THE EMERGING MARKET CLEARING PRACTICE IN

ETHIOPIA
(THE CASE OF BOUTIQUES IN ARDA SUB-CITY; ADDIS
ABABA)

BY: FUAD MUSTEFA ALI ID NO. GSR/2000/01

ADVISOR: ZEWDIE SHIBRIE (PHD)

A PROJECT SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES OF ADDIS

ABABA UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OF MASTERS OF BUSINESS ADMINISTRATION

ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES
MBA PROGRAM

JUNE, 2010
ADDIS ABABA
ETHIOPIA
 Addis Ababa University
School of graduate Studies

School of Business and Public Administration

THE EMERGING MARKET CLEARING PRACTICE IN

ETHIOPIA
(THE CASE OF BOUTIQUES IN ARDA SUB-CITY; ADDIS
ABABA)

BY: FUAD MUSTEFA ALI

Approval Board Committee

________________________ ________
Chairman, Graduate Studies Signature
__________________ _________
Research Advisor Signature
__________________ _________
Examiner Signature
__________________ ________
Examiner Signature
 Declaration
I, Fuad Mustefa declare that this work entitled “The Emerging Market Clearing

Practice in Ethiopia: the case of Arada Sub-city; Addis Ababa”, is outcome of my

own effort and study, and this study had not been present for a degree on any other university
and that all sources of material used for the project have been duly acknowledge.

Declared by:

Fuad Mustefa Ali ___________________ June, 2010

Student signature Date

Id No GSR/2000/01

Confirmed by:

Dr. Zewdie Shibrie ___________________ June, 2010

Advisor signature Date

 Acknowledgements

First all praises is to the one whom all dignity, honor and glory are due; the unique with
perfect attributes, who begets not, nor is he be gotten. He has not equaled but he is the
almighty, ALLAH, he gives me all the successes and a little daughter in the eve of my
graduation.

Next, I would like to express my heart-felt admiration and thanks to my project advisor
Dr. ZEWDIE SHIBRIE, for his unlimited support ad advice to complete my work and
evaluating my work from the beginning up to the end. I also want to extend my gratitude
to those boutique owner(s) and/or seller(s) who support me to collect the needed
information.

I would like to extend my special thanks to my family especially my wife SEADA

MAHMUD, My daughter RENIM FUAD, may father MUSTEFA ALI, and my mother
NEIMA ADEM. And I would like to express my warm thanks to My supportive friends
Amar (Aish), Habtamu Endris, Habtamu Arage, Abdurohman Ali, Jemal Seid, Muktar
Ibrahim, Mahmud Ali, Oumer Seid, Ahmed Alaba, Haile Yeshanew, Ashenafi Chanie,
Assefa Dessie, Robeil Haile, Abera Kassaw, Baki Nigussie, Zemi Kecho, Hikma Worku
for all the supports they provided to complete my study successfully. Finally, my deepest
thanks are addressed to all of my friends and families helping me to complete this work.
 Table of content

Content Page No

Acknowledgement ............................................................................................... i

Table of content .................................................................................................. ii

List of tables’ ....................................................................................................... iii

List of Figures ..................................................................................................... iv

Abstract .................................................................................................................v

CHAPTER ONE: INTRODUCTION

1.1. Background of the Study ....................................................................................1

1.2. Statement of the Problem ....................................................................................2

1.3. Objective of the Study .........................................................................................3

1.4.Scope and limitations of the Study .......................................................................3

1.5.Anticipated Ethical issue.......................................................................................4

1.6.Significance of the Study ......................................................................................5

1.7.Organization of the Paper .....................................................................................6

1.8.Research methodology ..........................................................................................7

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1. Market Clearing Practice ...................................................................................8

2.1.1. Marketing mix element ...................................................................9

2.2. Clearance sales ...............................................................................................14

2.3. Customer buying behavior as a moderator .....................................................18
CHAPTER THREE: DATA PRESENTATION ANALYSIS AND
INTERPRETATIONS
3.1.Data presentation ...............................................................................................22

3.1.1. Age, sex and educational background .............................................22

 3.1.2. Experience on the business ..............................................................23
3.1.4. Past sales trend of the boutiques ....................................................23

3.1.5. Past experience in clearance sales..................................................24

3.1.6. Past Target customers ....................................................................24

3.1.7. Discount rate ..................................................................................25

3.1.8. Reason for applying clearance sales ..............................................25

3.1.9. Price setting decision .....................................................................26

3.1.10. Seasons and occasion .....................................................................26

3.1.11. Advertisement mechanisms ...........................................................27

3.1.12. Duration of the discount period .....................................................27

3.1.13. Target customer during the clearance sales ...................................28

3.1.14. The relationship between price and quality ...................................28

3.1.15. The relationship between sales volume and clearance price .........29

3.1.16. Customer Behavior as a Moderator ...............................................30

3.1.17. Back ground information ...............................................................34

3.1.18. Awareness of the customer about the product ...............................35

3.1.19. Customers attitude towards clearance price and product quality...38

3.1.20. Customer attitude towards the reality of the price cut ...................41

3.2.Data analysis and interpretation ..........................................................................44

3.2.1. Demographic characteristics of respondent ...............................................44

3.2.2. Past sales trend of the boutiques ................................................................44

3.2.3. Past experience in clearance sales..............................................................45

3.2.4. Target customers before and during the clearance sales ..................... 45

3.2.5. Discount rate setting decision ....................................................................46

 3.2.6. Reason for applying clearance sales ..........................................................47

3.2.7. Price setting decision .................................................................................48

3.2.8. Seasons and occasions ...............................................................................49

3.2.9. Advertisement mechanisms .......................................................................50

3.2.10. Duration of the discount period .................................................................50

3.2.11. The relationship between price and quality ...............................................51

3.2.12. The relationship between sales volume and clearance price ....................51

3.2.13. Customer Behavior as a Moderator ...........................................................52

3.2.14. Data analysis and interpretations (data collected from the customer ........55

3.2.15. Back ground information ...........................................................................55

3.2.16. Awareness of the customer about the product ...........................................55

3.2.17. Customers’ attitude towards clearance price and product quality .............58

3.2.18. Customer attitude towards the reality of the price cut ...............................60

CHAPTER FOUR: CONCLUSIONS AND RECOMMENDATIONS

4.1 Conclusions .................................................................................................................62

4.2. Recommendations .......................................................................................................63

Bibliography
Appendices
 List of tables

Table Page No

Table 1 demographic characteristic of respondent ........................................................... 22

Table 2 Years of experience on the business .....................................................................23

Table 3 the boutiques trend in selling ................................................................................23

Table 4 past experiences in clearance sells……………………… ...............................….24

Table 5 target customer of the boutique before they apply clearance sales.......................24

Table 6 discount rate setter of the boutiques .....................................................................25

Table 7 the reason for using clearing practice ...................................................................25

Table 8 seasons and occasions boutiques apply clearance sales strategy ......................... 26

Table 9 advertizing mechanism used by boutiques .......................................................... 27

Table10 the length of time the discount sales stay ............................................................27

Table 11 expected target customer when they apply clearance sales ................................28

Table 12 owner(s) or sellers opinion about the relationship of price and quality..............28

Table 13 the boutiques goal achievement ..........................................................................29

Table 14 the relationship between selling price and sales volume ................................... 30

Table 15 customer interest to know the reason of clearance sells .....................................30

Table 16 customers’ knowledge about original price of the product.................................31

Table 17 the customers trust on the discount rate ..............................................................32

Table 18 complain about the discount rate ........................................................................32

Table 19 Customer confidence on the product quality .....................................................33

Table 20 sex and age of respondents .................................................................................34

Table 21 educational level of respondent ..........................................................................34

 List of figure

Figures Page No

Figure 1 clearance sales pricing decision...........................................................................26

Figure 2 the impact of clearance sells on sales volume .....................................................29

Figure 3 customers’ sensitivity towards clearance selling price ........................................31

Figure 4 customers knowledge of the product quality .......................................................35

Figure 5 the source of information about the product........................................................36

Figure 6 respondents knowledge of the price of the product .............................................36

Figure 7 the customers’ knowledge of the boutique and its product quality and price .....37

Figure 8 buying experience of respondents .......................................................................37

Figure 9 purchase experience respondents ........................................................................38

Figure10 customers’ knowledge about the relationship of price and quality ....................39

Figure 11 the thing that forces customers to come to benefit from clearance sales ..........39

Figure 12 the amount of purchase ......................................................................................40

Figure 13 respondents’ response about the reason of applying clearance sales ................40

Figure 14 accuracy of the discount rate .............................................................................41

Figure 15 the accuracy of the rate and respondents expectation of applying it .................42

Figure16 accuracy of clearance price in some boutiques ..................................................42

Figure 17 the correctness of the discount rate in all boutiques they visited ......................43
 Abstract
In this paper the Emerging Market Clearing Practice in Ethiopia was investigated in Arada-
Subcity: Addis Ababa

Data were obtained via interview, questionnaire and personal observation. The questioner
designed for the customers and seller(s) and/or owner(s) separately. 79 questioners were
distributed to and collected from the customers and from 18 questioners distributed to seller (s)
and/or owner(s) 16 (88.9) were collected. 8 seller (s) and/or owner(s) were interviewed and 20
customers who came to purchase the product on Saturday from 4:00pm to 5:00 pm and 10:00am
to 11:00am were fill the questionnaire and interviewed.

The findings of the study indicated that customers perceived the discount rate as erroneous, the
actual price and the displayed discount were in consistence, and there was only a slight
reeducation in price. Respondents also indicated that the clearance sales increase their sales
volume even if the customers are reluctant to purchase on the specified period and this indicates
that customer behavior have its own effect on the applied strategy. The main reason of the
boutiques for applying clearance sales was to sell the bulky inventory.
 CHAPTER ONE

Introduction

1.1. Background of the study

Nowadays there is a stiff competition in the clothing market, due to globalization and rapid
change in fashion and customer preference. The perishability of fashionable clothes leads to
short selling period. And in recent years also more and more retail products have been sold on
sales and a higher percentage markdown. Clearance sales strategy is currently practiced in our
country especially in the boutiques retail stores. The market clearing practice occurs
frequently but they are not studied systematically by scholars in Ethiopia. Because of its
dynamic nature of price change and customer preference over time, managers face a big
problem of how to sell the product to reduce the inventory of unsold items and out dated
fashions. In this process, setting appropriate pricing strategy, knowing the preference of
customer and managing the available inventory is vital to become profitable in this
competitive market.

One reason for the rise of markdown is the growing importance of fashion and product
Variety especially in the apparel merchandises; prints, stripes, colors and designs have grown
since the mid sixties. The diverse color assortment and the popularity of casual clothing,
where fewer well-accepted dressing guide lines exist, have increased uncertainty. In this
environment of style and color diversity, the store buyer faces greater uncertainty and makes
more pricing mistakes. Increased clearing sales practices are the result of the uncertain
environment (Pashigian and Bowen Nov., 1991).

The other issue that could be included in studying market clearing practice is the buyers’
behavior, because the buyer perception of low price affects the objective of the retail store
manager decision on how to set the price and its impact on future sales. The field of consumer
behavior studies, how individuals, groups, and organizations select, buy, use, and dispose
goods, services, ideas, or experiences to satisfy their needs and desires. Understanding
consumer behavior is not simple, because customers may say one thing but do another. They
may not be in touch with their deeper motivations, and they may respond to influences and
change their minds at the last minute. Customers often question the motivation behind price

changes. A price cut can be interpreted in different ways: The item is about to be replaced by
a new model; the item is faulty and is not selling well; the firm is in financial trouble; the
price will come down even further; the quality has been reduced. A price increase, which
would normally discourage sales, may carry some positive meanings to customers: The item
is "hot" and represents an unusually good value (Kotler and Killer, 2006).

