EFFECT OF MARKETING MIX STRATEGIES ON PERFORMANCE OF SELECTED

DAIRY CO-OPERATIVE SOCIETIES IN SOUTH RIFT, KENYA

BY

GEORGE ALAKIM

REG. D53/KER/PT/23042/2012

A PROPOSAL SUBMITTED TO THE SCHOOL OF BUSINESS IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF

BUSINESS ADMINISTRATION OF KENYATTA UNIVERSITY

SEPTEMBER 2015

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DECLARATION

I declare that this research proposal is my original work and that it has never been presented to

any University for examinations purpose for a ward of degree.

Signature…………………… Date …………………

Student‘s Name: KENNEDY SOITA

Registration: D53/KER/PT/23042/2012

This proposal is submitted for oral defenses with my approval as the university supervisor

Signature ……………………. Date…………………

DR. CHRIS SIMON KIPKORIR

For and on behalf of Kenyatta University

Signature …………………… Date…………………

DR. STEPHEN MUATHE

Chairman, Department of Business Administration

Kenyatta University

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ACKNOWLEDGEMENTS

I thank the almighty God for answering my prayers to have an opportunity to study for a master

degree course, for giving me life, strength, wisdom and courage to face that challenge involved

in the study. My sincere appreciation goes to my wife Jacinta for the encouragement and moral

support she gave me since I started the course.

Special thanks go to my course lecturers Dr. Chris Simon Kipkorir, for guiding me through this

project. I also thank the management of Shirika Sacco society for the credit facilities advanced to

me for fee payments in time.

Lastly let me recognize the contributions made by my course lecturers, my classmates, friends

and my work mates especially Mr. Otii for the moral support.

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DEDICATION

I wish to dedicate this project to my daughters Esther and Sarah for inspiring me to study for a

Master Degree course. Special dedication goes to my uncle Mr. Zablon Maruti Mola (deceased)

for the encouragement.

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ABBREVIATIONS AND ACRONYMS

EAC: East Africa Community

KCC: Kenya Cooperative Creameries

PWC: Price Waterhouse Coopers

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OPERATIONAL DEFINITION OF TERMS

Marketing Mix refers to tactical marketing tools of product, price, and promotion.

Performance is a measure of marketing high volumes of products given scarce resources.

A co-operative society is a business organization that is formed, operated and controlled by

owners who are also the patrons.

Dairy cooperatives are cooperative societies dealing with milk and milk products.

Management committee is the board of management that is vested with the authority to run the

co-operative society on behalf of the shareholders.

Effects refers to the effect of strategies on overall performance of dairy cooperatives

South Rift as used in the study refers to Kericho and Bomet County

Strategy: Strategy is a specific statement which a cooperative plans to attain its product and

price objectives.

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TABLE OF CONTENTS

DECLARATION ............................................................................................................................ ii

ACKNOWLEDGEMENTS ........................................................................................................... iii

DEDICATION ............................................................................................................................... iv

ABBREVIATIONS AND ACRONYMS ....................................................................................... v

OPERATIONAL DEFINITION OF TERMS ............................................................................... vi

TABLE OF CONTENTS .............................................................................................................. vii

ABSTRACT .................................................................................................................................... x

CHAPTER ONE ............................................................................................................................. 1

1.0 Introduction ......................................................................................................................................... 1

1.1 Background of the study ..................................................................................................................... 1

1.2 Statement of the problem .................................................................................................................... 7

1.3 Objectives of the study ........................................................................................................................ 8

1.3.1 General objective of the study ......................................................................................................... 8

1.3.2 Specific Objectives .......................................................................................................................... 9

1.4 Research Hypotheses .......................................................................................................................... 9

1.5 Significance of the study ..................................................................................................................... 9

1.6 Scope of the study ............................................................................................................................. 10

1.7 Assumptions of the study .................................................................................................................. 10

1.8 Limitations of the Study .................................................................................................................... 10

CHAPTER TWO LITERATURE REVIEW ............................................................................... 11

2.0 Introduction ....................................................................................................................................... 11

2.1 Theoretical Review ........................................................................................................................... 11

2.1.1 Product Life Cycle theory .............................................................................................................. 11

2.1.2 The theory of Constraints ............................................................................................................... 14

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2.2 Empirical review ............................................................................................................................... 16

2.2.1 Review of literature on effect of product strategy on performance of co-operative societies ....... 22

2.2.2 Review of literature on effect of price strategy on performance of co-operative societies ............ 25

2.2.3 Review of Literature on effect of promotion strategy on performance of co-operative societies .. 27

2.2.4 Review of literature on performance of business organizations .................................................... 28

2.3 Conceptual Framework ..................................................................................................................... 29

CHAPTER THREE RESEARCH METHODOLOGY ................................................................ 32

3.1 Introduction ....................................................................................................................................... 32

3.2 Research Design ................................................................................................................................ 32

3.3 Target population .............................................................................................................................. 32

3.4 Sampling design ................................................................................................................................ 33

3.5 Sample size ....................................................................................................................................... 33

3.6 Data collection .................................................................................................................................. 35

3.6.1 Validity .......................................................................................................................................... 36

3.6.2 Reliability ....................................................................................................................................... 36

3.7 Data analysis ..................................................................................................................................... 37

3.8 Ethical considerations ....................................................................................................................... 38

REFERENCES ............................................................................................................................. 39

APPENDICES .............................................................................................................................. 51

Appendix I: Questionnaires .......................................................................................................... 51

Appendix III: Budget .................................................................................................................... 57

Appendix IV: Time Schedule (2015) ............................................................................................ 58

Appendix V: Krecjie And Morgan Table .................................................................................... 59

Appendix VI: Dairy Cooperatives ................................................................................................ 60

LIST OF FIGURES AND TABLES

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Figure 1. Conceptual framework……………………………………....………………………..30

Table3.1 Distribution of population by County……………….……………………………………….33

Table 3.1 Distribution of sample by County………………………………………………..………….34

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ABSTRACT

This research will focus on the effects of marketing mix strategies on performance of selected

dairy cooperatives in South Rift. It covers the product strategy, price strategy, and promotion

strategy. The study will be of benefit to the government for purposes of policy formulation as

well as a source of knowledge to other stakeholders in the co-operative sector. In particular it

will benefit the leadership of dairy co-operatives in areas of good performance. This research is

grounded on Product Life Cycle theory by Raymond Vernon which will be used to develop the

conceptual framework. The study will adopt cross-sectional research design. The study targets a

population of 360 committee members from 40 dairy cooperatives in Kericho and Bomet

Counties. Out of this 186 will be selected using the simple random sampling technique. Data will

be collected using structured and unstructured questionnaires. Content validity will be

determined by experts and through piloting while the reliability of the instrument will be

determined using Cronbach‘s alpha method. Data will be analyzed using inferential statistics

and presented using frequency distribution tables, graphs and charts. Findings will be organized

around the statement of the problem.

Key words: Marketing mix, Product strategy, Price strategy, Promotion strategy, Performance

of Dairy cooperative Societies.

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CHAPTER ONE

1.0 Introduction

This chapter comprises the background of the study, statement of the problem, purpose of the

study, specific objectives, research hypotheses, significance of the study, scope of the study,

assumptions and the limitations.

1.1 Background of the study

Survival in a competitive business environment entails finding a right mix of marketing

strategies (Juma 2011). According to Bootwala et al (2009) marketing mix is a set of controllable

variables and their levels that the firm uses to influence the target market. Kumar (2010) supports

this and points out that it is the combination of methods employed by a business in order to

achieve its objectives by marketing its products and services effectively to a specific target

group.

