International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue X, October 2020 | ISSN 2454–6186

Effect of Price Skimming Strategies and Profitability of the Commercial Banks in Kericho County, Kenya

 Lasoi Maryleen Chepkemoi , Mr. Robert Cheruiyot
Department of Accounting and Finance, School of Business, Kenyatta University, Kenya

Abstract: Profitability of banking sector in Kenya has been declining since 2013. Some of the factors include high competition, capping of interest, pricing strategies among others. Pricing strategies in banking has not been considered despite underlying symptoms of declining growth in assets, loan and deposit. Therefore, there is need to investigate the pricing strategies used in commercial banks in Kenya. The study sought to establish the effect of pricing strategies on profitability of commercial banks in Kericho County, Kenya. The study adopted a descriptive survey design. The design is chosen because the target population was dispersed over a wide geographical area. The design was useful in helping the researcher to obtain both quantitative and qualitative data from the target population. The target respondents were 62 comprising of members of the pricing committees, who include the heads of strategy and planning, the general managers, marketing managers, sales managers, and finance managers in KCB, Equity, Standard Chartered, Co-operative, SBM Bank, Barclays, Trans-national bank, Sidian, DTB, National bank and Family Bank Kenya. The researcher used census sampling design to select 62 respondents representing the whole targeted population. Both closed and open ended questionnaires were utilized in data collection. Data analysis was done using ANOVA and multiple regression analysis with the help of Statistical Package for Social Science version 21.0. The study found out that there was significant relationship between price skimming strategies and profitability of the commercial banks. The study concluded that price skimming strategy provided new product to commercial banks and hence increased profitability. The study recommended that price skimming should be encouraged through encouraging product segmentation since it enables organization to develop new produces.

Keywords: Price Skimming Strategies, Profitability

I. INTRODUCTION

Organizations globally focus on ensuring high performance, profitability and customer loyalty in their business. Corporate profitability is one of the measures of organization performance based on the financial management. High profitability benefit stakeholders in the organization especially the shareholders, employees and board of directors. Investors, suppliers and customers are also beneficiaries on highly profitable organization. Therefore, profitable business is highly valued by stakeholder based on the monetary reward, benefit, profit, interest, payback and dividend it offers to them. However, profitability is dictated by internal and external environment of the business (Toni, Milan, Saciloto, & Larentis, 2017). The competitive model from Porter revealed that competitiveness of enterprises are mainly affected by buyers’ bargaining power, suppliers bargaining