The researcher was motivated to study this topic after observing different advertisings posted
on the boutiques in Addis Ababa especially around Piezza. After looking the posted discount
rate on different boutiques which says 100% discount which means providing the product for
free, due to this reason the researcher is triggered to study this topic.

1.2. Statement of the Problem

Using a single method of marketing strategy is very difficult in the present market condition
because, the competition is stiff, the development of new fashions is very fast, the
development of new technology and the varying preference of customers makes the marketing
activity very difficult. Especially in the closing store perishability and seasonality of
fashionable clothes are increased due to different innovation in the design of cloths, the
stripes, the color and style.

Currently in our country wearing fashion clothes increase from time to time due to the above
mentioned reasons and globalization effect. Due to this uncertain environment the buyers of
the product face different problems relating price, the type of product to chose, when to buy
the product and other quality related problems. On the other hand, the seller of the product is
struggling to survive in these aggressive markets. The problems are vast and increase from
time to time, how to set the prices of the products are most important. The emerging clearing
sales practice in our country is one strategy to sell unsold items and seasonal products but it
needs a critical thinking when one applies this strategy by considering the behavior of
customers. Putting a lower price only cannot make effective the boutique. Because a price cut
can be interpreted in different ways by the customer: The item is about to be replaced by a
new model; if the item is faulty and is not selling well; the firm is in financial trouble; the
price will come down even further; the quality has been reduced (Kotler, 2006).

Based on the data collected from the buyers and seller(s) as well as owner(s) if the owner(s) is
not seller, from those boutiques apply clearance sale practice in Arada sub city it was
analyzed and interpreted.

Thus, the report answered the following questions:

• What are the major reasons for setting a market clearing price?
• What is the perception of buyers to lower price and product quality?
• Does lower price relate to sales volume?
• Is the price cut real?

1.3. Objective of the Study

The overall objective of the study was to assess the market clearing practice; evaluate the
relation of clearing price with sales volume by considering customer perception of lower price
and product quality as a moderator. From this general objective the following specific
objectives emanate:

• To find out the major reason of selecting the market clearing strategy;
• To understand how they determine the market clearing price;
• To see the relationship between clearance price and sales volume;
• To see the perception of buyers towards clearing price;
• To assess the real application of the clearing price;

1.4. Scope and Limitations of the Study

The scope of the study was limited due to resource constraints (specially, time and financial
problems). As a result the target groups are limited to those boutique using clearing practice
found in Arada Sub City; not only this but also the respondents are limited by taking time and
day interval. And the number of variables used to assess the problem was also limited.
Limitations were:

• Unavailability of enough secondary data. Hence the topic is new and not well
considered in our country there was a problem of accessing up to date relevant data
for the study.
• Internet connection problem to download related material.
• The most challenging problem the researcher face during the study was the
respondents’ unwillingness to respond and the researcher spent much time on it.
• Resource problem to make the study longitudinal research. In order to study the
frequency of clearance sales it takes more time and resource because of this reason
the study focus only on those boutiques currently using this pricing strategy and by
asking them the frequency of applying this strategy.

1.5. Anticipated Ethical Issue

• It is somewhat difficult to know the genuineness of the discount, because the seller
and /or the owner) my not give the accurate data. But the researcher tried to know
this information by using different mechanism: like asking the price of the same
product in different boutique, those are found in the same location. And the
information will not be given for any one without the authorizations of the boutique
owner(s).
• Interviewing the purchasers of the product within the boutique is somewhat not
ethical and also they may give a distorted data. To solve this problem the question
designed in systematic form and the respondents asked systematically: like asking
them after they purchase the product and leave the boutique.

1.6. Significance of the Study

The finding of the study expected to have the following significance:

• It was a piece of contribution to the current knowledge in market clearing practice

and it will be used as a base for different scholars and other interested body for
farther investigation, hence this area is not well studied by local scholars.
 • The finding and the recommendation of this work will help the customers and the
owner in understanding the concept and how to act in applying the different
scientific method to become beneficiary by solving their problem.

1.7. Organization of the paper

The paper is organized in to four chapters. The first chapter includes background of the study,
statement of the problem, scope and limitation of the study, methodology of the study and
significance and limitation of the study. The second chapter deals with the presentation of the
related literature. The third chapter includes the presentation, interpretation and analysis of the
data. The last chapter is about the conclusion and recommendation of the study.

1.8. Research Methodology

a. Research Strategy

The study was conducted based on quantitative research method by using survey to show the
relationship between different variables; the dependant variable; sales volume, moderating
variable, customer buying behavior and the independent variable clearing price.
Questionnaire, interview and personal observation and different statistical analysis techniques
were used to collect and analyze the data.

Case study research method was used to assess the relationship of the different variables on
boutiques applied clearance sales during the study period found in Arada Sub-City.

b. Sources of Data
In order to see the inter relationship of the specified variables both primary and secondary
source of data were used. Secondary data like; journals, books, articles and different websites.
The primary data were collected by using questionnaire which were distributed to the
customer who made purchase and seller(s) and/or the owner of the (s), interview conducted to
the customers and seller(s) and/or the owner and direct observation made by the researcher in
order to see the reality of the discount.
 c. Sample Size Determination, Sampling and Data Collection Techniques

It is difficult to assess all boutiques which use a market clearing pricing strategy in Addis Ababa,
one sub city selected as a representative sample. Those boutiques which applied the market
clearing pricing strategy in Arada sub city were the target group being assessed. The seller and
the owner(s), if the owner is not the seller of the boutique and the buyers of the product were the
respondents for the primary data. The seller (owner) of the product and those buyers who arrived
to buy the product on Saturday from 4:00pm to 5:00 pm and 10:00am to11:00am were
interviewed and the actual buyer fill and return the questionnaire at the same date and time. The
day was selected intentionally, because during the weekend the numbers of buyer’s increased, by
expecting that in this time most of the workers have a break and during Sunday almost all of the
boutiques are closed so buyers participate in the marketing activity in Saturday. And the time
interval selected by expecting that most of the buyers use this time to purchase the product. In the
sub city those boutiques which displays a clearance sale notice on their boutique, were assessed.

Questionnaire: two types of questionnaire were developed. The first questionnaire distributed
to the seller of the product and the owner(s) of the product (if the seller is not the owner).
And the second type distributed for those buyers who actually purchased the product with the
specified day and time. The questionnaires distributed to the customers were designed using a
seven point lakerate Scale where almost all the statements were measured on a seven point
scale with 1 = strongly Agree; 2 = agree; 3 = slightly agree; 4=neutral (neither agree nor
disagree); 5 = slightly disagree; 6=disagree and, 7 = strongly disagree. The questions
containing 16 statements which were divided in to three based on the interrelationship of
questions apart from the background information. A total of 79 questionnaires were
distributed to those willing buyers during the specified date and time and the entire amounts
were collected. Closed ended questions were developed for the seller and/ or the owner of the
boutiques. The researcher searched out 9 boutiques which apply clearance sells in Arada Sub-
city during the study period and a total of 18 questions were distributed. Two for each
boutique, among the total questionnaire distributed to the boutiques 16 (89%) were
successfully completed and returned.
Interview: The buyers who came to buy on the specified day and time and the owner(s)
and/or seller(s) were interviewed. 32 and 8 respondents were interviewed from the buyers and
seller and/or owner respectively. The respondents were selected randomly.

Observation: The researcher observed the market condition; to know the reality of the
discount. Other boutique not applied the discount was observed to comparing the price of
similar product at different boutiques and the customer situation during the purchasing period
was observed.

d. Method of Data presentation, analysis and interpretations

The data collected by using interviews and questioners were presented accordingly by using
tables, figures, frequency distribution, percentages in order to avoid the redundancy in writing
the expressions of tables and figures in this part only same figures and tables were expressed.
The presented data were analyzed and interpreted. The interview and observation data were
analyzed in combination with the questioner based on their inter relationship; theories were
used to strengthen the analysis and interpretations made. And also the mean level was
calculated by using SPSS, for generalization purpose mean level below 4 shows agreement,
mean level 4 shows neutrality and mean level above 4 shows disagreement.
 CHAPTER TWO

Review of Related Literature

2.1. Market Clearing Practice

Marketing is a system of integrated business activities designed to develop strategies and

plans to the satisfaction of the customer wants. This can widely be understood as the activities
that are required to get the product in the most efficient way to the customer. This could lead
to the common misconception that marketing means to sell the product by clever ways or sell
them anyhow or at the most the art of selling. But actually it is something more than that; it is
the art of making the right thing and getting it to the right people in the right way or the most
efficient way. (www.scribed.com).

Marketing is a business function that identifies unfulfilled needs and wants, defines and
measures their magnitude, it decides which target market its organization should serve and
gear everyone in its organizations to serve the customer. (www.scribed.com).

Marketing is everywhere. Formally or informally, people and organizations engage in a vast

number of activities that could be called marketing. Good marketing has become an
increasingly vital ingredient for business success. And marketing profoundly affects our day-
to-day lives. (Kotler and Keller, 2006)

Marketing management is the art and science of choosing target markets and getting, keeping,
and growing customers through creating, delivering, and communicating superior customer
value. (Kotler and Keller, 2006)

But making the right decisions is not always easy. Marketing managers must make major
decisions such as what features to design into a new product, what prices to offer customers,
where to sell products, and how much to spend on advertising or sales. They must also make
more detailed decisions such as the exact wording or color for new packaging. Effective
marketing mix decision is essential.
 2.1.1. Marketing Mix Element
Marketing Mix is the method used for executing the important decisions that have
been taken. Particular targets are set and the planning to work towards them to attain
the target is called the marketing mix. This is comprised of 4 main elements: Product
Mix, Price Mix, Distribution Mix and Promotion Mix. Each of these elements is an
entire area by itself and comprise of smaller components. (www.scribed.com).

Although many factors affect an organization’s marketing strategy, all marketing decision-
making can be classified into four strategy elements, sometimes referred to as the marketing
mix or the four P’s: Product, price, place, and promotion. As each library product or potential
product is analyzed and developed for its target customer, it must be viewed with the four P’s
in mind. (http// www.mit.edu/rpindyck/). But for this paper price and promotion only presented

Price: is one of the most complex marketing decisions. It plays a number of roles in most
marketing strategies: it can be a key component in product image (quality); a powerful sales
promotion tool (discounts, coupons); or a versatile element in competition (under pricing).
Determining pricing strategy is a delicate task. It requires that you assess customer demand
and analyze cost in order to choose a price that will create customer satisfaction and yield a
satisfactory level of profit (Markim, 1982 as sited in Kotler and Killer, 2006).

Pricing is essentially the thing of interest since it generates revenue or income, it has to be
done tactfully in order to not disappoint the crowd and yet make a profit. Economists define
price as the exchange value of a product or service through the medium of money. Any
change of price strikes the customer immediately and makes him curious for the reasons,
whether less or more, he gets suspicious. He dislikes the idea of paying extra, and doubts the
success of the product if the price falls. Pricing label expresses the value of a product. An
exchange of goods can take place only if the buyer and seller agree on a price. The price of
any product is likely to vary depending on the condition of the market and demands. Some
label their products very high to show that they are of a higher class, and the other products of
the same type are forced to quote as high as the others so that the customers value their
products also and don't doubt their product. At the planning and decision making level, much
thought has to be given to appropriate pricing. (www.scribed.com).