Kitchen (2010) argues that the theory of marketing mix has evolved from a notion of ‗mixer of

ingredients‘ a term introduced by James Culliton (1948) during the study of marketing costs

conducted in 1947 and 1948. The principle of ‗mixer of ingredients‘ consisted of analyzing

various business processes and marketing efforts looked at as ‗ingredients‘ individually in order

to find the best combination for the improvement of the business. The concept of ‗marketing

mix‘ itself was introduced by Neil Borden during 1950s an initially implied different means of

cooperation (Borden, 1964). Initially there were 12 elements within the marketing mix concept

introduced by Borden: product planning; pricing; branding; channels of distribution; personal

selling; advertising; promotions; packaging; display; servicing; physical handling; and fact

finding and analysis (Goi, 2009). Suggestion was made by Frey (1961) to divide these elements

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into two groups: offering and methods and tools. Accordingly, offering group contained product,

packaging, brand, price and service, whereas the elements of methods and tools group were

distribution channels, personal selling, advertising, sales promotion and publicity.

According to McCarthy (1960) and Perreault and McCarthy (1999), a firm develops its

marketing strategies by first identifying the target market for its products or services. It then

develops a marketing mix—a particular combination of product, price, promotion, and place

(i.e., distribution and delivery functions in the supply chain) designed to enhance sales to the

target market. A unique mix of these elements in a given industry allows firms to compete more

effectively, thus ensuring profitability and sustainability. For example, by coordinating various

product offerings and associated price discriminations with sales promotions and effective

logistics, a firm can increase its sales and profit. Since the industry has a significant impact on

the makeup of this marketing mix, dairy cooperative should develop strategies that take the

unique nature of their marketing into account.

Peter & Olson (2010) have argued that most successful companies in the world have excelled by

designing marketing strategies and ensuring that they remain committed to developing quality

products and services which they sell at a price that gives consumers high value.

Peter & Olson (ibid) further argue that companies are making changes to serve consumers better.

They point out that the dramatic success of Japanese companies, such as Toyota and Sony that

focus on providing consumers with value-laden products has spurred other companies to follow

suit. They further point out that previously many U.S. companies could sell almost anything they

were able to produce. That previously the consumers in the US had no problem with the level of

quality of goods and services produced in their home country until they discovered the superior

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quality and lower prices offered in many Japanese products hence the shift to foreign-made

goods. Their affirmation is evidenced by the fact that several U.S. companies had to redesign

their organizations to serve consumers in order to survive and compete not only in the U.S. but

also in world markets. Furthermore they acknowledge that many firms have adopted marketing

strategies and are now world leaders in their industries, while others have failed to do so and are

no longer strong competitors in their industries.

However, the researcher contents that the product mentioned by Peter & Olson (ibid) are

vehicles and electronic devices while the product considered under the study is milk whose

pricing strategies are also different.

A survey done in South Africa by Price Waterhouse Coopers Limited under the auspices of The

Africa Business Agenda, July 2012, indicated that South African marketing managers are not

using marketing strategies and tactics compared to developed countries. However, the results

showed that a huge number of these managers have given up on marketing and instead they have

become glorified sales people.

Juma (ibid) acknowledges that the East Africa Community (EAC) has reduced barriers and

increased regional trade by 50 percent leading to stiff competition especially in the dairy sector.

He therefore argues that this action makes it mandatory for companies to adopt marketing

strategies. He further argues that through marketing strategies, the opportunity for growth in

Kenya still exists. He concludes that some of the Kenyan organizations including dairy co-

operatives have already taken full advantage of the marketing strategies to become the key

industry players.

The scholarly argument advanced by Juma (ibid) focuses on marketing strategies in relation to

competitiveness in general terms while the study concentrates on marketing strategies on

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performance of dairy co-operatives in the South Rift. Kaustin (1994) also acknowledges that

there is a challenge to organizations regarding the understanding, measurement criteria of

marketing strategies and more so the corresponding success of the strategies. Zou & Cavusgil

(2002) mention that there are ultimately four strategic perspectives which include price, product,

place and promotion. Contrary to this, a research carried out by Karuppur (1994) established that

there are mainly three strategies: standardization, multi-domestic, and various strategies that fall

between the two. Similarly contradiction is provided by Kaustin (ibid) who describes that global

marketing strategy approach can be divided into two options: modified marketing strategy or

standardized marketing strategy. Moon (2005) acknowledges Karuppur‘s (ibid) research that

despite the fact that his view on marketing strategies are collapsed into two pairs

(production/price and place/promotion).

The researcher asserts that due to the argument advanced by Kaustan (ibid) there is need to

undertake the study on the basis of success of the marketing strategies. The researcher opines

that the concept of production as mentioned by Moon (ibid) automatically leads to creation of the

product. He therefore argues that the paired product/price is hard to separate especially when the

product is milk. It is on this basis that the topic of research was coined. He further argues that

what is learnt from Karuppur and Moon (ibid) is that marketing strategies are generally not

linked to any variable(s). However, he points out that the marketing strategies considered under

the study are linked to performance.

. Sales promotion has effects on various aspects of consumer‘s purchase decisions such as brand

choice, purchase time, quantity, and brand switching (Nijs, et al., 2001). Thus, sales promotion

becomes an integral part of the marketing strategy for reaching the target market and it is the

responsibility of marketing managers to combine elements of promotional strategies, which is

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promotional mix into coordinated plans. The importance of the excessive promotion in a

competitive market environment has generated a lot of interest in marketers and firms to develop

numerous and comprehensive promotional approaches (Adaramola, 2010).

A research done by Ailawadi et al (2001) yields that promotion and advertising are marketing

tools for customer retention. However, a study by Alsem et al. (1996) confirms that creating

long-term relationships with customers is considered as the main company marketing focus of

approximately 60% of the companies surveyed. Promotion involves any purposeful

communications employed by channel members to inform, remind, and/or persuade prospects

and customers regarding some aspect of their market offering. In channel relationships,

promotion is a portfolio of persuasive tactics that can be wielded with the purpose of informing,

changing preferences and attitudes, positioning and/or repositioning products, and, ultimately,

stimulating sales. But the contemporary view also posits promotions as a means of relationship

building.

Blythe (2006) viewed sales promotion as any activity intended to generate a temporary boost in

sales. This includes several communications activities pursued in an attempt to provide added

value or incentives to consumers, wholesalers, retailers, or other organizational customers to

stimulate immediate sales. Such efforts are usually geared towards stimulating product interest,

trial, or purchase. It is specifically designed to boost quick sales and ultimately create loyalty.

Aham (2008) is of the opinion that sales promotion emerged as a reaction by manufacturers

marketers, and marketing strategies alike to find a short term solution to the problems of excess

stock of goods which are available in variables manufacturer‘s warehouses but are not demanded

by consumers and organization. Sales promotions are comparatively easy to apply, and are likely

to have abrupt and considerable effect on the volume of sales (Hanssens et al, 2001). According

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Kotler and Armstrong (2002), consumer promotion is a category of sales promotion including

free samples, winning contests, different price packs, and sweep stakes. Sales promotion is

projected to increase the sales of final ultimate consumers of the product.

Sommers & Barnes (2001) acknowledge that promotions are critical to influence the behavior of

retailers and others who resell or distribute the product. They further point out that there exists

three major types of promotion i.e. personal selling, mass selling, and sales promotions where

sales promotion efforts include free samples, coupons, contests, rebates, and other miscellaneous

marketing tactics. Keegan & Schlegelmilch (2001) contend that increased rebates attract more

intakes of the insurance products and that promotion creates advertisements that work in

different countries and cultures. Keegan & Green (1999) supports this argument and point out

that companies standardize the promotion, by creating advertising messages which are effective

all around the world. This is further supported by Onkvisit & Shaw (2004) who have argued that

standardization of the promotion means that same promotion is used in all countries in the world

without any changes.

