Analysis of the Factors Affecting Pricing Strategies of Selected Consumer Goods in the Retail Market: a Case Study of Supermarkets in Nairobi, Kenya

Abstract

This study sought to investigate the factors affecting pricing strategies of selected consumer goods in the retail market. The study was limited to supermarkets located in Nairobi, and had two objectives, namely 1. To identify the factors that affect pricing strategies. 2. To analyze how prices vary with the age, size and the perceived consumer buying behaviour. To achieve the objectives, a semi-structured and undisguised questionnaire was developed in order to obtain data to fulfill the first objective, while price variations of four selected consumer goods were observed over the study period for all the 22 supermarkets studied, in order to get data for the second objective. The basis for selecting the consumer goods were their relative availability and variability, so that the four were those with the highest availability and variability, from an initial ten items. The supermarkets were categorised on the basis of three factors, namely the age, size and location, in order to permit comparisons along these lines. Results indicated that competition was the most important factor affecting pricing strategies, followed by handling and selling costs, and demand consideration, respectively. The importance of these factors was also found to vary according to the age. size and location of the supermarket. Although supermarkets were found to he sensitive to the perceived consumer buying behaviour as during special occasions such as christmas. they concentrated more on satisfying the anticipated high demand rather than adjusting the prices. although special offers were quite common. The study also found that most of the known pricing strategies are applied at varying degrees among the supermarkets. depending on their age. size orlocation. Prices of the consumer goods studied were found to vary according to the age. size and location of the supermarkets. and in particular. it was established that Prices of small supermarkets tended to be slightly higher than those pf large supermarkets. Prices of young supermarkets tended to he slightly lower than those of older supermarkets. Prices of supermarkets in the city centre were found to be significantly lower than those of supermarkets in Westlands and lIurlingham. These findings thus lead to the conclusion that prices are directly proportional to the age, and inversely proportional to the size of the supermarket.