Companies do their pricing in a variety of ways. In small companies, prices are often set by
the boss. In large companies, pricing is handled by division and product-line managers. Even
hear top management sets general pricing objectives and policies and often approves the
prices proposed by lower levels of management. (Kotler and Keller, 2006).

Pricing a product is one of the most important decisions a seller has to make. As Monroe
(1990, as sited in Kotler and Killer, 2006) states, "More and more, today's pricing
environment demands better, faster, and more frequent pricing decisions than ever before. It is
also forcing companies to take a new look at pricing and its role in an increasingly complex
marketing climate.

In setting a product’s price, marketers follow a six-step procedure: (1) selecting the pricing
objective; (2) determining demand; (3) estimating costs; (4) analyzing competitors’ costs,
prices, and offers; (5) selecting a pricing method; and (6) selecting the final

Step 1: Selecting the Pricing Objective

A company can pursue any of five major objectives through pricing:
• Survival. This is a short-term objective that is appropriate only for companies that
are plagued with overcapacity, intense competition, or changing consumer wants. As
long as prices cover variable costs and some fixed costs, the company will be able to
remain in business.
• Maximum current profit. To maximize current profits, companies estimate the
demand and costs associated with alternative prices and then choose the price that
produces maximum current profit, cash flow, or return on investment. However, by
emphasizing current profits, the company may sacrifice long-run performance by
ignoring the effects of other marketing-mix variables, competitors’ reactions, and
legal restraints on price.
• Maximum market share. Firms choose this objective because they believe that higher
sales volume will lead to lower unit costs and higher long-run profit. With this
 market-penetration pricing, the firms set the lowest price, assuming the market is
price sensitive. This is appropriate when (1) the market is highly price sensitive, so a
low price stimulates market growth; (2) production and distribution costs fall with
accumulated production experience; and (3) a low price discourages competition.
• Maximum market skimming. Many companies favor setting high prices to “skim” the
market. This objective makes sense under the following conditions: (1) A sufficient
number of buyers have a high current demand; (2) the unit costs of producing a
small volume are not so high that they cancel the advantage of charging what the
traffic will bear; (3) the high initial price does not attract more competitors to the
market; and (4) the high price communicates the image of a superior product.
• Product-quality leadership. Companies such as Maytag that aim to be product-
quality leaders will offer premium products at premium prices. (Kotler, 2000).

Step 2: Determining Demand

Each price will lead to a different level of demand and, therefore, will have a different impact
on a company’s marketing objectives. The relationship between alternative prices and the
resulting current demand is captured in a demand curve. Normally, demand and price are
inversely related: The higher the price, the lower the demand. In the case of prestige goods,
however, the demand curve sometimes slopes upward because some consumers take the
higher price to signify a better product. Still, if the price is too high, the level of demand may
fall. (Kotler, 2000).
Price Sensitivity
The demand curve shows the market’s probable purchase quantity at alternative prices,
summing the reactions of many individuals who have different price sensitivities. The first
step in estimating demand is to understand what affects price sensitivity. Nagle (sighted in
Kotler, 2000) says there is less price sensitivity when:
• The product is more distinctive,
• Buyers are less aware of substitutes,
• Buyers cannot easily compare the quality of substitutes,
• The expenditure is a lower part of buyer’s total income,
• The expenditure is small compared to the total cost of the end product,
 • Part of the cost is borne by another party,
• The product is used in conjunction with assets previously bought,
• The product is assumed to have more quality, prestige, or exclusiveness, and
• Buyers cannot store the product.

Price Elasticity of Demand

Marketers need to know how responsive, or elastic, demand would be to a change in price. If
demand hardly changes with a small change in price, we say the demand is inelastic. If
demand changes considerably, demand is elastic. Demand is likely to be less elastic when (1)
there are few or no substitutes or competitors; (2) buyers do not readily notice the higher
price; (3) buyers are slow to change their buying habits and search for lower prices; and (4)
buyers think the higher prices are justified by quality differences, normal inflation, and so on.
If demand is elastic, sellers will consider lowering the price to produce more total revenue.
This makes sense as long as the costs of producing and selling more units do not increase
disproportionately. (Kotler, 2000).

Price elasticity depends on the magnitude and direction of the contemplated price change. It
may be negligible with a small price change and substantial with a large price change; it may
differ for a price cut versus a price increase. Finally, long run price elasticity may differ from
short-run elasticity. Buyers may continue to buy from their current supplier after a price
increase because they do not notice the increase, or the increase is small, or they are distracted
by other concerns, or they find that choosing a new supplier takes time. But they may
eventually switch suppliers. The distinction between short-run and long-run elasticity means
that sellers will not know the total effect of a price change until time passes. (Kotler, 2000).

Step 3: Estimating Costs

While demand sets a ceiling on the price the company can charge for its product, costs set the
floor. Every company should charge a price that covers its cost of producing, distributing, and
selling the product and provides a fair return for its effort and risk.
 Types of Costs and Levels of Production
A company’s costs take two forms—fixed and variable. Fixed costs (also known as overhead)
are costs that do not vary with production or sales revenue, such as payments for rent, heat,
interest, salaries, and other bills that must be paid regardless of output. (Kotler, 2000).

Step 4: Analyzing Competitors’ Costs, Prices, and Offers

Within the range of possible prices determined by market demand and company costs, the
firm must take into account its competitors’ costs, prices, and possible price reactions. If the
firm’s offer is similar to a major competitor’s offer, then the firm will have to price close to
the competitor or lose sales. If the firm’s offer is inferior, it will not be able to charge more
than the competitor charges. If the firm’s offer is superior, it can charge more than does the
competitor—remembering, however, that competitors might change their prices in response at
any time. (Kotler, 2000).

Step 5: Selecting a Pricing Method

The three Cs—the customers’ demand schedule, the cost function, and competitors’ prices—
are major considerations in setting price. First, costs set a floor to the price. Second,
competitors’ prices and the price of substitutes provide an orienting point. Third, customers’
assessment of unique product features establishes the ceiling price. Companies must therefore
select a pricing method that includes one or more of these considerations. (Kotler, 2000).

Step 6: Selecting the Final Price

The previous pricing methods narrow the range from which the company selects its final
price. In selecting that price, the company must consider additional factors: psychological
pricing, the influence of other marketing-mix elements on price, company pricing policies,
and the impact of price on other parties. (Kotler, 2000).
 Initiating Price Cuts
Several circumstances might lead a firm to cut prices. One is excess plant capacity: If the firm
needs additional business but cannot generate it through increased sales effort or other
measures, it may initiate a price cut. In doing so, however, the company risks triggering a
price war. Another circumstance is a declining market share, which may prompt the firm to
cut prices as a way of regaining share. In addition, companies sometimes initiate price cuts in
a drive to dominate the market through lower costs. Either the company starts with lower
costs than those of its competitors or it initiates price cuts in the hope of gaining market share
and lower costs. When considering price-cutting, marketers need to be aware of three possible
traps: (1) Customers may assume that lower-priced products have lower quality; (2) a low
price buys market share but not market loyalty because the same customers will shift to any
lower-price firm; and (3) higher-priced competitors may cut their prices and still have longer
staying power because of deeper cash reserves.(Kotler, 2000). Among the difference pricing
strategy used by different sealers clearance sales is the emerging technique in our country.

2.2. Clearance Sales:

Clearance sale is an attempt to move merchandise at a price (significantly) below its original
price (Lazear, 1986). “Clearance market down dollars,” which equals the revenue that would
be generated at regular price minus the actual dollar obtained from market down items. Given
the thin margin of most retailers, the effectiveness of clearance markdown policies can make
the difference between a profitable and unprofitable season (Smith and Achabal, 1998).
Information about market down in the retail store since in the mid twenties shows the
frequency of market down offered by department store was relatively stable over four decades
from 1925-1965 pricing practices to change in the last sixties as more product especially
apparel product sold at a price cut.(Pashigian 1988). Among other reasons that explain this
phenomenon is the growing importance of fashion and product variety. Another important
phenomenon in the fashion industry is the "perishability" of the products. Even though
products do not perish at the end of the season, stores usually liquidate the inventory and do
not store merchandise for the next season. Among several reasons for this behavior are rapid
changes in fashion and high inventory costs (Bitran and Mondschein, 1997). Form the above
definitions clearance sales implies that sealing of products at lower price than before due to
different reasons among this, the growing importance of fashion, high cost of inventory and
the variety of product.

Discount pricing has become the modus operandi of a surprising number of companies
offering both products and services. Some product categories tend to self-destruct by always
being on sale. Salespeople, in particular, are quick to give discounts in order to close a sale.
But word can get around fast that the company's list price is "soft," and discounting becomes
the norm. The discounts undermine the value perceptions of the offerings. Some companies in
an overcapacity situation are tempted to give discounts or even begin to supply a retailer with
a store brand version of their product at a deep discount. Because the store brand is priced
lower, however, it may start making inroads on the manufacturer's brand. Manufacturers
should stop to consider the implications of supplying products at a discount to retailers
because they may end up losing long-run profits in an effort to meet short-run volume goals.

Sales management needs to monitor the proportion of customers who are receiving discounts,
the average discount, and the particular salespeople who are over relying on discounting.
Higher levels of management should conduct a net price analysis to arrive at the "real price"
of their offering. (Kotler and Killer, 2006).

Response to a clearance sale was found to be a function of two primary factors the degree to
which a consumer personally committed to the discount sales alternative and changes in the
difficulty of making a decision due to limitation of buying options (Rajagopal, 2008).
Consumers response of the clearance sells, both in terms of decision satisfaction level and
observed store loyalty behavior, are strongly affected by the variability of price sensitivity,
attractiveness of product, store loyalty and perceived value on available brands. Clearance
sales affect consumers’ decision experience to some extent, but not their consumption
experience (Rajagopal, 2008).

The final price is a marketing decision. The ultimate price that is set may be to cover expenses
only; a reasonable fee based on the demographics of the community or the corporation; a fee
high enough to generate sufficient revenue to make up the difference between donations or
grants and total expenses; or a fee commensurate with the perceived value of the product
being offered. Marketers often refer to these pricing approaches as average-cost pricing,
target rare-of-return pricing and breakeven-analysis pricing.

Marketing communication: Today, marketing communications are increasingly seen as an

interactive dialogue between the company and its customers. To make the sale to customers,
marketers must work hard and work smart. Companies must ask not only "How can we reach
our customers?" but also, "How can our customers reach us?" Thanks to technological
breakthroughs, people can now communicate through traditional media (newspapers,
magazines, radio, telephone, television, billboards), as well as through computers, fax
machines, cellular phones, pagers, and wireless appliances. By decreasing communications
costs, the new technologies have encouraged more companies to move from mass
communication to more targeted communications and one-to-one dialogue. But companies are
also using their sales force to provide a human touch to their marketing. (Kotler and Killer,
2006). Among the different communication tools advertising and sales promotion are
presented in the following parts.

Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or
services by an identified sponsor.15 Advertisers include not only business firms but also
museums, charitable organizations, and government agencies that direct messages to target
publics. Ads are a cost-effective way to disseminate messages, whether to build brand
preference for Intel computer chips or to educate people about the dangers of drugs. In
developing an advertising program, successful firms start by identifying the target market and
buyer motives. Then they can make five critical decisions, known as the five Ms: Mission:
What are the advertising objectives? Money: How much can be spent? Message: What
message should be sent? Media: What media should be used? Measurement: How should the
results is evaluated? These decisions are summarized in. (Kotler, 2000).

Sales promotion, a key ingredient in many marketing campaigns, consists of a diverse

collection of incentive tools, mostly short term, designed to stimulate trial, or quicker or
greater purchase, of particular products or services by consumers or the trade. Whereas
advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion
includes tools for consumer promotion (samples, coupons, cash refund offers, prices off,
premiums, prizes, patronage rewards, free trials, warranties, tie-in promotions, cross-
promotions, point-of-purchase displays, and demonstrations); trade promotion (prices off,
advertising and display allowances, and free goods), and business and sales force promotion
(trade shows and conventions, contests for sales reps, and specialty advertising). (Kotler,
2000). In order to have effective pricing decision identifying the target customer of the
product is essential.

Market Segmentation
Market segmentation is about describing and dividing groups of people. People with different
characteristics may want the same product in somewhat different forms and for different
reasons. Therefore, marketers divide people into groups based on certain relevant
characteristics, and then adjust elements of their marketing mix to meet the specific needs of
each group. (www.campus.udarton.edu).

A market segment consists of a group of customers who share a similar set of needs and
wants. The marketer does not create the segments; the marketer's task is to identify the
segments and decide which one(s) to target. Segment marketing offers key benefits over mass
marketing. The company can presumably better design, price, disclose and deliver the product
or service to satisfy the target market. The company also can fine-tune the marketing program
and activities to better reflect competitors' marketing. (Kotler and Killer, 2006).

Why Segment Markets? When marketers segment product markets and select targets, they
hope to increase the efficiency and profitability with which they serve their customers. By
excluding groups of people who are less likely to buy a firm’s brand, the firm has additional
resources to direct toward groups with a greater potential to become customers. Effective
segmentation allows marketers to increase the return on their investments by reducing wasted
efforts or in some cases lowering overall marketing expenditures. Indeed, segmentation is so
effective at helping businesses more wisely spend their resources that some business
historians consider segmentation to be the single most valuable tool marketing has to offer the
economy and our society. (www.campus.udarton.edu).
Target marketing requires marketers to take three major steps: (1) Identify and profile distinct
groups of buyers who might require separate products or marketing mixes (market
segmentation); (2) select one or more market segments to enter (market targeting); and (3)
establish and communicate the products’ key distinctive benefits in the market (market
positioning). This chapter focuses on the first two steps; the following chapter will discuss
positioning strategy.

2.3. Customer Buying Behavior as A Moderator

The aim of marketing is to meet and satisfy target customers and wants better than
competitors. Consumer behavior is the study of how individuals, groups, and organizations
select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and
wants. Studying consumers provides clues for improving or introducing products or services,
setting prices, devising channels, crafting messages, and developing other marketing
activities. Marketers are always looking for emerging trends that suggest new marketing
opportunities. Consumer’s buying behavior is influenced by cultural, social, personal, and
psychological factors. (Kotler, 2000).

Cultural Factors Influencing Buyer Behavior:

Culture, subculture, and social class are particularly important influences on consumer buying
behavior.
• Culture is the most fundamental determinant of a person’s wants and behavior.
• Subculture. Each culture consists of smaller subcultures that provide more specific
identification and socialization for their members. Subcultures include nationalities,
religions, racial groups, and geographic regions. Many subcultures make up
important market segments, leading marketers to tailor products and marketing
programs to their needs.
• Social class. Social classes are relatively homogeneous and enduring divisions in a
society. They are hierarchically ordered and their members share similar values,
interests, and behavior
 Social Factors Influencing Buyer Behavior
In addition to cultural factors, a consumer’s behavior is influenced by such social factors as
reference groups, family, and social roles and statuses.
• Reference groups: consist of all of the groups that have a direct (face-to-face) or
indirect influence on a person’s attitudes or behavior
• Family: the family is the most important consumer-buying organization in society,
and it has been researched extensively. The family of orientation consists of one’s
parents and siblings. From parents, a person acquires an orientation toward religion,
politics, and economics as well as a sense of personal ambition, self-worth, and love.
A more direct influence on the everyday buying behavior of adults is the family of
procreation—namely, one’s spouse and children.
• Roles and Statuses: A person participates in many groups, such as family, clubs, or
organizations. The person’s position in each group can be defined in terms of role
and status. A role consists of the activities that a person is expected to perform. Each
role carries a status. A Supreme Court justice has more status than a sales manager,
and a sales manager has more status than an administrative assistant. In general,
people choose products that communicate their role and status in society. (Kotler,
2000).

Personal Factors Influencing Buyer Behavior

Cultural and social factors are just two of the four major factors that influence consumer
buying behavior. The third factor is personal characteristics, including the buyer’s age, stage
in the life cycle, occupation, economic circumstances, lifestyle, personality, and self-concept.
• Age and Stage in the Life Cycle: People buy different goods and services over a
lifetime. They eat baby food in the early years, most foods in the growing and
mature years, and special diets in the later years. Taste in clothes, furniture, and
recreation is also age-related, which is why smart marketers are attentive to the
influence of age. Similarly, consumption is shaped by the family life cycle. The
traditional family life cycle covers stages in adult lives, starting with independence
from parents and continuing into marriage, child-rearing, empty-nest years,
 retirement, and later life. Marketers often choose a specific group from this
traditional life-cycle as their target market.
• Occupation and Economic Circumstances: Occupation also influences a person’s
consumption pattern. A blue-collar worker will buy work clothes and lunchboxes,
while a company president will buy expensive suits and a country club membership.
For this reason, marketers should identify the occupational groups that are more
interested in their products and services, and consider specializing their products for
certain occupations.
• Lifestyle People from the same subculture, social class, and occupation may actually
lead quite different lifestyles. A lifestyle is the person’s pattern of living in the world
as expressed in activities, interests, and opinions. Lifestyle portrays the “whole
person” interacting with his or her environment.
• Personality and Self-Concept Each person has a distinct personality that influences
buying behavior. Personality refers to the distinguishing psychological
characteristics that lead to relatively consistent and enduring responses to
environment. Personality is usually described in terms of such traits as self-
confidence, dominance, autonomy, deference, sociability, defensiveness, and
adaptability. (Kotler, 2000).

Psychological Factors Influencing Buyer Behavior

Psychological factors are the fourth major influence on consumer buying behavior (in
addition to cultural, social, and personal factors). In general, a person’s buying choices are
influenced by the psychological factors of motivation, perception, learning, beliefs, and
attitudes.
• Motivation: A person has many needs at any given time. Some needs are biogenic;
they arise from physiological states of tension such as hunger, thirst, discomfort.
Other needs are psychogenic; they arise from psychological states of tension such as
the need for recognition, esteem, or belonging. A need becomes a motive when it is
aroused to a sufficient level of intensity. A motive is a need that is sufficiently
pressing to drive the person to act.
 • Perception: A motivated person is ready to act, yet how that person actually acts is
influenced by his or her perception of the situation. Perception is the process by
which an individual selects, organizes, and interprets information inputs to create a
meaningful picture of the world. Perception depends not only on physical stimuli,
but also on the stimuli’s relation to the surrounding field and on conditions within
the individual. The key word is individual. Individuals can have different
perceptions of the same object because of three perceptual processes: selective
attention, selective distortion, and selective retention.
• Learning: When people act, they learn. Learning involves changes in an
individual’s behavior that arise from experience. Theorists believe that learning is
produced through the interplay of drives, stimuli, cues, responses, and
reinforcement. A drive is a strong internal stimulus that impels action. Cues are
minor stimuli that determine when, where, and how a person responds.
• Beliefs and Attitudes: Through doing and learning, people acquire beliefs and
attitudes that, in turn, influence buying behavior. A belief is a descriptive thought
that a person holds about something. Beliefs may be based on knowledge, opinion,
or faith, and they may or may not carry an emotional charge. Of course,
manufacturers are very interested in the beliefs that people have about their products
and services. These beliefs make up product and brand images, and people act on
their images. (Kotler, 2001).

In order to have good marketing mix decision understanding the behavior of the customer is
essential. Thus far, lower price helps to increase the sells volume of those boutiques. The
perceptions of the customer towards the clearance price and quality of the product have a
significant impact on their sales. Because a price cut can be interpreted in different ways by
the customer: The item is about to be replaced by a new model; the item is faulty and is not
selling well; the firm is in financial trouble; the price will come down even further; the quality
has been reduced (Kotler and Killer, 2006). The theory shows that even at a lower price the
buyer may not prefer to purchase the product.
 CHAPTER THREE

Data Presentation Analysis and Interpretation

3.2. Data presentation

The data collected from the customer and the seller and /or the owner were presented
separately. In the first part the data collected from the boutique owner(s) and/or seller(s) were
presented. First background information of the respondent was presented. The background
information includes sex, age, educational background; work experience and the past trend of
boutiques. This information had impact on the assignment/determination of discount price;
customer handling and other marketing activities.

3.1.1. Age, Sex and Educational Background

Table 1 demographic characteristics of respondent

Sex Male Female Total

Frequency 12 4 16
Percentage 75 25 100
Age below 20 20-25 25-30 30-35 35-40 40-45 45-50 50-55 total
Frequency 1 2 3 4 2 3 1 - 16
Percentage (%) 6.25 12.5 18.75 25 12.5 18.75 6.25 - 100
Educational
Less than

10

12

Certificate
completed

completed

Diploma
grade 10

Masters

background
Degree

Doctor
degree
Grade

Grade

Frequency 1 2 2 2 4 3 1 1 16
Percentage (%) 6.25 12.5 12.5 12.5 25 18.75 6.25 6.25 100
 3.1.2. Experience on The Business

Table 2 Years of experience on the business

Item For how many years you operate in this Frequency Percentage
business?
A Above 20 years - -
B From 15-20 years 2 12.5
C From 10-15 years 5 31.25
D From 5-10 years 4 25
E From 1-5 years 4 25
F Below one year 1 6.25
Total 16 100

3.1.21. Past Sales Trend of The Boutiques

Table 3 the boutiques trend in selling

Item What was your boutiques past trend in Frequency Percentage

selling?
A Highly profitable 2 12.5
B Profitable 7 43.75
C Not that much 3 18.75
D No profit no loss 3 18.75
E No profit 1 6.25
Total 16 100

As shown in the above table 43.75% of the response implies the boutiques a positive trend in
profitable; 18.75% not that much; 18.75% breakeven level; 12.5% highly profitable and
6.25%.
 3.1.22. Past Experience in Clearance Sales

Table 4 past experiences in clearance sells

Items Do you apply clearance sells strategy before this Frequency Percentage
time?
A Yes 14 87.5
B No 2 12.5
Total 16 100
Items If your answer is yes how many times in a year?
A Once 8 57.14
B Twice 3 21.43
C Three times 3 21.43
D For times
E Other
Total 14 100

3.1.23. Past Target Customers

Table 5 Target customer of the boutique before they apply clearance sales strategy

Items Before you apply clearance sales strategy, which Frequency Percentage
income group of buyers you expect as a target
customer?
A Higher
B Medium 2 12.5
C Lower 1 6.25
D I don’t know 13 81.25
Total 16 100
 3.1.24. Discount Rate

Table 6 Discount rate setter of the boutiques

Item Who set the discount rate? Frequency Percentage

A The owner of the boutiques 15 95.75
B The seller of the boutique
C Outside consultant
D By developing a committee containing all the 1 6.25
above parties
E Other
Total 16 100

What do you mean by replacing existing product by the new product?