Mulford (2013) established that Kenyan Government policies have influenced marketing

strategies and sales patterns in the dairy industry. He points out that the liberalization of the dairy

sector in early 1990s marked the end of state-managed, Kenya Cooperative Creameries‘ (KCC)

monopoly on milk processing and urban milk sales. Wambugu, Kirimi, & Opiyo (2011) supports

this position and argue that liberalization of the dairy sector in Kenya provided a window for

more than thirty private processors to enter the market, with three processors – Brookside Dairy

Limited, New KCC and Githunguri Dairy Farmers Cooperative and Processors - accounting for

over 80% of the formal market. According to Wambugu, Kirimi, & Opiyo (ibid), the largest of

these, Brookside Dairy Limited, has a capacity to process 800,000 liters per day, and sources its

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milk from more than 185,000 smallholder farmers. This is further supported by Mulford (ibid)

who asserts that this is due to efficiency in all operation, from production systems to the entire

value chain process. The researcher appreciates this and points out that efficiency is an aspect of

performance. Ngigi, (2004) further argues that comparatively, unlike dairy cooperatives, private

processors provide demand and price stability via contract mechanisms.

On the basis of arguments and views advanced by many scholars, there is need to undertake the

study.

1.2 Statement of the problem

Dairy co-operative societies are by all intends and purposes supposed to be the panacea of the

plight of farmers especially in the developing countries. Well managed dairy co-operative

societies have been found to be an efficient way of marketing farmers produce, a system that

promises better payments, better services to the members and improved dairy products for the

consumer. However, poor performance in these dairy co-operatives still remains a big challenge

in the dairy sector. The decision by the Kenyan Government to liberalize the sector in 1999 only

resulted in stiff competition and the fight for market share (Wanyama, 2007). Inadequate dairy

handling equipments i.e. milk coolers, milk cans, quality testing equipments, and reliable means

of transport is a major challenge to the dairy co-operatives. Poor infrastructure in these dairies

i.e. lack of reliable source of water, power, and poor road network poses a big challenge

especially given that milk is a perishable product. Inadequate use of modern technology in most

of the dairy cooperatives hampers strategy implementation like new product design and

development and product differentiation. Most of these dairy cooperatives are managed by

committee members with low education background which hinders strategy implementation.

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This is further exasperated by poor human resource policies where recruitment of staff is not

done professionally.

Manyara (2004) in his research revealed that liberalization of dairy cooperatives gave elected

leaders freedom to dangerously abuse their power. He argues that liberalization witnessed an

increase in cases of corruption, gross mismanagement by officials, theft of cooperative resources

and favoritism in hiring and dismissal of staff, challenges that still face dairy cooperatives to

date. A similar research by Kuria (2013) point out that in cooperatives, members incur huge

losses through mismanagement hence the need to have micro insurance cover for members to

cushion them from such losses. Most dairy products are homogeneous in nature and prices are

almost the same hence seasonal price fluctuations are often key factors causing famers to move

between formal and informal markets to sell their dairy produce. This also presents a challenge

to regulators in the sector in terms of provision of the necessary policy direction to make the

sector more vibrant.

It is on these bases that there is need to undertake a study on the effect of marketing mix

strategies on performance.

1.3 Objectives of the study

1.3.1 General objective of the study

The main objective of the study is to determine the effects of marketing mix strategies on

performance of dairy co-operatives.

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1.3.2 Specific Objectives

i. To examine the effect of product strategies on performance of dairy co-operatives in

South Rift

ii. To investigate the effect of price strategies on performance of dairy co-operatives in

South Rift.

iii. To determine the effect promotion strategies on performance of dairy co-operatives in

South Rift,

1.4 Research Hypotheses

Ho1: There is no significant relationship between product strategies and performance of dairy

co-operative societies.

Ho2: There is no significant relationship between price strategies and performance of dairy

co-operative societies.

Ho3: There is no significant relationship between promotion strategies and performance of dairy

co-operative societies.

1.5 Significance of the study

The findings of this study will be useful to relevant key stakeholders of dairy cooperatives in

South Rift. The findings will be used to facilitate effective management among cooperative

owners. The study will also be useful to the government in formulation of key policies in the

dairy sector for increasing performance in the management of dairy co-operatives. Again, the

study will contribute towards filling the knowledge gap on effects of marketing mix strategies on

performance of cooperative societies in Kenya as whole.

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1.6 Scope of the study

This study will be conducted in 40 selected dairy cooperative societies in Kericho and Bomet

counties, South Rift. The study targets a population of 360 committee members. Out of this 186

committee members will be selected using the simple random sampling technique. The study

will also be limited to the application of the key variables of product, price and promotion

strategies and their subsequent effect on the performance of dairy co-operative societies because

of the resources employed by members through their management committees.

1.7 Assumptions of the study

(i) It is assumed that the respondents will co-operate and avail information needed for

purposes of the study in time.

(ii) It is also assumed that the records necessary for the carrying out of the assessment will be

availed during the data collection and that they are properly kept by the concerned dairy

cooperatives.

1.8 Limitations of the Study

A study of this magnitude cannot be possible without limitations. Some of the respondents may

not be willing to reveal true information needed for the study. This will be solved through

explanation of the benefits of the study to the respondents. The study will rely purely on

responses from the respondents and this may not give the actual position of the strategies put in

place by the respective cooperatives. The researcher, however, will minimize this by collecting

information from the society leaders and their chief executive officers who are involved in the

management of the cooperative societies.

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CHAPTER TWO LITERATURE REVIEW

2.0 Introduction

This section deals with review of related literature. The section consists of theoretical review,

empirical review, review of literature on the marketing mix strategies and their effects on

performance of dairy co-operative societies, performance of business organizations, and

conceptual framework.

2.1 Theoretical Review

According to Mertens (1998) the theoretical framework of a research project relates to the

philosophical basis on which the research takes place, and forms the link between the theoretical

aspects and practical components of the investigation undertaken. This means that theoretical

framework, influences all the decisions made in the research process.The starting point in

developing a research proposal according to Crotty (1998) is to identify the theoretical and

methods that will be utilized in the research project to justify their choice. According to Crotty

(ibid) theory relates to the strategy, plan of action, process design linking the choice and use of

methods for the desired outcomes. Kothari (2003) argues that theoretical review is related to

some abstract idea or theory that allows the researcher to have a philosophical stand.

2.1.1 Product Life Cycle theory

The Product Life-Cycle theory (PLC) is an economic theory that was developed by Raymond

Vernon (1975) to explain the observed pattern of international trade. It is an important concept in

marketing. Most discussions of product life cycle portray - the sales history of a product as

following an S-shaped curve. The curve is typically divided into four stages i.e. introduction,

growth, maturity, and decline. Marketers manage their offerings through the various phases of

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the PLC by using the marketing mix variables in their decision-making. These variables include

competitive pricing, price penetration, product differentiation and product positioning. The PLC

concept allows marketing managers to forecast and conduct strategic planning to manage their

products and/or services through the various phases of their respective PLCs. As argued by

Herbst (2001) the concept is used to determine current phases of the organization‘s products, and

available instruments to use in the management of these products after commercialization. The

theory assumes that the duration of each of the stages is fixed such that the product completes its

entire life cycle i.e. the product passes through all four stages of its life in a chronological order

with no reintroduction, bypassing or overlapping of products at any of the stages.

In this study however, the dairy products that follow the PLC theory are the branded and new

varieties of milk products packaged through dairy cooperatives. New markets emerge when a

dairy branded product is created to satisfy an unmet need. The innovator usually designs a

product for the mass market. Competitors enter the market with similar branded dairy products

leading to market growth. Growth eventually slows down and the market enters maturity. The

market undergoes increasing fragmentation until some firm introduces a powerful new attribute

that consolidates the market into fewer segments. Because competitors copy the new attributes,

the market demand for the present product will begin to decline. A company must plan

successive strategies appropriate to each stage in the PLC.

Product is the first and most important element of marketing mix. Product strategy calls for

making coordinating decisions on product mixes, product lines, individual products, and service

products. Strategic product decisions include: product attributes (quality, features, and design),

branding, packing and labeling. Brand decisions can add great value to a product and is therefore

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an intrinsic aspect of product strategy. Branding should differentiate dairy products from one

dairy cooperative and another. Different branded products are offered at different prices

depending on the quality and features.

