Pricing decision has been a crucial decision made by all business enterprises at all levels and has posed a great challenge for Small and Medium Enterprises in Nigeria. This research work treats the impact of change in price on the sales...
morePricing decision has been a crucial decision made by all business enterprises at all levels and has posed a great challenge for Small and Medium Enterprises in Nigeria. This research work treats the impact of change in price on the sales turnover of organizations, a study of SMEs in Nigeria. The methodology adopted was the survey and empirical approach, with the administration of questionnaires to some SMEs in Nigeria, evaluating the effect change in product price has on turnover. Primary and secondary sources were used to in collecting data. It was discovered that there is a relationship between change in cost of sales and turnover. Recommendations were made for the close monitoring of SMEs and that SMEs should employ the service of price experts when making pricing decisions. 1. Introduction For any organization that is involved in the production of goods and rendering of services, after answering the question what to produce, and who to produce for, there is need to answer the question how much will our potential customers be willing to pay for the good? This difficulty of price fixture and the other various intervening variables such as cost, competitors price, demand, political factors, environmental factors, involved in fixing price for goods and services, has posed a sense of concern to most small and medium enterprises in Nigeria. This work is aimed at finding an answer to some probing questions in the mind of manufacturers and managers of small and medium enterprises about how to set prices effectively, combining all the various factors, as well as meeting the organizational overall objective, which is profit maximization. Given the macroeconomic function of: max (π) = f(x1,x2,…,xn), where π represents the profit and xi the exogenous variables of the function of profit, which consists of effective pricing, cost minimization, high turnover, amongst others. Pricing decision is a crucial decision every organization has to make, because this will eventually affect their corporate objectives, either directly or indirectly (Monroe 2003:8). 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 2008:10). According to Hilton (2005:634), 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 (1996:428), 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 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,