• Purchasing new but similar product

• Purchasing similar product by adding some fashion product

3.1.25. Reason for Applying Clearance Sales

Table 7 the reason for using clearing practice

Items Why you use market clearing practice? Frequency Percentage

A To change the business
B To clear the bulky inventory 9 56.25
C To sell seasonal products
D To close the business
E To replace the existing product by the new 5 31.25
coming product
F To sell old fashioned clothes 2 12.5
G Other
 3.1.26. Price Setting Decision

Figure 1 clearance sales priieing decision

120

100

80
percentage
Frequancy

60

40

20
How you decide the
clearing price? 0
At a At a
At a very At break Randoml At a At higher
At a loss specific specific other total
high loss even y profit profit
loss profit
Frequency 1 1 3 10 1 16
Percentage 6.25 6.25 18.75 62.5 6.25 100

3.1.27. Seasons and Occasion

Table 8 seasons and occasions that the boutiques apply clearance sales

Items In which season most of the time you apply this Frequency Percentage
strategy?
A During summer 15 93.75
B During autumn 1 16.25
C During winter
D During spring
Total 16 100
Items At what occasion your boutiques apply clearance
sales strategy?
A During the holiday 8 50
B During the ordinary day 8 50
Total 16 100
 3.1.28. Advertisement Mechanisms

Table 9 Advertizing mechanism used by boutiques

Items How you communicate the clearance sells to the Frequency Percentage
customer?
A Through TV advertisement
B Through radio advertisement
C Through news paper advertisement
D By displaying notice on the boutique 10 62.5
E Other 6 37.5
Total 16 100

3.1.29. Duration of the Discount Period

Table 10 the length of time the discount sales stayed.

Items How long this clearance practice Frequency Percentage

lasts?
A Less than a month 2 12.5
B 1-4 month 10 62.5
C 4-7 month 3 18.75
D 4-11 month
E Above 11 month 1 6.5
Total 16 100

Do you extend the discount period that you sate? What is the reason?

• Yes
The reason was

The product cannot be sold during the specified time.
 3.1.30. Target Customer During the Clearance Sales

Table 11 expected target customer when they apply clearance sales strategy

Items When you apply clearance sales strategy, which Frequency Percentage
income group of buyers you expect as a target
customer?
A Higher
B Medium 2 12.5
C Lower 4 25
D I don’t know 10 62.5
Total 16 100

3.1.31. The Relationship Between Price and Quality

Table 12 the owner(s) or sellers opinion about the relationship of price and quality

Items Do you think that the quality of the product and Frequency Percentage
its price have a direct relationship?
A Yes 16 100
B No
C I don’t know
Total 16 100

The entire respondent believed that the quality of the product have a direct relationship with
quality.
 3.1.32. The relationship between sales volume and clearance price

figure 2 the impact of clearance sells on sales volume

120

100 What is the impact of clearance sales on

your sales volume? May sales volume is?
80
percentage
Frequancy

60

40

20

0
Significantl Slightly Slightly
Increase No change Decrease Total
y increase increase decrease
Frequency 1 15 16
Percentage 6.25 93.75 100

Table 13 the boutiques goal achievement

Item Do you achieve the goal that you set? Frequency Percentage
A Yes 16 100
B No
Total 16 100

What problem you face when you apply clearance sales?

• The customer are reluctant to purchase as we expected

• The customer want a farther reeducation in price
• We cannot sell the expected amount on the specified discount date, rather we extend it more
than we expect.
• Difficulties to convince customer
Table 14 the relationship between selling price and sales volume

Item What do you think about the relationship between Frequency Percentage
selling price and sales volume? They have:
A Direct relationship 15 100

B Indirect relationship
C Have no relationship 1 6.25

D I don’t know
Total 15

3.1.33. Customer Behavior as a Moderator

Table 15 customer interest to know the reason of clearance sells

Items Do your customers ask a question about your reason of Frequency Percentage
setting clearance sells?
A Yes 16 100
B No
Total 16 100
Items If your answer is yes how many of them?
A All 1 6.25
B Many 6 37.5
C Some 9 56.25
D None of them
Total 16 100

The entire boutiques were asked the reason of applying clearance sales. Among this 56.25%
response shows some of the customer asked them, 37.5 many of the customer, 6.25 all of the
customer.
Table 16 customers’ knowledge about original price of the product

Items Do you believe that, your customer knows the original price Frequency Percentage
of the product?
A Yes 9 56.25
B No 3 18.75
C I don’t know 4 25
Total 16 100

The above table indicates as about 56.25% believed that their customer knows the original
price of the product; 18.75% said no and the remaining 25% said I don’t know.

Figure 3 customers’ sensitivity towards clearance selling price

120

100
How do you think about your customers’
80
percentage
Frequancy

sensitivity to clearance selling price?

60

40

20

0
Not that I don’t
Very good Good No trust Total
much know
Frequency 1 4 8 2 1 16
Percentage 6.25 25 50 12.5 6.25 100

As indicated in the figure 50% shows that the customers were not that much sensitive to the
clearance sales; 25% good; 12.5% they don’t know, 6.25% no trust and 6.25% very good.
Table 17 the customers trust on the discount rate

Items To what extent your customers trust the discount Frequency Percentage
rate?
A Very good 1 6.25

B Good 4 25
C Not that much 8 50

D I don’t know 2 12.5

E No trust 1 6.25
Total 16 100

Table 18 customers complain about the correctness of the discount rate and the method the
used to convince them.

Items Is there any customer complaining about the Frequency Percentage

correctness of the discount?
A Yes 10 62,5

B No 6 37.5
C I don’t know
Total 16 100
Item If your answer is “yes” what mechanism you use
to convince them?
A By telling the original price 5 50
B By showing the original selling price
C By telling them to see the same product from
other related boutique
D I(or we) can’t say any thing 5 50
E Other
Total 10 100
Table 19 Customer confidence on the product quality which have lower price and the method
they use to convince customer

Items When you make a price cut, did your customer Frequency Percentage
have confidence on the quality of the product?
A Yes 5 31.25
B No 7 43.75
C I don’t know 4 25
Total 16 100

Item If your answer is “no” what mechanism you use to

convince them?
A By telling them about the product 2 28.6
B By telling them to see the same product from 2 28.6
other shop
C Telling them to come with their friend or other
person who knows about the product
D By telling them to return the product if it does not
feet with your expectation
E If you believe buy it other ways leave it
F I (or we) can’t say any thing
G Other 3 42.8
Total 7 100

Data presentation (collected from customers). The data was divided in to four major
categories based on the similarity of the information. These were: background information of
the respondent; awareness of the customer about the product; Customers attitude towards
clearance price and perceived quality; and Customer attitude about the reality of the price cut.
 3.1.34. Back Ground Information

Table 20 sex and age of respondents

Sex Male Female Total

Frequency 26 53 79
Percentage 33 67 100
20-25

25-30

30-35

35-40

40-45

45-50

50-55

>55

total
<20

Age
Frequency 5 9 9 10 11 13 14 5 3 79
Percentage (%) 6.3 11.4 11.39 12.6 13.9 16.5 17.7 6.3 6.3 100

Table 21 educational level of respondent

Item Education level Frequency Percentage

(%)
A Below grade 10 11 13.92
B Grade 10 completed 13 16.46
C Grade 12 completed 10 12.66
D Certificate 13 16.46
E Diploma 17 21.52
F Degree 12 15.19
G Masters 2 2.53
H Doctor 1 1.26
Total 79 100
 Basic Information
In this part the main information collected from the customers through questionnaire and
interview was presented. The questions were divided in to three parts, based on interrelation
of questions. These were: awareness of the customer about the product; customer attitude
towards clearance price and product quality and customer attitude about the reality of the
clearance price.

3.1.35. Awareness off the Customer about the Product.

I know the quality of the product I bought, because I use it before.

Figure 4 customers knowledge of the product quality
120
100
100
Comulative Percentage
Valid Percentage

80
Percentage
Frequancy

60

40
26.6
21.5 19
20 13.9
10.1 8.9

0
Level of Agreement Strongly Slightly Slightly Strongly
Agree Disagree total
Agree Agree disagree Disagree
frequancy 21 17 8 11 15 7 79
percentage 26.6 21.5 10.1 13.9 19 8.9 100
valid percentage 26.6 21.5 10.1 13.9 19 8.9 100
Cumulative Percent 26.6 48.1 58.2 72.2 91.1 100

As shown in the above figure 26.6% strongly agree with the statement “I know the quality of
the product I bought, because I use it before”. 21.5% agree; 10.1 slightly agree; 13.9%
slightly disagree; 19% disagree and 8.9% strongly disagree.
My friends tell me about the product and also recommend me to buy it.

Figure 5 the source of information about the product

120

Comulative Percentage
Valid Percentage 100

80
Percentage
Frequancy

60

40

20

Level of Agreement0 Strongl

Slightly
Strongl Slightly Disagre y
Agree disagre Total
y Agree Agree e Disagre
e
e
Frequency 18 24 17 7 9 4 79
Percent 22.8 30.4 21.5 8.9 11.4 5.1 100
Valid Percent 22.8 30.4 21.5 8.9 11.4 5.1 100
Cumulative Percent 22.8 53.2 74.7 83.5 94.9 100
Mean 2.96

I know the price of the product before because I bought the same product prior to this time.
Figure 6 respondants knowledge of the price of the product
120
Comulative Percentage

100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Strongly Slightly Slightly Strongly
Agree Neutral Disagree Total
Level of Agreement Agree Agree disagree Disagree
Frequency 12 20 11 1 14 16 5 79
Percent 15.2 25.3 13.9 1.3 17.7 20.3 6.3 100
Valid Percent 15.2 25.3 13.9 1.3 17.7 20.3 6.3 100
Cumulative Percent 15.2 40.5 54.4 55.7 73.4 93.7 100
I am the customer of this boutique and I know about the product quality and prices.

Figure 7 the customers’ knowledge of the boutique and its product quality and
price.
120
Comulative Percentage

100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Level of Agreement Strongly Agree
Slightly
Neutral
Slightly
Disagree
Strongly
Total
Agree Agree disagree Disagree
Frequency 5 9 10 3 22 20 10 79
Percent 6.33 11.4 12.65 3.8 27.85 25.3 12.65 100
Valid Percent 6.33 11.4 12.65 3.8 27.85 25.3 12.65 100
Cumulative Percent 6.33 17.73 30.38 34.18 62.03 87.33 100

Mean 4.62

I buy a product by comparing the price and the quality of the product from different
boutiques, whether there is a price discount or not.

Figure 8 buying Experience of respondentes

120
Comulative Percentage

100
Valid Percentage
Percentage

80
Frequancy

60
40
20
0
Strongl
Strongl Slightly Slightly Disagre y
Agree Neutral Total
y Agree Agree disagree e Disagre
Level of Agreement e
Frequency 9 9 10 4 15 21 11 79
Percent 11.4 11.4 12.65 5.1 18.99 26.6 13.9 100
Valid Percent 11.4 11.4 12.65 5.1 18.99 26.6 13.9 100
Cumulative Percent 11.4 22.8 35.45 40.55 59.54 86.1 100

Mean 4.44
I bought this type of product for the first time and I don’t know before about the price or the
quality of the product.