Product positioning entails developing graphic representations that reflect how firm's products or

services compare to competitors' on most important dimensions of interest in the market. It is

based on the idea that a single product item does not usually appeal to all consumers. Branded

dairy products are therefore branded differently to suite different needs of the consumers. For

this reason, marketing strategies typically focus their marketing effort on specific groups of

consumer rather than on the whole population. Marketing segmentation is the process of dividing

a market into groups of similar consumer and selecting the most appropriate groups(s) for the

organization to serve through market targeting. A market is selected on the basis of size, profit

potential, and how well it can be defined and served by the organization.

Price determine the total revenue and to a large extent the profitability of any business. The goals

of pricing strategy are: to determine how much consumers are prepared to pay for a product, to

ensure that the company covers all costs involved in manufacturing and marketing the products

(direct and indirect) and to ensure that an adequate profit is made, so as to earn a satisfactory

return on investment. The price strategy is directly affected by the factors that make up the

competitive structure of the industry. Thus, in making any pricing decision, the following factors

deserve consideration: pricing objectives, cost, competition, the customer, and government

regulations. This can be related to the pricing of different dairy brands. Different dairy

cooperatives brand their product differently and charge different prices for each brand.

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Organization seeks a competitive advantage and synergy through a well integrated programme of

marketing mix variables tailored to the needs and wants of customers in the market segment

through segmentation, targeting and positioning. The concept of the marketing mix variables for

physical products was formally defined by Neil Borden (Van Waters hoot & van Bulte, 1992)

and redefined over the years and are referred to as the traditional marketing mix. This traditional

marketing mix consists of the marketing mix variables (4Ps) – product, price, placement and

promotion. This study however focuses on the product and price marketing strategies and how it

influence firms performance. New dairy branded product follows the product life cycle with

strategies applied at every level of growth. Competitive pricing strategy is employed in trying to

capture market that is already filled with similar products. This strategy will get the attention of

the market that is price sensitive. It is similar to price penetration strategy. Price penetration

pricing also occurs at the early stage of the product life cycle where the newly branded milk are

taken to new markets with relative lower prices than other brands to get the product known to the

market. Product differentiation and positioning strategies occur in the initial and growth stage of

the product life cycle. These strategies are applied to make the product distinguished from other

dairy products that are already in the market.

The researcher acknowledges that there is no mention about performance in the PLC theory.

However, he asserts that the objective behind strategy development and implementation along

the cycle is performance improvement.

2.1.2 The theory of Constraints

Theory of Constraints (TOC) is an overall management philosophy introduced by Dr. Eliyahu M.

Goldratt in his 1984 book titled The Goal, which is geared to help organizations continually

achieve their goal. Dr. Eliyahu Goldratt conceived the Theory of Constraints (TOC), and

15

introduced it to a wide audience through his bestselling 1984 novel, ―The Goal‖. One of the

appealing characteristics of the Theory of Constraints is that it inherently prioritizes

improvement activities. The top priority is always the current constraint. In environments where

there is an urgent need to improve, TOC offers a highly focused methodology for creating rapid

improvement. The underlying assumption of this theory that organizations can be measured and

controlled by variations on three measures: throughput, operational expense, and inventory.

Another assumption of this theory is that everything within a system is connected by cause and

effect relationships. Identification of the causes leads us to converge onto an apparent core

problem/contradiction/conflict.

A common approach in capacity management is to focus on the performance of each machine

individually and try to maximize the number of hours the machines are working.

This approach causes the sub-optimization of the system. It does not increase the overall

performance of the system because it does not guarantee that the product will be completed on

time. The solution to this problem is to understand that the capacity of a system is determined by

the bottleneck of the system. The system cannot produce more than the bottleneck can. The

bottleneck machine determines the pace of the system. So, no matter how much the management

improves the performance of a non-bottleneck machine, this improvement will only decrease the

cost of running that specific machine, but it will not have a great effect on the whole system. Just

improving the performance of a non bottleneck should not be the aim of the management.

Management must focus on the overall plant performance, rather than on individual machines.

And this can be accomplished by focusing on the bottlenecks

One of the most important decisions that a manufacturing company should make is to determine

the product mix that will maximize profits. Given that a company has capacity constraints, it

16

may not be able to produce every unit of product demanded by the market. The best action to

take in this case is to focus on the most profitable products for the company and to use all the

existing resources of the company to produce these products. In this way the company can

increase its profitability because it will use its existing resources to produce the most profitable

products (Gurses, 2001).

The product mix problem is one of the most well-known applications of linear programming.

The problem includes determining both the quantity and the identification of each product to

produce. The main structure of the problem is to maximize profit from the mix of manufactured

products subject to constraints on the available capacity of resources. Determining the best

product mix of a company correctly is an important requirement to increase the profitability of a

company. To make right decisions, management needs more accurate information about the

optimal product mix and the restrictive bottlenecks of a company (Gurses, 2001). The theory of

constraints philosophy (TOC) and mathematical programming can provide management with

more accurate information about the optimal product mix of a company and can help to identify

the right bottlenecks that should be focused on to improve the system. The researcher

acknowledges that this can be applicable to many sectors including the dairy sector.

Having reviewed the two scholarly theories above, the researcher has settled on the Product Life

Cycle Theory (PLC) as the pillar of the study as it addresses most of the variables.

2.2 Empirical review

In a study done by Rajendran & Mohanty (2004) on milk marketing in India, it was revealed that

producers‘ bargaining power and the lack of proper infrastructure for transportation, distribution,

and storage are other constraints which make milk procurement difficult. Furthermore, other

challenges in milk marketing were concerned with quality, product development, infrastructure-

17

support development, and global marketing thereby recommending for strengthening of the dairy

co-operatives.

An empirical study by Sarker & Kumar (2010) on co-operatives in West Bengal, found out that

although the inter-market (and intra-market) price variation for liquid milk under the cooperative

marketing agency is not far from uniformity, it fails to provide much economic benefit, either to

the producer or to the consumer, because of the burden of much higher fixed cost per unit of

liquid milk. The study concluded that both producers‘ price and consumers‘ liquid milk price in

all markets in both cooperative and private marketing channels are almost uniform and that all

types of market middlemen in the private marketing channel receive higher profit performance

compared to the cooperative channel. They also concluded that the marketing cost per unit of

milk is much higher in the cooperative marketing channel than in the private channel though

marketing performance in all markets does not differ much. But review on earlier research by

Gol (2004) concluded that marketing of milk and milk products in India is dominated by the

unorganized sector, and the organized sector handles only about 14 % of total milk production.

Another review by Rangasamy & Dhaka (2008) on the marketing of dairy products in

Coimbatore district established that marketing performance for all dairy products in dairy co-

operatives has been observed relatively less than that of private dairies, except toned milk. The

study has observed that value addition in dairy products should be done without compromising

the quality and consumer-oriented market research and development should be accorded greater

attention.

In a study done by Mwebaze & Kjaer (2013) found out that liberalization enhanced the

competitiveness of the dairy sector business which has attracted a big number of middlemen

18

including processors, leading to a significant increase in milk production. They however

acknowledge that regulation has been relatively successful and the Dairy Development Authority

(DDA) had promoted performance in marketing of milk in Uganda. In a study done by Muriuki

et al (2000) on dairy development in Kenya, it was found out that infrastructure plays a great role

on boosting marketing performance. They acknowledge that as infrastructure develops, markets

become more efficient and that urban consumers develop stronger preferences for pasteurized

milk.

In a study done by Chu (2013) on quantitative analysis of influence factors on distribution

performance of agricultural products in China, it was concluded that the level of information and

logistics infrastructure greatly influence the distribution performance of agricultural products

while the Logistics transportation and the professional level of labourers do not promote the

performance of agricultural distribution system.

In a study done by Rit (2014) on marketing performance of agricultural products in India, it was

concluded that performance of the agricultural markets cannot be judged solely by the structure

conduct performance framework (correlation coefficient and co integration analysis) or by the

marketing margin analysis. Instead it needs to be backed up by some additional evidences of

competitive conditions like low inter-market price differentials, possibility of inter-market trade

etc.

