CHAPTER ONE

INTRODUCTION

1.1        Background of the Study

The aim of marketing is to meet and satisfy target customers’needs and wants better than competitors. Successful marketing requires that companies fully connect with their customers. This calls for adopting a holistic marketing orientation which means understanding customers and gaining a full turn-around view of both their daily lives and the changes that occur during their lifetimes so that the right products are marketed to the right customers in the right way. These consumers have varied influences that affect their buying decisions and among these are the pricing tactics and strategies of the marketing firm (Kotler and Armstrong 2007:5).

Brassington and Pettitt (2003:392) defined price as the value that is placed on something. Usually, the price is measured in money, as a convenient medium of exchange that allows price to be set quite precisely. This is not necessarily always the case.However, goods and services may be bartered, or there may be circumstances where monetary exchanges are not appropriate.

Zeithaml (1998:17) noted that from the buyer’s perspective, price represents the value they attach to whatever is being exchanged. Up to the point of purchase, the marketer has been making promises to the potential buyer about what this product is and what it can do for that customer. The customer is going to weigh up those promises against the price and decide, whether it is worth paying.

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There is much competition for consumers’ disposable income. This is reflected in both the range of different product markets available for them to spend in and the variety of products competing in any one market. Consumers also have a great deal of discretion over whether they spend or not. There are very few real necessities and, on many occasions consumers buy because they want to, rather than because they need to (Achumba 2001:17).

Also, as a result of the fact that consumers are largely buying to please themselves, their assessments of competing products in most markets is often informal, non-rational or emotional or even none existent. McCarthy and Perrault (2005:172) stated that psychological factors can play a much greater role than analytical skills. Even where hard product information is provided, the consumer does not necessarily make the effort to digest it properly or retain it. Price too, as has already been pointed out, may be interpreted variously, depending on the individual customer.

Most consumers are utility maximizers; many of them always look for value-to-cost when they make buying decisions. In some situations, consumers are extensively involved in haggling in order to justify economic value for their purchase. Stanton and Sommers (1985:17) opined that in Business to Business (B2B) markets and major open markets in consumer buying situations where high-value purchases are involved, haggling usually takes place. This determines the final price agreed between the parties and the nature of the offer package that will be provided for that price. Price haggling, according to Lysons (1993:215), is concerned with communication processes that take place between the two parties to arrive at a mutually acceptable bargain.

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Baily (1987:101) stated that price haggling is also known as negotiation. In marketing parlance, negotiation is usually used. Baily (1987:101) further defined negotiation as any form of verbal communications in which the participants seek to exploit the relative strengths of their bargaining positions to achieve explicit or implicit objectives within the overall purpose of seeking to resolve the identified areas of disagreement.

Many price haggling issues revolve around price and/or cost trade-offs with the rest of the commercial packages offered. Thus, a buyer may agree to pay a slightly higher price than he/she had intended, if the seller agrees to deliver more quickly than originally suggested. It must be noted that price haggling (or negotiation) is not only limited to the purchases of expensive, highly complex products. Also, in the Nigerian contemporary open markets, the issue of “hagglling” has become the most fundamental. It is only in selected departmental stores and large-scale retail outlets that price haggling may seem not to be effective (Kotler &Armstrong 2010:396).

Basing the discussions on the open markets, price haggling (or negotiation pricing) can never be overemphasized in this area of marketing. Olakunori (2009:162) asserted that haggling in Nigeria markets is a fundamental phenomenon that did not start yesterday or today. He pointed out that this can be traced back to the early 1860s when market structure started developing in Nigeria.

Olakunori (2009:172) defined haggling as a type of negotiation in which the buyer and seller of a good or service dispute the price which will be paid, and the exact nature of the transaction that will take place, and eventually come to an agreement. Haggling or bargaining is an alternative pricing strategy to fixed prices. Optimally, if it costs the retailer

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nothing to engage and allow bargaining, the retailer can define the buyer’s willingness to spend. It allows for capturing more consumer surplus as price discriminationwhich is a process whereby a seller can charge a higher price to one buyer who is more eager or desperate.

This research work therefore examines the effects of price haggling as a strategy on consumer buying decisions in selected traditional markets in Ibadan, Oyo State, Nigeria. It must be realised that decision making, according to Kotler and Keller (2013:163), consists of how individuals, groups, and organizations select, buy, use and dispose goods and services, ideas or experiences to satisfy their needs and wants.

1.2        Statement of Research Problem

One major phenomenon that is a driving force in many Nigerian open markets is haggling. This has to do with what should be the established product price between sellers and buyers. Some of our open markets are being despised especially in the large cities mainly because of haggling problem. Some

Consumers have tended to shift their buying outlet to departmental stores and supermarketswhere prices most times are fixed. In addition, some traders in selected markets in Ibadan complained severally on delay in time and purchase decision which frequently occurs during haggling or negotiation process. This, sometimes to them, may eventually lead to consumer not finally buying the product or even using reference psychological price.

Many buying decisions are predominantly determined by haggling outcomes. Some consumers widely articulated that when making purchases in open markets, such as that of selected traditional markets, the haggling price arrived at sometimes may determine their

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repeat purchases and selected retail traders in the subsequent purchases. Furthermore, in recent times, it has not been ascertained whether the issue of price haggling or negotiation is effective. This is so because many consumers, especially those who are not price sensitive and purchasing experts, are usually exploited. Haggling could result in permanent relationship that may even give rise to price waivers, and may result in crises that leads to boycott of trading outlets and most often these may strengthen or weaken the system. Both traders or marketers and consumers in these open markets have positioned their interests in favour of haggling as a way of enriching the system. Both may end up satisfied or dissatisfied.

In the long-run, their purchases in the open markets are affected negatively and this is supported by the fact that many consumers usually use unfavourable expressions and critically criticize the operations of the open market such as in selected traditional markets. It is in the light of the above problems that the researcher seeks to determine the effects of price haggling as a strategy for consumer decisions in buying products at selected traditional markets in Ibadan. Thus, this research will assess the degree of adequacy and continuous use of price haggling as an instrument of negotiation in traditional markets in Ibadan, in spite of the likely implications of time wasting, lack of trust and false pricing embedded in the transactions.

1.3        Objectives of the Study

The broad objective of this study is to evaluate the effects of price haggling as a strategy for consumer buyi