Figure 9 purchase experience of respondents

120

100
Comulative Percentage

80
Valid Percentage
Percentage
Frequancy

60

40

20

0
Strongly Slightly Slightly Strongly
Level of Agreement Agree
Agree
Agree
Neutral
disagree
Disagree
Disagree
Total

Frequency 20 6 8 1 9 14 21 79
Percent 25.3 7.6 10.1 1.3 11.4 17.7 26.6 100
Valid Percent 25.3 7.6 10.1 1.3 11.4 17.7 26.6 100
Cumulative Percent 25.3 32.9 43 44.3 55.7 73.4 100

Mean 4.25

As indicated in figure 9, 25% of the respondents strongly agree with the statement “I bought
this type of product for the first time and I don’t know before about the price or the quality of
the product.”” 7.6% agree; 10.1 slightly agree; 1.3% neutral; 11.4
11.4%% slightly agree, 17.7%
disagree and finally 26.6% strongly disagree.

3.1.36. Customers At
Attitude Towards Clearance Price and
nd Product Quality
In this part the customers’ attitude towards clearance price and its implication on product
quality was presented.
I believe that higher price indicates higher quality of the product, because the price increases
due to the quality of the product.

Figure10 respondents’ knowledge about the relationship of price and

Comulative Percentage 120
quality
Valid Percentage

100
Percentage
Frequancy

80
60
40
20
0
Strongly Slightly Slightly Strongly
Level of Agreement Agree Agree Neutral Disagree Total
Agree disagree Disagree
Frequency 13 15 23 10 5 4 9 79
Percent 16.5 19 29.1 12.7 6.3 5.1 11.4 100
Valid Percent 16.5 19 29.1 12.7 6.3 5.1 11.4 100
Cumulative Percent 16.5 35.4 64.6 77.2 83.5 88.6 100

Mean 3.34

I am forced to come in this boutique by seeing the displayed discount, in order to buy product
at a lower price.

Figure 11 the thing that forces customers to come to benefit from clearance
sales
Comulative Percentage
Valid Percentage

120
Percentage

100
Frequancy

80
60
40
20
0
Strongl
Slightly
Strongl Slightly Disagre y
Agree Neutral disagre Total
Level of Agreement y Agree Agree e Disagre
e
e

Mean 2.54
I bought more products than what I plan, because the price cut is good in relation to the
quality of the product.

Figure 12 respondents’ amount of purchase

Comulative Percentage 120
100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Strongl
Slightly
Strongl Slightly Disagre y
Agree Neutral disagre Total
y Agree Agree e Disagre
Level of Agreement e
e
Frequency 3 8 18 9 23 7 11 79
Percent 3.8 10.1 22.8 11.4 29.1 8.9 13.9 100
Valid Percent 3.8 10.1 22.8 11.4 29.1 8.9 13.9 100
Cumulative Percent 3.8 13.9 36.7 48.1 77.2 86.1 100

Mean 4.34

I expect that they discount the price because the product is defective or have a low quality.

Figure 13 respondents’ response about the reason of applying clearance sales

120
Comulative Percentage

100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Slightly Strongly
Strongly Slightly Disagre
Agree Neutral disagre Disagre Total
Agree Agree e
Level of Agreement e e
Frequency 8 14 23 14 11 7 2 79
Percent 10.1 17.7 29.1 17.7 13.9 8.9 2.5 100
Valid Percent 10.1 17.7 29.1 17.7 13.9 8.9 2.5 100
Cumulative Percent 10.1 27.8 57 74.7 88.6 97.5 100

Mean 3.44
 3.1.37. Customer Attitude Towards the Reality Of The Price Cut
In this part the customer perception of the price cut and its reality was presented. Four
interrelated questions are asked and answered by the respondents. Based on the information
collected the data was presented as follow.

When I compare the price of tthe

he product which sold at discount with other boutique which
sell the same product, the discount rate is not accurate.

Figure 14 accuracy of the discount rate

120
Comulative Percentage

100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Strongl
Strongl Slightly
Slightly Disagre y
y Agree Neutral disagre Total
Agree e Disagre
Agree e
Level of Agreement e
Frequency 13 18 23 10 8 5 2 79
Percent 16.5 22.8 29.1 12.7 10.1 6.3 2.5 100
Valid Percent 16.5 22.8 29.1 12.7 10.1 6.3 2.5 100
Cumulative Percent 16.5 39.2 68.4 81 91.1 97.5 100

Mean 3.06

About 16.5% of the respondent strongly agree, that the discount rate is not correct when it
compared with other related boutiques; 22.8% agree; 29.1% slightly agree; 12.7% neutral;
10.1% slightly disagree; 6.3% disagree and 2.5% strongly disagree.
I visit different boutiques which display discount sales, but the rate is not accurate rather they
use it to attract customer.
figure 15 accuracy of the rate and respondents expectation of applying it
120
Comulative Percentage
100
Valid Percentage
Percentage
Frequancy

80

60

40

20

0
Strongl
Level of Agreement Strongl Slightly
Slightly Neutra Disagr y
y Agree disagre Total
Agree l ee Disagr
Agree e
ee
Frequency 8 24 29 7 5 6 79 79
Percent 10.1 30.4 36.7 8.9 6.3 7.6 100 100
Valid Percent 10.1 30.4 36.7 8.9 6.3 7.6 100 100
Cumulative Percent 10.1 40.5 77.2 86.1 92.4 100

Mean 2.94

I visit different boutiques which display discount sales and the rate is accurate in some
boutiques.

Figure16 accuracy of clearance price in some boutiques

120
Comulative Percentage

100
Valid Percentage

80
Percentage
Frequancy

60
40
20
0
Strongly Slightly Slightly Strongly
Agree Neutral Disagree Total
Level of Agreement Agree Agree disagree Disagree
Frequency 7 22 20 14 8 7 1 79
Percent 8.9 27.8 25.3 17.7 10.1 8.9 1.3 100
Valid Percent 8.9 27.8 25.3 17.7 10.1 8.9 1.3 100
Cumulative Percent 8.9 36.7 62 79.7 89.9 98.7 100
Mean 3.24
 I visit different boutiques which display discount sales and the rate is accurate in all
boutiques.

Figure 17 correctness of the discount rate in all boutiques they visited.

120

100
Comulative Percentage
Valid Percentage

80
Percentage
Frequancy

60

40

20

0
Strongl
Slightly
Level of Agreement Strongl Agree
Slightly
Neutral disagre
Disagre y
Total
y Agree Agree e Disagre
e
e
Frequency 2 6 5 12 14 11 29 79
Percent 2.5 7.6 6.33 15.2 17.72 13.9 36.7 100
Valid Percent 2.5 7.6 6.33 15.2 17.72 13.9 36.7 100
Cumulative Percent 2.5 10.1 16.43 31.63 49.35 63.25 100 Mean 5.26

Why boutiques applying clearance sales?

• To attract the customer in order to sale their unsold items

• They may apply it because they become bankrupt
• The products have low quality or it was defective.

What do you think about the previous price and the current price of the product?

• I now it before, but the current price is more than double.

• Due to inflation
tion the price becomes higher.
• It is difficult to know the current price based on past information.
 3.2 Data Analysis and Interpretation
3.2.19. Demographic Characteristics of Respondent

Among the respondents 75% were male and the remaining 25% are female. Regarding the age
of the study participants 31.25% were below the age of 30; 56.25% between the age of 30 and
45 the remaining 6.25% between 45 and 50 ages. The largest groups 25% have educational
back ground of diploma; the next largest 18.75% have degree; grade 10 completed, grade 12
completed and certificate 12.5% each and the remaining Doctor, Masters Degree and less than
grade 10 each 6.25%. (See table 1).

From the data it is possible to infer that more than half of the boutique owner and/or seller
were found in the age between 30 and 45. And 75% of them were male; this shows that more
of the business owners or sellers are male. Finally more than 50% have education background
of diploma and above. Educational background helps the seller and the owner in order to have
a competitive advantage over their competitor.

3.2.20. Past Sales Trend of the Boutiques

Past sales experience of the boutique affects the boutiques’ present and future situation
positively or negatively. The boutiques past experience shows a positive profit level it
indicates the boutiques strength in applying marketing strategies. And it has its own
implication on the current pricing strategy of the business. On the other hand those boutiques
which have a negative profit trend were due to poor marketing strategies. And they apply the
current pricing strategy to change the business; to have enough cash on hand to change their
marketing strategy or to shut down the business. The experience of the target group were
analyzed and interpreted as follow.

50% had the experience of 1 to 10 years among this 4(25%) had the experience of 5 to 10
years; 7 (43.75%) had 10 to 20 years of business experience, out of this 5(31.25%) have 10 to
15 years experience and the remaining 12.25% had 15 to 20 year of experience.(see table 2)

This figure shows that more than half (56.25%) of the boutiques had work experience
between 5 to 15 year. This shows that most of the boutiques worked for more than five year.
Among the 16 respondents only 12.5% (2) said their boutiques were highly profitable before
this time, one (6.25) said not profitable. And almost half (43.75% or 7of them) said their
boutiques had a positive profit trend, 3 (18.75%) the boutique worked at break even and the
remaining 3(18.75%) were generates a lesser profit. (See table 3)

From this data it is possible to generalize that most of the boutiques had a positive past trend
in profit.

3.2.21. Past Experience in Clearance Sales

87.5% of the respondents’ response shows that the boutiques apply clearance sales strategy
before and 12.5% were not applying clearance sales before. Among those applying clearance
sales 57.14% applies once in a year; the other applied two and three times in a year accounts
21.43% each. (See table 4).

From the data it is possible to generalize that more than 85% of the boutiques applied
clearance sales before this time. And out of those boutiques having clearance sales experience
more than half apply it once a year. The entire figure shows’ that applying clearance sale
creates advantage of selling for the boutiques, if not they would not apply again. Applying
clearance repetitively have impact on normal period sales of the boutiques because customers
wait the discount time to purchase clothing or their customer made purchase only during the
discount period.

3.2.22. Target Customers Before and During the Clearance Sales

The market segments that a company decides to serve with their marketing efforts are referred
to as “target markets.” If market segmentation had done well, it identifies the people who may
have want or need for your product, then divides them into groups so that you may serve them
more efficiently and profitably.” When marketers segment product markets and select target
markets, they hope to increase the efficiency and profitability with which they serve their
customers. By excluding groups of people who are less likely to buy a firm’s brand, the firm
has additional resources to direct toward groups with a greater potential to become customers.
Effective segmentation allows marketers to increase the return on their investments by
reducing wasted efforts or in some cases lowering overall marketing expenditures. Market
segments are subgroups of the product market who share characteristics other than their need
for the product category. These characteristics may include similar backgrounds, lifestyles,
economic condition or locations. Indeed, effective market segmentation requires good
decisions on what similarities market segments will be based. (www.campus.udarton.edu).

About 81.25% of the response shows that the boutiques can’t know their target customers;
12.5% target medium income and the remaining 6.25% targets lower income groups prior
they apply clearance sales. And about 62.5% of the respondents don’t know the target
customer when they set the clearance selling price; 25% target lower income customers and
the other 12.5% consider medium income customer as their target customer. (See table 5 and
11)

This data implies that more than 80% of the boutiques before applying clearance sales and
60% of the boutiques when they apply clearance sales don’t know which income group
purchases their product; this means they open a business without understanding the income
level of their target customers. Such type of business operation creates difficulties in
developing the marketing mix strategies especially the pricing decision.