In another study done by Vargas JGH et al (2015) on organizational innovation in the

cooperative societies of fish production, it was concluded that innovation in the productive

process is important for the company to be more competitive and efficient in the market where

the company develops and continues to offer their products. However there have been several

studies of the marketing of liquid milk in both cooperative and non-cooperative dairy plants.

19

Sharma et al, (2007) in their study for example showed that there is great variation in the

marketing performance of different cooperative and non-cooperative milk producing firms in

different resource situations due to variations in marketing costs and marketing margins.

In a study carried out by H¨aring (2003) to analyze market performance and pricing strategies in

digital markets, the empirical results revealed evidence for lower prices and less price dispersion

which supports the hypothesis of enhanced market performance in electronic markets.

Furthermore, the results showed that an online shop‘s virtual location influences its prices and

that price dispersion is partially driven by differentiation in retailer service.

A study done by Wanyama (2007) on the impact of liberalization on the cooperative movement

in Kenya found out that cooperatives in Kenya have survived the market forces and continued to

grow in number and membership and that market forces have triggered a structural

transformation that has seen the fading away of inefficient cooperatives. His study further points

out that those members in cooperatives were currently seeking better service provision hence the

need to diversify to record better performance.

In another study by Omore et al (1999), it was established that dairy cooperatives are the largest

players, while private dairy processors are thought to capture only some 12%. The study contents

that dairy cooperatives play an intermediary role by supplying both informal traders and dairy

processors, and that the market share of the dairy processors includes that share collected

through cooperatives which is then sold to the formal market (Staal et al., 1998).

20

Owango et al. (1998) found that between 1990 and 1995, the share of cooperative milk sales

going to dairy processors fell by more than half in some cases. The market policy change caused

dairy cooperatives to pursue the higher prices in the informal market.

Manyara (2004) pointed out that the performance of post liberalized dairy cooperatives lies

mainly on the management. These are evidences though failure to hold elections in co-

operatives; favoritism in hiring and dismissal of staff; refusal by co-operative officials to vacate

office after being duly voted out; conflict of interest among co-operative officials and endless

litigations, all these affect the day to day running of the dairy cooperatives.

De Leeuw et al., (1999) argues that until infrastructural improvements occur, and because of the

readily available cheap human capital (labour) and the relative expense of financial capital,

smallholder dairy production and informal raw milk marketing are likely to predominate for the

foreseeable future. Consequently it is anticipated that the industrialized model of dairy

production, processing and marketing will remain a minor contributor in Kenya and elsewhere in

the region.

The researcher has reviewed the foregoing empirical studies on the topic under study. Sarker &

Kumar (ibid) contents that the middleman in the milk marketing enjoys high profits partly

because he is more efficient in the value chain as compared to both the co-operative and the

private milk marketing channels that are bogged down with high fixed costs. Rajendran &

Mohanty (ibid) only established some of the challenges in milk marketing as: poor bargaining

power and the lack of proper infrastructure for transportation, distribution, storage, quality,

product development, infrastructure-support development, and global marketing. De Leeuw et

al., (ibid) agrees and points out that until infrastructural improvements occur, and because of the

21

readily available cheap human capital (labour) and the relative expense of financial capital,

smallholder dairy production and informal raw milk marketing are likely to predominate for the

foreseeable future. This position is further supported by the scholarly work of Manyara (ibid)

who contents that dairy co-operatives are bogged down by a number of marketing challenges i.e.

failure to hold elections in co-operatives; favoritism in hiring and dismissal of staff; refusal by

co-operative officials to vacate office after being duly voted out; conflict of interest among co-

operative officials and endless litigations which affect performance. The scholarly work of Chu

(ibid) supports this by pointing out that the level of information and logistics infrastructure

greatly influence the distribution performance of agricultural products. The scholarly work of

H¨aring (ibid) supports this by establishing that digitization increases performance. Muriuki et al

(ibid) further supports this position by pointing out that infrastructure plays a great role on

boosting marketing performance. Rit (ibid) however, differs with the scholarly work of

Rajendran & Mohanty (ibid) and contends that performance of the agricultural markets cannot be

judged solely by the structure conduct performance framework or by the marketing margin

analysis but it should be backed up by some additional evidences of competitive conditions in

the market i.e. price differentials, possibility of inter-market trade etc.

The scholarly work of Mwebaze & Kjaer (ibid), however, advocates for regulation to enhance

performance in dairy marketing. The scholarly work of Wanyama (ibid) differs with this view by

pointing out that liberalization in Kenya is self regulating and that the inefficient dairy co-

operatives were to give way for the more efficient ones thereby advocating for diversification.

The work of Owango et al (ibid) also addresses the issue of liberalization of the dairy sector and

points out that the market policy change caused dairy cooperatives to pursue the higher prices in

the informal market.

22

The scholarly work of Manyara (ibid) revealed that dairy co-operatives are bogged down by a

number of marketing challenges i.e. failure to hold elections in co-operatives; favoritism in

hiring and dismissal of staff; refusal by co-operative officials to vacate office after being duly

voted out; conflict of interest among co-operative officials and endless litigations which affect

performance.

The researcher therefore asserts that the empirical review has basically yielded information on

factors contributing to poor performance in dairy co-operatives which is evidenced by poor

pricing as a result of high marketing costs. He therefore contents that there is a gap on the

strategies employed to address the same inefficiencies in the dairy co-operatives hence the need

for this study.

2.2.1 Review of literature on effect of product strategy on performance of co-operative

societies

According to Bennet (2002) product differentiation is the modification of a product to make it

more attractive to the target market. He points out that this involves differentiating a product

from those offered by competitors as well as the firm‘s own product mix. He further observes

that the changes are usually minor such as a change in packaging or a change in the advertising

theme whose objective is to develop a position that appeals to potential customers hence

resulting in increases sales.

A research done by Bates, Bates & Johnston (2003) established that competitive advantage can

be achieved when a firm pursues a strategy of differentiating products that justify a premium

price that yields higher returns. This position is supported by Sharp and Dawes (2001) who holds

that a firm that achieves such a difference where its price premium exceeds the extra costs

through being unique is said to be an above average performer. Study by Kim, Nam and

23

Stimpert (2004) revealed that firms in most developing economies implementing the

differentiation strategy do not focus on a single dimension but emphasize several dimensions

such as image, customer loyalty, quality, innovation and level of service. Pearce & Robinson

(2005) points out that superior value is created through differentiation because the product is said

to acquire higher quality, technically superior in some way, comes with superior service, or has a

special appeal in some perceived way. This is supported by Carpenter and Moore (2006) who

argues that some of the differentiation strategies adopted by organizations to foster sales

performance evolve around interplay of various elements of the retail mix i.e. offering quality

products, wide selection, assortment, strategic positioning, after-sales-service, quality service,

convenient location, parking space, attractive design and layout, conducive atmosphere, sales

incentives, convenient operating hours, own branding/value addition and a one-stop-shop.

According to Acquaah & Yasai-Ardekani (2006), differentiation firms are able to achieve

competitive advantage over their rivals because of the perceived uniqueness of their products and

services. Hernant, Mikael & Thomas (2007) showed that differentiation builds competitive

advantage by making customers more loyal and less price sensitive to a given firms‘ product.

Hernant, Mikael & Thomas (ibid) point out that consumers are less likely to search for other

alternative products once they are satisfied.

Gerry, Kevan, & Richard (2008) assert that this is true of manufacturing and service industries

alike while the generic of differentiation strategy involves creating a market position that is

perceived as being unique in the industry and that such differentiation can be based on design or

brand image distribution.

24

Kotler & Keller (2009) acknowledge that positioning is the act of designing, establishing the

company‘s offer and image and communicating the products‘ key distinctive benefits in the

market so that it occupies a distinct and valued place in the minds of the target customers. They

argue that positioning indicates how the business aspires to be perceived by the stakeholders in

relation with the competition and the marketplace.

