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BACKGROUD TO THE STUDY

Consumers make many buying decisions every day. Most large companies research consumer buying decisions in great detail to answer questions about what consumers buy, where they buy, how and how much they buy, when they buy, and why they buy. Marketers can study actual consumer purchases to find out what they buy, where, and how much. But learning about the whys of consumer buying behaviour is not so easy because the answers are often locked deep within the consumer's head. Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces and events in the buyer's environment: economic, technological, political, and cultural. All these inputs enter the buyer's black box, where they are turned into a set of observable buyer responses: product choice, brand choice, dealer choice, purchase timing, and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer's black box, which has two parts. First, the buyer's characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer's decision process itself affects the buyer's behaviour. Empirical research indicates that consumers form price perceptions. While literature in economics (Bucovetsky 1983 ), and marketing (Meyer and Assuncao 1990) has modelled the effect of uncertain price expectations on purchase policy, most of these models have been developed for the purchase of a single commodity. Consumers purchase multiple brands in a product category, and form price perceptions or multiple brands. Price expectations for different brands may have important implications for how consumers react to price

promotions, since the likelihood of their buying a brand may be a function not only of expectations of future prices for that brand, but also of future prices of competing brands. The central question for marketers is: How do consumers respond to price change? Pricing is quite a sensitive issue for most companies especially the consumer goods industry. The impact of price on consumer purchases determines the sales that an organisation will make. According to Philip Kotler (2003), the reaction to change in price levels can provoke response from customers, competitors, distributors, suppliers and event the government. All stakeholders of a business question the motivation behind price change. Change in price levels either impact positively or negatively on a companys sales revenue. Change in price of commodities can cause a consumer to switch from the product offered by a company to the same product offered by another company. Thus, increase in the price level of Coca Cola without a resultant increase in Pepsi Cola will cause consumers to shift to the consumption of Pepsi Cola. To many organisations, price is the most flexible and controllable, but delicate elements in the four Ps in the marketing mix. The reason is the nature and complexity of the interaction that exist between three interest groups consumers, traders and competitors. There is an adage in marketing which says real gap between a company and its competitor is always between the value you create and your price, not your price and your competitors price. This adage had motivated the researcher to conduct a research on the topic: The Impact of Price Change on Consumer Purchases