But the theory underlying market segmentation is simple: People with different characteristics
may want the same product in somewhat different forms and for different reasons. Therefore,
marketers divide people into groups based on certain relevant characteristics, and then adjust
elements of their marketing mix to meet the specific needs of each group. And identifying
target customer of your product helps them to increase efficiency and profitability.

3.2.23. Discount Rate Setting Decision

It is the rate boutiques reduce from their normal selling price, so as to sell the unsold
inventory, this can be set by different authorized bodies, by considering different factors like
customers’ attitude, cost of the product and other.

About 95.75% (15) of the response indicates that the discount rate was set by the owner(s) of
the boutiques; the remaining 6.25% response indicates the discount set by the group of
committee members containing the owner the seller and other external consultant. (See table
6)

From this it is possible to conclude that almost all boutiques discount rate was set by the
owner of the boutique.

3.2.24. Reason for Applying Clearance Sales

Different boutiques have different reasons of applying markdown sales depending on their
current situation. But most of the time in the apparel markets the obsolescence of fashionable
close is high. Even though products do not perish at the end of the season, stores usually
liquidate the inventory and do not store merchandise for the next season. Among several
reasons for this behavior are rapid changes in fashion and high inventory costs (Bitran and
Mondschein, 1997). Due to this and other related reasons most boutiques sale their product at
markdown price.

The response shows more than half or 56.25% apply clearance sales to sell the bulky
inventory. The other 5 (32.25%) applied clearance sales to replace the existing product by the
new coming product. When the analyst interviewed them about the replacement of existing
product by the new coming product they said that the upcoming product is also similar to the
existing products which are found in their boutique with some addition of new products. The
remaining 2(12.5%) respondent response shows that their boutiques applied clearance sales to
sell old fashioned clothes. (See table 7)

As indicated in the data most of the boutique applied clearance sales to sell the unsold items.
These were held to have enough cash on their hand by exploit the tied up capital and
minimize the inventory carrying cost. It helps the boutiques to purchase new product or to use
the idle resources for other activity. Some of them apply it to replace the existing product by
the new coming product, but most of the products newly purchased are similar to the existing
one. And some of the boutiques applied clearance sales to sell old fashioned clothes. This
indicates that the customers are less sensitive to fashion closes. But the theory indicates that
the main reasons for clearance sales are rapid changes in fashion and high inventory costs.
But in this study the main reason of the boutique applying clearance sales was the bulky
inventory found in their boutique.

3.2.25. Price Setting Decision

There are different factors that affect the pricing decision of the boutiques like; competitors
pricing strategy, quality of the product, the cost of the material, the sellers experience,
location of the boutique and the customers’ bargaining power, inventory level, the fishiness of
the product and other. These all should be taken in to consideration when the boutiques sets
price of their product. Setting clearance sales also depends on those factors but the main
objective of clearance sales is not the generation of profit instead to sale the idle inventory at
higher volume by attracting price sensitive customers.

Clearance sale is an attempt to move merchandise at a price (significantly) below its original
price (Lazear, 1986).

“Clearance market down dollars,” which equals the revenue that would be generated at
regular price minus the actual dollar obtained from market down items. Given the thin margin
of most retailers, the effectiveness of clearance markdown policies can make the difference
between a profitable and unprofitable season (Smith and Achabal, 1998). The data about this
was analyzed and interpreted below

About 62.5% of the response indicates that the boutique sets their clearance sales at
breakeven, 18.75% at a specific loss, the other 18.75% shared by specific profit, loss and very
high loss equally. (See figure 1).

From the above data it is possible to deduce that more than 60% of the boutiques set their
price at a no profit no loss base or they set the price that covers all their costs. In my
observation most of the boutiques discount amount was between the ranges of 50% to 70%.
This implies that during their normal situation most of the boutiques generate a net profit of
more than 50%. This indicates that the boutique generates a very high profit in the current
business situation. And there were others applied clearance sales to generate some profit. This
is difficult to accept as true or the discount rate is phony. To see this truth I bought a trouser
from one boutique that display 50% to 70% discount and tried to compare the price of the
 purchased product with the same product in other boutique which are found in the same
location but not applied clearance sales, but the result shows a slight difference in price
between the two boutiques. From this it is possible to understand that the discount rate set by
different boutiques was not reliable.

The theory shows that in current business world retailers generate a tin margin from the sale
of their product but the result of the study implies that boutiques generate more than 50% net
profit, this two are contradicting. So the reason is the discount rate they displayed was fake.
[

3.2.26. Seasons and Occasions

In this part the preferred seasons and occasions the boutiques applied clearance sales strategy
was interpreted analyzed. Different boutiques prefer different season and occasion to sell their
product on markdown price. They select the time that helps them to clear their store, most of
the time, when the demand of the product decreased.

Regarding the seasons preferred by the boutiques, the largest group (93 .75%) of the response
shows that boutiques applied clearance sales during the summer season and the remaining
6.25% during autumn. And 50% of the response shows that they apply clearance sales during
the holiday and the other 50% apply during the ordinary day. (See table 8).

From this data it is possible to infer that more than 90% of the boutiques applied clearance
sales during summer. And half of boutique applied clearance sales during holiday. But in our
country there is an anomaly on the holyday sales. Most people want to buy clothes and other
product before and after the holyday because they expect that during the holiday or when the
holiday approaches the price of goods will be increased. This is due to the fact that more
persons purchase products especially apparel for the holiday. When the number of buyers of
the product increases the price of the product will be increase this may be my justification
about holiday sales in our country. Some person said “don’t buy the product during the
holiday”, other said “why don’t you made your purchase after or before the holiday” in my
previous experience and observation the price of clothes increases during the holyday than
other ordinary days it may be due to the increase in the demand of the product. So applying
clearance sales at this time is important because the general demand of the clothes increases
and customer prefers to get products at lower price due to the increased spending during this
occasion.

3.2.27. Advertisement Mechanisms

Advertising campaign helps to communicate the price cut made by boutiques. But different
boutiques apply different advertisement mechanism depending on their marketing strategy.

In relation to advertizing mechanism used by boutiques, 62.5% of the response indicates that
they use displayed notice on their boutique to announce the clearance sales. The remaining
37.5% uses a combination of different advertisement mechanism. (See table 9)

From this it is possible to infer that more than 60% of the boutique communicated their
strategy by displaying the clearance sales, but it would not help to get access by various
customers. But it is the cost effective method of advertisement, so it helps to save the
companies spending in advertisement.

3.2.28. Duration of the Discount Period

It is the lengths of time the boutique stay on sales; it differs from boutique to boutique. Some
product categories tend to self-destruct by always being on sale. Salespeople, in particular, are
quick to give discounts in order to close a sale. But word can get around fast that the
company's list price is "soft," and discounting becomes the norm. The discounts undermine
the value perceptions of the offerings. Some companies in an overcapacity situation are
tempted to give discounts or even begin to supply a retailer with a store brand version of their
product at a deep discount. Because the store brand is priced lower, however, it may start
making inroads on the manufacturer's brand. Manufacturers should stop to consider the
implications of supplying products at a discount to retailers because they may end up losing
long-run profits in an effort to meet short-run volume goals.

About 62.5% of the response indicates that the clearance sales stayed for 1-4 months, 18.25%
for 4-7 months, 12.5% for less than a month and finally 6.5% above 11 months. (See table 10)
From this data more than 80% of the boutique stayed on sale for 1 to 7 months this indicates
that to sell their unsold inventory they spent a long period of time or it shows that they have a
very enormous inventory or the clearance price not attract more customers. The interview
response reveals that most of the boutiques extend their discount period due to the reason that
they were not sell the specified product in the specified period. And also in my observation
there are some boutiques that display 360 days clearance sales this indicates clearance sales
that stay for a year. The theory indicates that staying long in clearance sales reduce the value
perception of the product, the customer always want to purchase the product at the discount
price and generally the boutique may loss long-run profits in an effort to meet short-run
volume goals.

3.2.29. The Relationship between Price and Quality

All of the respondents believed that the price of the product signals its quality. (See table 11)
Though higher price signals higher quality and the reverse, in some situation it may not be
true due to different reasons like customer perceived quality, location of the boutique, the
deceptive nature of the business person, knowledge of the customer about the product quality
and price, the bargaining power of the purchaser and others. In my observation the same
product sold in Mercato and piazza hasn’t the same price. But sellers can’t say my products
have lower quality, and the result also signifies this, because due to the specified reasons price
can’t always signify quality.

3.2.30. The Relationship between Sales Volume and Clearance Price

The primary purpose of clearance sales is to clear the bulky stock of the boutique. Clearance
sales is retail sale in which closeout goods are offered at heavily discounted prices (http://
www investor words .com/1474/ discounted.html) and sales volume is the quantity or number
of goods sold or services rendered in the normal operations of a firm in a specified period
prices (http:// www business dictionary .com/definition/ quantity.html). The price cut made by
the boutique have its effect on their sales volume. In the following part the respondents’
response about the relationship of clearance price and sales volume were discussed.
Response about the impact of clearance sales on the sales volume of the boutique shows that
93.7% said that clearance sales increases their sales volume, the remaining 6.25% said it
significantly increase their sales volume. (See figure 2). The entire respondents replied that
Applying market clearing strategy helps them to achieve their objectives. (See table 13). As
indicated in the second part of the analysis their reason of setting clearance sales is to sell the
bulk inventory, to replace existing product by the new coming product and to sell old fashion
clothes so, based on this response all of them achieve these goals goal.

The data indicates that sales volume increased in almost all boutiques due to the clearance
sales. From this it is possible to conclude that clearance sales have a direct impact on sales
volume. But the interview responses about the problem they face during they apply clearance
sales were the following.

• The customer are reluctant to purchase as we expected

• The customer want a farther reeducation in price
• We cannot sell the expected amount on the specified discount date, rather we extend
it more than we expect.
• Difficulties to convince customer

From the response it is possible to conclude that even if it helps to active their objective, they
were not realizing their objective on the date specified.

3.2.31. Customer Behavior as a Moderator

Thus far, lower price helps to increase the sells volume of those boutiques. The perceptions of
the customer towards the clearance price and quality of the product have a significant impact
on their sales. Because a price cut can be interpreted in different ways by the customer: The
item is about to be replaced by a new model; the item is faulty and is not selling well; the firm
is in financial trouble; the price will come down even further; the quality has been reduced
(kotler, 2006). The theory shows that even at a lower price the buyer may not prefer to
purchase the product. Different questions designed for the seller(s) and/or the owner(s) to
know their perception about their customer.
The customer interest to know the reason of applying clearance as the owner and/or the seller
response shows that 56.25% responds said some of their customer wants to know the reason
of applying clearance sells, 37.5 many of their customer and the remaining 6.25% their entire
customer asks about their reason of applying clearance sales. (See table 15). In all cases the
customer wants to know the reason of allying clearance sales by the boutiques.

About 56.25% respondents believed that their customer knows the original price of the
product, 18.75% respond that, their customer don’t know about the price of the product and
the remaining 25% said I don’t know about the customers’ knowledge of the price. (See table
16). This data indicates that more than 50% of the boutique believed that their customer
knows the price of the product. The interview question answered by the customer shows that
much of the customer knew the price of the product before but due to inflation and other
factor like the behavior of sellers the price of the product increased even more than double.
This indicates that even if the customer knows the product and its price before due to the daily
shift in the price of the product it is difficult to know the current price accurately.