According to Cravens & Piercy (2009) positioning is deciding the desired perception association

of an organization/brand by customers of the target market segment and developing the

marketing program with a view to meet (or exceed) the needs and requirements of the customers

of that marketplace. They argue that the objective of positioning is to locate the brand/product in

the consumers‘ minds so that organization can secure maximize potential benefits. (Kotler &

Keller (2009) acknowledge that an effective positioning is helpful to guide marketing strategy by

clarifying the brand‘s essence, what goals it helps the consumer achieve, and how it does so in a

unique way. Schiffman & Kanuk (2010) support this view and acknowledge that marketers

formulate different value propositions for positioning different brands for different market

segments.

The researcher observes that the literature reviewed above have basically defined the general

concept in relation to product differentiation and positioning strategies. The main focus has been

on product differentiation and product positioning strategies as the main strategies considered

under the study. However, it has been established that there exists a gap in the area of study due

to limited literature on product differentiation and positioning strategies adopted by dairy co-

operative societies in the South Rift.

25

2.2.2 Review of literature on effect of price strategy on performance of co-operative

societies

Many empirical studies have been done on pricing strategies but none has really focused on the

relationship that exists between penetration pricing strategy and the performance of enterprises.

In a study done by Ruiliang (2009) on pricing strategies and firm performances under alliance

brand through game-theoretic model it was established that optimal pricing and brand

management strategies exist for firms in a competitive market. Ruiliang & John (2010)

conducted a study on service level, pricing strategy and firm performance in a manufacturering

retailer supply chain, using a profit-maximization model and demonstrated that optimal service

level and pricing strategy exist under different market structures in a manufacturering retail

supply chain. Anna et al. (2012) conducted a study on the relationship between customer value

and pricing strategies by use of washing machine models and concluded that the alignment

between price and value for the customer is limited. In a related study, Chalita et al. (2013)

established that mobile operators have introduced several innovative price plans to attract and

retain their consumers. Howard and James (2013) also carried out a similar study on the effect of

decision context on perceived risk in pricing strategies on attribution theory and found out that

uncontrollable environmental factors influence pricing strategies adopted by managers.

According to Vikas (2011) penetration pricing strategy is one of the most effective marketing

strategies available to a business organization. He points out that penetration involves setting a

low entry price for a new product or brand in order to gain a competitive adage in a highly

competitive market. He asserts that the strategy can be used when introducing a completely

novel product in the market or when tapping a new market segment for an existing product. He

further argues that a company employs penetration pricing with the expectation that eventually

26

the price will be raised once the initial marketing objectives are fulfilled. According to Oliver et

al. (2001) penetration pricing is the dominant strategy for all vendors and normally firms initially

execute low prices to speed up adoption of the product in the market. A review of the work by

Kortge & Okonkwo (2002) indicated that price has a direct impact on company profit as it

influences the perception of the customer. They argue that price assigned to a product is meant to

meet two main objectives i.e. profit and return on investments. They further argue that traditional

cost-based approaches only go to meet the interests of the seller against that of the buyer hence

contenting that pricing approaches should be based on customer‘s perceptions of unique value.

Harmon & Raffo (2007) also showed that competitive pricing leads to better decisions for

improved sales. They argue that value based pricing gives a firm a competitive edge. While

contributing to this discussion, Harmon & David (2007) argue that in today‘s competitive

markets the historical cost-driven approach to pricing has become less useful and strategic

pricing capability need to have the core role in setting the firm‘s pricing direction. Harmon &

David (ibid) therefore advice that the marketing team needs to build social capital both internally

with other functional groups and externally with the customer thereby asserting that the ability to

build and manage long-term relationships results in better understanding and communication of

customer value expectations. Jim (2012) acknowledges that penetration pricing is often used to

support the launch of a new product, and works best when a product enters a market with

relatively little product differentiation and where demand is price elastic such that a lower price

in comparison to that by offered by the serves as a competitive weapon.

The researcher contents that literature reviewed in this context has only focused on the general

effect of price in relation to competition. However, the main area of focus for this research is to

27

assess the effect of competitive price strategies on performance of dairy co-operative societies in

the South Rift.

2.2.3 Review of Literature on effect of promotion strategy on performance of co-operative

societies

Brown (2002) investigated on the problems created by a promotional culture, and opined that the

pressure to run promotions can have an impact on overall marketing performance. He indicated

that a review by major consumer goods companies yielded that a great deal of time was required

to design, implement and oversee sales promotion efforts. He further argued that this accounted

for 25% of sales forces time and 33% of brand manager‘s time and that a company can achieve

promotion objectives through certain methods i.e. personal selling, mass selling, and sales

promotion.

According to Berkowitz et al. (2000), advertising is said to be any paid form of non-personal

communication about an organization, good, service or idea by an identified sponsor. It is a

persuasive medium that permits the seller to repeat a message many times. It provides

opportunities for dramatizing the company and its products through artful use of print, sound and

colour. Kristina (2006) recommends that promotional strategies should be designed as per the

nature of services to be promoted. He asserts that the advertisers should seek a narrative

approach to communicate the service experience rather than a logical, argumentative approach.

He further points out that location convenience, speed of service, competence and friendliness of

personnel are also the most important points with maximum value in services. Cannon, Perreault

& McCarthy (2008) acknowledge that each promotion method has its own advantages and

disadvantages as seen from the name that personal selling is about having face-to-face or one on-

one interaction with the customers through salespeople. They argue that the main advantage is an

28

immediate feedback from the customers, while personal selling requires a lot of effort and

money. Banabo & Koroy, (2011) contents that a combination of the above variables defines a

firm‘s promotional programme that hopes to influence consumers to patronize and become loyal

to the organizations offering. Okoli (2011) explains that the essence of setting up a business

organization is to make profit without which a business is bound to fail.

The researcher argues that there exists a gap as no none of the literature reviewed has yielded

substantial information on the effect of promotional strategies on performance of dairy co-

operatives in the South Rift.

2.2.4 Review of literature on performance of business organizations

Hooley et al. (2001) holds that performance, which relates to the optimal use of resources to

achieve the desired output is the best mode of measuring performance thereby asserting that

performance outcomes result from success or market position achieved which can be determined

in form of financial, market, customer service or overall performance. Bounds et al, (2005) &

Robbins, (2000) have acknowledged that common measures of the organizational performance

are effectiveness and performance for managers, suppliers and investors. A review of the work

done by Richard (2009) indicated that organizational performance is a priority in both private

and public sectors as it is directly associated with the value creation of the entity. However,

Richard (ibid) asserts that due to many approaches for conducting valuation of entities,

management still find it a challenge to make adequate assessment of their organizational

performance. While contributing to this discussion, Chavan, (2009) argues that effectiveness is a

better determinant of performance in organizations as the main focus is attainment of vision,

mission and goals. The researcher acknowledges the assertions as true in the dairy sector where

product differentiation comes as a result of branding dairy products. The researcher points out

29

that given that all the information is available to consumers, they may learn through experience

that, in this market, equal-priced products offer comparable values and a higher price indicates a

higher quality.

The researcher acknowledges that Richard (ibid) only links performance with value creation

while Chavan (ibid) has only advocated for effectiveness as a better yardstick of assessing

organizational performance. However, the two approaches taken by Hooley et al (ibid) and that

of Rosen (ibid) have attempted to address the performance more deeply in relation to the area of

the study by laying more emphasis on optimal use of resources in achieving strategic market

positions. However, in this study, the term performance is used to mean a measure of marketing

high volumes of products given scarce resources.

2.3 Conceptual Framework

The researcher points out that the conceptual framework is derived from the theoretical

framework consisting of product, promotion and price strategies applied in stages of product life

cycle theory. The conceptual framework is designed based on product price and promotion

strategies. The researcher further affirms that product positioning strategy, product

differentiation strategy, penetration price strategy, competitive pricing strategy as well as

advertising and sales promotion strategy are generated from product, price and promotion that

are the main variables in the marketing mix concept.

