CHAPTER ONE

INTRODUCTION

1.0 Introduction            

In this chapter we have the theoretical background of the study, the statement of problem, aim of study, objective of the study, scope of the study, significant of the study, organization of study, research and the definition of terms.

1.1 Theoretical Background

Price tag management can be defined as any marketing tactic used by firms to create the perception that its current price offers good value compared to competitors’ price, past prices or future prices. The phenomenon of price adjustment is central in economics for several reasons. First, at the microeconomic level, since price adjustment is considered the main market clearing mechanism, whether prices adjust or not can have important implications for the efficiency of resulting allocations. Therefore, having a better understanding of the price change process can provide insights on issues like: how rigid are prices of individual products; how fast are costs passed-through onto prices; how long it takes prices to adjust to changes in market conditions such as changes in supply and demand, etc. Second, at the managerial level of an individual business, pricing and price adjustment play a critical role as it determines the bottom line profitability. For example, questions such as: how to adjust prices of individual products in response to temporary cost increases, how to adjust prices to competitors’ price changes, how to adjust prices of sale and non-sale items, how frequently to change prices, etc., are all questions pricing managers and retail sellers face on a daily basis. Third, there are variety of markets (e.g. different types of auction markets, non-auction markets such as markets with posted prices, etc.), and understanding the specific characteristics of these institutions may help us better understand and predict the outcomes observed at these markets. Given the importance of the price adjustment mechanism, it is not surprising that the issue has received considerable theoretical as well as empirical attention.

A detailed understanding of the costs associated with all aspects of the price change process can be valuable for managers. A decision to change a price of a product, like any other economic decision, has costs and benefits. In the area of pricing strategy, managers have developed an extensive understanding of the benefits associated with adjusting prices to changing market conditions. For example, in the grocery industry, studies of price elasticity’s, promotion sensitivities, and consumer responsiveness to pricing activity are frequently undertaken by branded manufacturers, retailers, and private companies. Similarly, in industrial markets many firms undertake conjoint or tradeoff analysis to assess the price sensitivity of their customers (Nagle and Holden, 1995).

A common strategy among retailers is to offer consumers a price guarantee. There are two widely used versions: price matching policies and best price policies. A price matching policy guarantees that prices will be no higher than the prices charged by other retailers. A typical price matching policy guarantees the consumer a rebate equal to the price (and perhaps more) if the consumer finds the same product offered at lower price by a competing firm within 30 days of purchase. Price tag management is relevant based on the following reasons: Many customers have poor price knowledge. Price tags are effective at increasing demand,  Price tags are more effective (and actual price changes are less effective) when customers have poor price knowledge,  Price tags are most effective on newly introduced items and with newly acquired customers.  Price tags are less effective when used more often. It is profitable for firms to place price cues on items for which prices are low. Price tags may lower demand if used incorrectly. The manual way of computing price tags is not effective. Hence there is need for an automated system that will significantly aid retailers to compute and update price tags.

1.2 Statement Of Problem

Many retailers do not have an effective method of managing price tags such that they maximize profit. When customers lack perfect information about prices they may also have imperfect knowledge of quality. Price tag management is intended to create the perception of a low price and increase demand. Many variables are usually involved from the purchasing of the product to marketing it and many business persons that are not conversant with how to set a price tag may end up running at a loss. In addition, the situation of increased price of the product may also reduce demand. There is therefore need for an effective software system that can aid in the determination of optimal price such that there is no loss or excess profit and also to provide room for updating price tag of items when needed.

• Aim And Objectives Of The Study

The aim of the study is to develop an automated price tag management system. The following are the specific objectives:

• To develop an automated price tag management system that can aid in the determination of prices of products based on cost variables.
• To develop a system that will allow the easy updating of price tags
• To develop a system that will replace the manual way of giving price tag to products
• To implement a system that can hold a database of price tags such that the price of any product can be queried easily.

1.4 Scope of the Study

This study covers the design and implementation of an automated price tag management system for Happy Day Supermarket, Oron.

1.5 Significance of the Study

The significance of the study is that it will provide a possible solution to the problem of determining the price tag of products; it will serve as a decision support system and also as an information system to managers of supermarket.

1.6 Organization of the Research

This research work is organized into five chapters. Chapter one is concerned with the introduction of the research study and it presents the preliminaries, theoretical background, statement of the problem, aim and objectives of the study, significance of the study, scope of the study, organization of the research and definition of terms. Chapter two focuses on the literature review, the contributions of other scholars on the subject matter is discussed. Chapter three is concerned with the system analysis and design. It analyzes the present system to identify the problems and provides information on the advantages and disadvantages of the proposed system. The system design is also presented in this chapter. Chapter four presents the system implementation and documentation. The choice of programming language, analysis of modules, choice of programming language and system requirements for implementation.

Chapter five focuses on the summary, conclusion and recommendations are provided in this chapter based on the study carried out.

1.7 Definition of Terms

Price: The amount, usually of money, that is offered or asked for when something is bought or sold

Price Tag:  Label saying what something costs also a small label attached to an item that is for sale, with the price written or printed on it.

Management: the organizing and controlling of the affairs of a business or a sector of a business.