The Effect of Pricing Strategy on the Performance of Micro, Small and Medium Enterprises (MSMEs) in Kenya
Abstract
An effective pricing strategy is considered one of the most innovative and cost effective practice-based entrepreneurial marketing approaches, that MSMEs can employ to increase performance. This is because effective pricing techniques aid organizations in selecting rates that take full advantage of earnings as well as shareholder value while thinking about consumer and market demand. Similarly, it takes into account ability to pay, market conditions, rival activities, trade margins as well as input costs, amongst others. Therefore, MSMEs can effectively deliver on their fundamental roles through formulation and application of appropriate pricing strategy so as to exert a positive effect on performance, and therefore, the focus of this study. The study assessed the effect of pricing strategy on the performance of Micro, Small and Medium Enterprises (MSMEs) in Kenya. The study was guided by positivism research philosophy. A descriptive survey design was adopted. The study population included 8,526 licensed MSMEs in Tharaka-Nithi County. Stratified sampling and random sampling techniques were employed to arrive at the study sample size of 368 MSMEs. Data was collected using questionnaires through hand and delivery procedure. Quantitative data was analyzed using both the descriptive statistics and inferential statistics. Qualitative data was analyzed through content analysis. The simple linear regression findings indicated that pricing strategy accounted for 39.3% of the variation in performance of MSMEs in Kenya. The results further showed that an effective pricing strategy has a significant positive effect on the performance of MSMEs in Kenya as reflected by β=0.621, sig value =0.000, <0.05. Pearson product moment correlation coefficient at r = 0.627 showed that there is a strong positive correlation between pricing strategy and performance of MSMEs. Consequently, the study supported the alternative hypotheses that pricing strategy has a significant positive effect on the performance of MSMEs in Kenya. The study concluded that effective pricing strategies culminates to enhanced performance. The study further concluded that a good pricing strategy should be anchored on an organizational wide evaluation of a firm’s pricing objectives, consumers (target market), demand curve, competition, and other internal factors such as costs incurred as this is cardinal in establishing and sustaining a competitive edge over other co-players in the market, culminating to a better firm performance. The study recommends that MSME owners and managers should have in place a pricing strategy if they are to achieve superior performance. In order to derive full benefits of the pricing strategy, it is recommended that pricing decisions should be made in cognizant of other firm wide factors that in return affect the expected outcomes of such decisions.
Keywords: Pricing Strategy, Performance, MSMEs & Tharaka-Nithi County, Kenya
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