30

Independent variables Moderating Variable Dependent Variables

Conceptual Framework of the Study discussion

Figure 2.1. Source: Researcher, 2015

The conceptual framework shows the relationship between the various product, promotion and

price strategies and the performance of dairy cooperatives. Proper product strategies in the

market affect the sales revenue. Implementation of price strategy has effects on profitability of

the product. This strategy is associated with customer retention in case of possible switching to

alternative products being introduced in the market by competitors. Promotion through

advertising affects the number of customers buying the product and ultimately affects the

revenue.

The moderating variable has some effect on both the independent and the dependent variables as

well. This variable concerns government legislations and policies likely to affect the dairy sector.

The variable cannot be controlled by the researcher but could have some effect on performance

Performance of Dairy

cooperative

Sales revenue

Profitability

Bonus/dividend

payment

Product Strategies

Positioning

Differentiation

Promotion strategy

Advertising

Sales promotion

Price Strategies

Competitive pricing

Penetration pricing

Government policies/

Legislation

31

of the dairy cooperatives. In this study, the researcher will control the moderating variable by

getting the respondents‘ opinion on the extent to which the variable will affect the performance

of dairy cooperative society. The outcome of this question will be factored in making final

conclusions.

32

CHAPTER THREE RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the research design, the target population, sample design, sample size,

sampling techniques, the data collection instruments, data collection procedures, pilot test,

validity and reliability of data and finally data processing and analysis.

3.2 Research Design

The research design in this study will be cross-sectional research design. Gay, (1993) argues that

research design seeks to ascertain respondent‘s opinions on a specified subject in a

predetermined structured manner. Smith et al (2008) describe this design as taking a ―snapshot‖

of a group of individuals. It employs the survey strategy. Oso & Onen (2005) argue that cross-

sectional research design is suitable in carrying out research because it seeks to obtain

information that describes existing phenomenon by asking individuals about their perceptions,

attitudes and behaviours. The study will use the cross-sectional research design because it is user

friendly and that it yields precise information hence facilitating possible drawing of valid

conclusions without asking for long term cooperation from the respondents.

3.3 Target population

A population is a group of individuals, objects or items from which samples are taken for

measurement (Kombo and Tromp, 2006). Kasomo (2006) describes the target population as the

aggregate of all cases that conform to designated sets of specifications to which the study will

generalize the results. The study targets a population of 360 committee members the 40 dairy

cooperative societies in Kericho and Bomet counties, South Rift.

33

Table 3.0 Distribution of population by County

County Number of

Cooperatives

Population of respondents

Committee members

Kericho 14 126*

Bomet 26 234*

Total 40 360

Source: New KCC- Sotik Milk Suppliers‘ Register, (2015)

Note: Calculation of population for committee members- Kericho

14×9=126

Calculation of population for committee members- Bomet

26×9=234

3.4 Sampling design

Kothari (2003) has defined sampling as the process of selecting a representative of a total

population in order to produce a small cross section or a small proportion of the target population

selected for analysis. According to Kerlinger (1986), sampling is selecting any portion of a target

population or universe. In the study, counties will be stratified into two stratus (counties);

Kericho and Bomet. From each county/strata respondents (committee members) will be selected

using simple random sampling technique.

3.5 Sample size

The size of the sample should be neither too large nor too small (Kothari, 2007). The sample

comprises 186 respondents drawn from the 40 dairy co-operative societies in Bomet and Kericho

Counties. The sample is determined according to Krejcie & Morgan (1970) table at 5% margin

34

of error. Krejcie & Morgan (ibid) as cited by Amin (2005) recommend that for a population of

360, a sample of 186 is adequate since a large sample will not make any difference in the study

results as shown in Table 3.1 below.

Table 3.1 Distribution of sample by County

County Dairy

cooperative

Committee

County

Name

Population

Per county

Population Sample

Kericho 14 126 65*

Bomet 26 234 121*

Total 40 360 186

Source: Researcher (2015)

Formula: Proportion for Kericho Committee: Tk/Tbk* Tc

=126/360*186 =65

Proportion for Bomet Committee: Tb/Tbk*Tc

126/360*186=121

Where,

Tbk- Total number of committees in Bomet and Kericho Counties,

Tb- Sample of Bomet county committees.

35

Tk- A sample of committees members in Kericho County.

Tc - Total sample of the committee .

(Source: Researcher, 2015)

The 186 committee members will be selected based on the proportion of numbers of dairy

cooperatives in respective dairy cooperatives within the county. These committee members are

the top five management committees of the cooperative societies

3.6 Data collection

As described by Nganga et al (2009), data collection is the process of gathering

and measuring information on variables of interest, in an established systematic fashion which

enables one to answer stated research questions, test hypotheses, and evaluate outcome.

According to Mugenda (1999) it is the process of acquiring subjects and gathering information

needed for a study. Data will be collected using structured and unstructured questionnaires

which will be self-administered to 186 respondents from 40 dairy cooperative societies. The

questionnaire will be structured to cover the details of the expected effect of marketing strategies

being investigated in the study.

The questionnaire will also provide the rating Likert scale responses out of the total study sample

response per item in which percentages will be calculated. Quantitative data will be analyzed

using descriptive statistics and presented using frequency distribution tables and charts to enable

for easy inferences. The data that will be collected will be qualitative data and quantitative. The

researcher will issue the questionnaires to all the respondents with the help of research assistant

and the respondent will be expected to self administer and return the completed questionnaires in

a span of one week.

36

3.6.1 Validity

Validity of the instruments is critical in all forms of researchers and the acceptable level largely

depends on logical reasoning, experience and professionalism of the researchers who should

have good understanding of the various quality control techniques (Oso, 2005). Nachmiasis &

Nachmiasis (1996), also noted that validity is the extent to which the instruments capture what

they purport to measure. Items will be randomly chosen for the content that will accurately

represent the information in all areas being investigated. The content validity of the data

collection instruments is the extent to which the data provides accurate and adequate coverage of

the objectives of the study (Cohen et al, 2000). The instrument will be interrogated by my

supervisor, peers and piloted for content validity. Secondly, by examining earlier creditable

literature, the variables and parameters used in capturing and measuring achievability of the

study objectives and content validity will be established as used by other scholars.

3.6.2 Reliability

The tendency toward consistency found in repeated measurements is referred to as reliability

(Carmines & Zeller, 1979). Reliability of a research instrument is a measure of the degree to

which the instrument yields consistent data after repeated trials (Mugenda & Mugenda, 2003).

Orodho (2005) gives reliability as the consistency of research instruments in eliciting similar

data from the same respondents after administering the instruments for two or more times within

a considerable time lapse apart in between the two or more distinct times of the instruments‘

administration. To establish the reliability, Cronbach‘s alpha, KR-20 will be used to check the

internal consistency of measurements. It is equivalent to performing the split half methodology

on all combinations of questions and is applicable when each question is either right or wrong.

37

The test statistic is

Where

k = number of questions

pj = number of people in the sample who answered question j correctly

qj = number of people in the sample who didn‘t answer question j correctly

σ2 = variance of the total scores of all the people taking the test = VARP (R1) where R1 = array

containing the total scores of all the people taking the test.

j= the nth number of respondent

Values range from 0 to 1. A high value indicates reliability; while too high a value (in excess of

0.90) indicates a homogeneous test. In this study, the researcher will only accept the value which

is at least 0.6. The advantage of Cronbach‘s method is that it can handle both discrete and

continuous variables. The KR-20 formula can't be used when multiple-choice questions involve

partial credit, and it requires detailed item analysis

3.7 Data analysis

A review done on the work of Bryman and Cramer (1997) showed that data analysis seeks to

fulfill research objective and provide answers to research question. The choice of analysis

procedures depends on how well the techniques are suited to the study objectives and scale of

measurement of the variable question (Kothari, 2004). Data will be analyzed using inferential

statistics i.e. regression analysis:

38

Y= α + X1B1 + X2B2 + β3X3 + ∑

X1- Product strategy

X2-Price strategy

X3- Promotion strategy

Data to be presented using frequency distribution tables, graphs and charts.

