that demand for product
increases the level of patronage
5.2 Conclusion: -
Price can be seen as element of marketing mix which interpretes the value at which
one can exchange monetary value for a bundle of utility or satisfaction to be
derived from a product. It determines the level of revenue an organization would
realize from the sales of their product. After products have been produced and
distributed, such product is given adequate exposure through promotion. Yet such
product cannot be sold until a price is set or derived. For growth, existence and
 46

contains survival of business, there must be an underlying idea of targeting a

revenue which must equate or exceed the cost of producing the product which must
also reflect the interest and accepted value to the consumers. Hence is the need for
price.
In essence, every organization must handle price well because of it influence
on organizational goals and objectives. The primary objective of pricing is to
achieve increasing sales, for increasing profit and create better reassertion and
prospect for business.
The financial performance of a business will be determined by the
company’s effectiveness at pricing its goods and services. This is because
profitability can only be achieved when customers patronize the company’s well
priced product. A small error in price setting may move a company from profit to
loss. This pricing needs careful handling by marketer because of it delicacy in
business.
Pricing occupies an important position in the formulation of marketing
objectives and policies of an organization.
In conclusion, pricing is viewed as the most powerful instrument that assists
the marketer in inducing and motivating customers to continuously thereby
bringing in higher volume of sales as well as profit.
5.3 Recommendation: -
This research work will be considered incomplete if the researcher does not
make recommendations in order to guide or assist future research work or aid an
ideal marketer in his task of price setting, influencing customers’ patronage and
increasing profitability of business. As such, base on the research work conducted
on the organizations pricing system and its effect on customers’ patronage and
profitability with reference to MIKAP Nig. Ltd. The researcher makes the
following recommendation for possible consideration and implementation.
i. To make an effective contribution towards the company’s goals and
objectives, management of MIKAP Nig Ltd must not relent it effort in
 47

application of those pricing strategy which reflects the interest of the

organization and the customers. The company should find a way of
rationing the cost-oriented, demand-oriented and competitive-oriented
pricing strategies in order and competitive-oriented pricing strategies in
order to increase demand and sales, to be able to withstand competition
and also cover cost of production by making additional profit.
ii. The researcher also recommends that the organization should engage
in constant and period research in order for it management to be able to
properly diagnose any problem it could be facing in the future.
Management should ensure to breach the gap between the organization
and it customers through interviews and dialogues.
iii. . The government should also intervene in issues of product pricing
and quality in order to prevent customers’ exploitation by organization
and to also ensure that organizations operates in accordance to ethical
rule and principles.
iv. The researcher strongly recommends the adoption of consumerism
especially in those aspects of price, quality and safety.
v. In conclusion, the researcher also recommends periodic marketing
seminars and conferences for marketing executives so as to broaden their
knowledge of customers’ satisfaction via price setting and other
marketing activities towards organizational profitability.
5.4 Limitations
There is no research work which will be undertaken without encountering
difficulties in one way or the other. There are two major problems faced by
the researcher.
i. Time Constraint: - to a significant extent, time is a major limitation to
this work. At the time of this of this study, the researcher is also engaged in
other academic endeavors. Also the line frame for this research is short.
 48

ii. Financial Constraint: - another problem faced by the researcher is

financial difficulty which greatly reduces the researcher ability in making
frequent trips to MIKAP Nig. Ltd hardship.
5.5 Suggestion for Further Studies
This study was carried out on the effect of price variation and
costumer patronage on the profitability of small scale business in Benue
state. However further study can be carry out to determine effect of business
location on customer patronage and profitability of MIKAP Nig Ltd.
 49

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