3.8 Ethical considerations

The study will seek the consent and permission of respondents through relevant authorities,

confidentiality will be ensured throughout the data collection process since the names of the

respondents will not be indicated in the research instruments. The respondents will be permitted

to pull out of the study at any time and that no inducements will be given to any individual in

order to solicit for information or participate in the study. Research assistants will be oriented on

the ethics of the research.

39

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APPENDICES

Appendix I: Questionnaires

The researcher is a Master of Business Administration student at Kenyatta University carrying

out research on ―Effect of marketing mix strategies on performance of dairy co-operative

societies in Kericho and Bomet Counties‖. This is to kindly request you to tick or fill in blank

spaces with your most suitable answer or response. The information provided will be treated in

confidence and only used for the purpose of academic.

SECTION A: ORGANIZATIONAL DETAILS

a) Name of your society………………………………

b) Name of Respondent (Optional) ……………………………..

c) Number of members ………………..

d) Average Intake of milk per day………….

e) Average sales/ Turnover per month…………….

f) Rate of payments to farmers in Kshs ………………….

g) Average Society commission per month ……..

h) Average bonus paid per annum …….

Section B: Demographic Characteristics of the Respondents

1. What is your age bracket?(please tick the appropriate box)

Less than 19 years

Between 20 –29

Between 30-39

Between 40-49

52

Above 50 years

2. Gender :( please tick appropriate box)

Female

Male

3. What is your highest level of education? (Please specify)

Primary level

Secondary level

Tertiary level

University level

4. For how long have you been working with this dairy cooperative dairy co-operative society?

(Please tick the appropriate box)

Between 6 months – 1 year

Less than 2 years

Between 3 -6 years

Between 7 – 10 years

Over 10 years

5. Does your organization formulate price promotion and product strategies?

Yes No I don‘t know

6. Has your dairy co-operative society changed business strategy since its formation?

Yes No I don‘t know

53

Section c

a) Effect of product strategies on performance of dairy co-operative societies

Please indicate your views on the answer which closely matches your opinion. Where 1=strongly

disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree

Your dairy cooperative society has created product strategies for

the past six ( 6 ) years

1 2 3 4 5

Product strategy review is often done 1 2 3 4 5

Product positioning and differentiation exist in your dairy

cooperative society

1 2 3 4 5

Product positioning strategy adopted by your dairy co-operative

society affects sales

1 2 3 4 5

Product differentiation strategy adopted by your dairy co-

operative society affects sales

1 2 3 4 5

Product strategies adopted by your dairy co-operative society

have to a great extent affected performance of your cooperative

society.

1 2 3 4 5

54

b) Effect of price strategies on performance of dairy co-operative societies

Please indicate your views on the answer which closely matches your opinion. Where

1=strongly disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree

Your dairy cooperative society has created price strategies for

the past six ( 6 ) years

1 2 3 4 5

Price strategy review is often done 1 2 3 4 5

Competitive pricing and price penetration exist in your dairy

cooperative society

1 2 3 4 5

Competitive pricing affects profits in your dairy cooperative

society

1 2 3 4 5

Price penetration affects profits in your dairy cooperative society 1 2 3 4 5

Price strategies have to a great extent affected the performance

of your dairy co-operative society

1 2 3 4 5

55

c) Effects of promotion strategies on performance of dairy co-operative societies

Please indicate your views on the answer which closely matches your opinion. Where

1=strongly disagree 2=disagree 3=Neutral 4=Agree 5= strongly agree

Your dairy cooperative society has created promotion strategies

for the past six ( 6 ) years

1 2 3 4 5

Your dairy cooperative society has often conduct promotional

activities like advertising

1 2 3 4 5

Advertising affects bonus payments in your dairy cooperative

society

1 2 3 4 5

Promotional strategies affects performance of your dairy

cooperative society to a great extent

1 2 3 4 5

Government policies and regulations also affect the performance of your dairy co-operatives

society?

Strongly disagree disagree Neutral Agree strongly agree

Which type of trainings does your dairy co-operative society organize for the committees and

staff? Please enumerate

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

56

To what extend do you think these trainings have improved on the general performance of your

dairy co-operative society?

Great extent Moderate Less extent

Which major role does your milk processor play to cushion your dairy co-operative from

competition? Please elaborate.

………………………………………………………………………………………………………

………………………………………………………………………………………………………

Kindly give your considered opinion on what you think should be done to improve on the

volume of sales in your co-operative.

……………………………………………………………………………

Thank you for your cooperation

57

Appendix III: Budget

ITEM UNIT(KSH) AMOUNT(KSH)

Research Assistants(2) 2500 5000

Travel and Accommodation 30000

Stationary 15000

Equipments and Materials 10000

Consultancy/Data analysis/research assistant 20000

Services (secretarial, photocopying, printing

and binding)

20000

Miscellaneous 9800

TOTAL 114,800

58

Appendix IV: Time Schedule (2015)

ACTIVITY August

Sept. Oct. Nov. Dec

Development and

presentation of proposal

Developing and piloting of

instruments

Data collection

Data organization , analysis,

interpretation report writing

Presentation of project

59

Appendix V: Krecjie And Morgan Table

60

Appendix VI: Dairy Cooperatives

Population of Active Dairy Co-Operatives in Bomet and Kericho Counties Delivering Milk to

New KCC (Sotik):

Bomet County

1. Longisa Farmers Co-operative Society Limited

2. Ndarawet Farmers Co-operative Society Limited

3. Sigor Farmers Co-operative Society Limited

4. Tenwek Farmers Co-operative Society Limited

5. Chebunyo Farmers Co-operative Society Limited

6. Moche Farmers Co-operative Society Limited

7. Labotiet Dairy Farmers Co-operative Society Limited

8. Kanusin Farmers Co-operative Society Limited

9. Kiptulwa Farmers Co-operative Society Limited

10. Kipsonoi Farmers Co-operative Society Limited

11. Sukurusiek Farmers Co-operative Society Limited

12. Kapkures Farmers Co-operative Society Limited

13. Sarichiat Farmers Co-operative Society Limited

14. Chepkalwal Farmers Co-operative Society Limited

15. Kelelkele Farmers Co-operative Society Limited

16. Manaret Farmers Co-operative Society Limited

17. Sotik Farmers Co-operative Society Limited

18. Kamungei Farmers Co-operative Society Limited

61

19. Itembe Farmers Co-operative Society Limited

20. Mosop Farmers Co-operative Society Limited

21. Ndanai Farmers Co-operative Society Limited

22. Kipngosos Farmers Co-operative Society Limited

23. Kapolesero Farmers Co-operative Society Limited

24. Makimeny Farmers Co-operative Society Limited

25. Siongiroi Farmers Co-operative Society Limited

26. Olbutio Farmers Co-operative Society Limited

Kericho County

1. Cheborgei Farmers Co-operative Society Limited

2. Bokik Farmers Co-operative Society Limited

3. Litein Kipagenge Farmers Co-operative Society Limited

4. Kapkatet Farmers Co-operative Society Limited

5. Kabianga Farmers Co-operative Society Limited

6. Getengeret Farmers Co-operative Society Limited

7. Sosiot Farmers Co-operative Society Limited

8. Kapsoit Farmers Co-operative Society Limited

9. Mosop Farmers Co-operative Society Limited

10. Chepsir Farmers Co-operative Society Limited

11. Ruskebei Farmers Co-operative Society Limited

12. Londiani Farmers Co-operative Society Limited

13. Kipkelion Farmers Co-operative Society Limited

62

14. Kipsitet Farmers Co-operative Society Limited

Source: NEW KCC (SOTIK) Milk Supplier’s Register (2015)