50% of the response implied that the customers’ sensitivity towards clearance sells is not that
much good; the other 50% account for almost good response of the customer to the clearance
sales. (See figure 3). During my observation some of the customers’ before they got into to
the boutique, they said that “the price cut is forged” and they don’t want to use it. This was
due to their previous experience. Almost half of the customers were not sensitive to the
clearance price. As the theory indicates this was due to the different perception of the
customer about the clearance price.

The respondents response shows that 50% of the customers were not that much trust on the
discount, 25% good, 6.25% very good, 12.5% don’t know and 6.25% no trust by the customer
about the discount rate. (See table 17).

This data indicates that more of the customers almost have no trust on the reality of the
discount. In my observation also I bought a trouser from the boutique that apply clearance
sales, and compare the same product in different boutiques found in the same location but not
applying clearance sales, it had only small difference in price. This entire thing shows that the
price cut was not trusted by most of the customers. And also customers are interviewed about
their expected reason of clearance sales applied by the boutiques. Most of them said “to
attract the customer in order to sale their unsold items”, other said “they may apply it because
they become bankrupt, the product have low quality or it was defective”.

About 62.5% response shows that the customer complained to the seller about the correctness
of the discount; 37.5% response implies that the customer not complain about the discount
rate. And in order to convince the complaining customer they use different methods. 50%
convince by telling the original price of the product and the remaining 50% cannot say
anything. (See table 18).

From the data it is possible to generalize that more than 60% of the customer complain about
the correctness of the discount, this implies that the customer did not trust the discount. And
the customer asked them but almost half cannot say anything, this implied that the customers
complain about the reality of the discount rate is correct. And those complaining person
knows something about the discount or the normal price of the product.

On the other hand 43.75% of response shows customer have confidence on the quality of the
product; 31.25% shows the customer have no confidence on the quality of the product and the
remaining 25% implies the respondent don’t know about their customers confidence
level.(See table 19). The interview response from the customer about the quality of the
product that was sold on discount; most of them said that “they apply clearance sales to sell
low quality items because in some boutiques after you enter they told as the discount was only
for some products”. And some other said “they add second hand clothes during the sell
period”. So this and the above data show that most of the customers have no trust on the
quality of the product.

In order to convince their customer the boutiques use different techniques among this: 28.57%
try to convince by telling them about the product; 28.57% by telling them to see the same
product from other boutiques and the remaining 42.86% uses the combination of the methods
explained in the table. (See table 19).
 3.2.32. Data Analysis and Interpretations (data collected from the customer)

The data was divided in to four major categories based on the similarity of the information, to
have good interpretation and analysis. These were: background information of the respondent;
awareness of the customer about the product; customers’ attitude towards clearance price and
perceived quality; and customer’s attitude about the reality of the price cut.

3.2.33. Back Ground Information

Demographic and socio-economic characteristics of respondents have a significant straight

forward/direct/indirect/ linkage with the way they spent their money in the purchase of
closings and other purchase decision. And also it helps to select the product and to judge the
price and quality of the product. Some of the demographic characteristics are sex, age and
socio-economic characters including educational background, occupation, wealth and others.
In this paper age, sex and educational background were considered.

From table 20, it is possible to realize the following facts. About 67% of the respondents are
female and the rest 33% are male. This implies that most of the customers who made discount
purchase are female this is due to the fact that; in our country generally known that the
economic status of female is lower than male, and most of the time female wants to have
more closing than male (this is my personal experience) this and other related factors make
them sensitive to lower price. In addition, most of the respondents age (73.42%) is above 30
years which indicates more than 70% of the customers who purchase discounted clothing
have age of above 30. (See table 21). The level of education, about 81% of the respondents
have education back ground below diploma; from this it is possible to infer that more than
80% of the customers who use discount purchase have educational back ground of below
diploma.

3.2.34. Awareness of the Customer about the Product.

Customer consciousness of the product helps them in order to make better purchasing
decision. In order to understand the customers’ awareness of the product six related questions
were developed and asked based on their response the result was analyzed and interpreted in
the subsequent part.

The knowledge of the respondent about the product indicates that 58.2% of the respondents
almost know the quality of the product because they use the same product before but the
remaining 41.8% more or less don’t know the quality of the product they purchased and have
a mean level of 3.46 which was between slightly agreed and neutral. (See figure 4). It is
possible to summarize that more than half of the customer knows the quality of the product
they purchased.

Response about source of information about the product and advice by friends reviles that
74.7% of the respondents were informed and recommended by their friends to buy the
product; but the remaining 25.3% are not informed and recommended by their friends or they
get the information from other source. And it had a mean of 2.96 which lies between agree
and slightly agree. (See figure 5)

The data implies that most of the customers got information and are recommended by their
friends to buy a particular product. The information and recommendation of friends influence
the purchasing decision of the customers.

As indicated in figure 6, 54.4% of the respondent knows the price of the product because they
bought the same product before; 1.3% of the respondent is neutral or they give less concern
for it. The remaining 44.3% almost don’t know the price of the product before, this implies
that they purchase the product for the first time or they cannot memorize it even they purchase
the product before. The mean 3.67 is lay between neutral and slightly agree. (See figure 6).
This indicates that more than half of the respondent knows the price of the product they
purchase before. But interview response about their knowledge of the product shows that,
most of them know it before, but they said that; due to inflation the price of the product vary
dramatically. It is difficult to know the current real price of the product based on their past
knowledge even in some products price increased more than half of their previous price. From
this data it is possible to conclude that more than half of the customers know the price of the
product before but due to inflation and other related factors they can’t accurately know the
real price the product have currently.

About 30.38% of the respondents’ are the customer of the boutique before and they almost
know the quality and price of the product, one respondent is neutral and the remaining
65.82% are not the customer of the boutique and don’t know the quality and the price of the
product of the boutique. The mean level 4.62 lay between neutral and slightly disagree. (See
figure 7)

The data entail that currently, when the boutique applies clearance sales more than 65% of the
new customers are attracted and came to purchase the product. More than 65% of the
purchasers were new customers for the boutique. The pricing strategy used by the boutique
assist to attract new customers, and it also helps them to increase their market share if the
customers are satisfied with the discount and other related services given by the boutique.

The customers purchasing experience, 59.45% of the respondent purchase the product
without comparing the price and the quality of the product with different boutiques, 35.45%
purchase the product by comparing the price and quality of the product with other boutique
product quality and price, whether there is a price cut or not; the remaining 5.1% not taking
sides. The mean levels 4.443 found in the range between 4 and 5 this was represented as
neutral and slightly disagree respectively. (See figure 8)

All the iterations show that more than 50% of the customers purchased the product without
comparing the price and the quality of the product with other related boutiques.

The consumer passes through five stages in order to make a purchase decision: problem
recognition, information search, evaluation of alternatives, purchase decision, and post
purchase behavior. Clearly the buying process starts before the actual purchase and has
consequences long after the purchase. (Philip Kotler, 1994). In order to purchase a product the
consumer passes five stages, among this evaluation of alternatives is the 3rd stage and the
most essential one in order to solve the recognized problems the buyer should find different
alternatives and evaluate and select one best alternative. But the respondent response shows
that more than 50% of the customers made purchase without finding and evaluating
alternatives.

As indicated in figure 9, 43% of the respondents made their first time purchase without the
knowledge of the quality and price of the product; 1.3% in the middle- of the road they did
not agree or disagree; and the remaining 55.7% purchase the same product before and they
know the quality and price of the product. The mean level 4.25 found between neutral slightly
disagree.

The data implies more than half of the customers know the product they purchase before and
it helps them to know the price and quality of the product even if the price changes from time
to time.

3.2.35. Customers Attitude Towards Clearance Price and Product Quality

In this part the customers’ attitude towards clearance price and its implication on product
quality was analyzed and interpreted. Customers have different attitude to lower price.
Because a price cut can be interpreted in different ways by the customer: The item is about to
be replaced by a new model; the item is faulty and is not selling well; the firm is in financial
trouble; the price will come down even further; the quality has been reduced (Kotler, 2006).
Four inter related questions were asked to collect the appropriate data.

Quality is the totality of features and characteristics of a product or service that bear on its
ability to satisfy stated or implied needs. Satisfaction is the level of a person’s felt resulting
from comparing a products perceived performance (outcome) in relation to the person’s
expectations. (Philip Kotler, 1994). This theory shows as the seller delivered quality whenever
the seller’s product and service meets or exceeds the customers’ expectation. Expectation are
formed on the bases of buyer’s past buying experience, statement made by friends and
associates and marketer and competitor information and promises. (Philip Kotler, 1994).

Customer response about the relationship between quality and price shows that, 64.6% of the
respondent believed that higher price signals higher quality, their reasons is that the price
increases due to the increase in quality; 12.7% becomes neutral or they don’t want to say it
signals quality or it doesn’t signal quality; the remaining 22.8% believed that higher price is
not indicator of higher quality. The mean level 3.34% found between slightly agree and
natural. (See figure 10)

From the presented data it is possible to conclude that more than almost 65% of the customers
believed that quality and selling price have direct relationship. And also it implies that the
lower price sate by the boutique to clear the bulky inventory is due to the lower quality of the
product, according to the customers’ response.

The theory indicates that quality is dependent on the buyers’ expectation and knowledge
about the product. so, the quality is not the only determinant of product price there are other
factors that increases or decreases the price level like: before and after sales service, the
location of the boutiques, the cost of the product, bargaining power of buyer (because sellers
always wants to sell their product at higher price if you are not bargain them well they may
charge a higher price and this price may not signal quality) and others.

As presented in figure 11, 78.5% of the respondents’ get information about the discount from
the displayed poster; 1.3% becomes neutral; the remaining 20.3% of the respondents disagree
about the statement. And the mean level 2.54 found between agree and slightly agree.

From the above descriptive data it is possible to say that, more than 75% of the customer gate
informed by looking the displayed poster about the discount. So among the advertizing
mechanisms the boutique uses posters were effective. And also it saves advertizing cost of the
boutique.

The response presented in figure 12 revealed that, 36.7% bought more product than what they
plan, because the price cut is good in relation to the quality of the product; 11.4% are not
taking sides; the remaining 52% not buy more product than what they planned. Mean 4.34
found between neutral and slightly disagree.

The figures indicates that more than 50% of the customers did not purchased more than what
they plan to purchase or they purchase only what they plan. The other 36.7% purchase more
products but this does not indicate the accurateness of the discount rate because out of 36.7%
22.8% slightly agree with the statement. This shows there is a slight price cut and the quality
is also good so they purchase more product than they plan.

Analysis of the expectation of the respondents’ about discounted price revealed that 57% expects
that the boutique set clearance sales because the product is defective or have a lower quality;
about 17.7% becomes neutral; the remaining 25.3% all most disagree or expect that the
discounted price is not to sell defective or low quality product. The mean 3.44 is laid between
neutral and slightly agree.(See figure 13)

From the description, it is possible to infer that more than 55% of the customers expect the
product sold at discount is defective or have low quality. The customer expectation implies
those products sold at discount are those products that are defective or have lower quality; this
interpretation also shows as the direct relationship of quality and price.

3.2.36. Customer Attitude Towards the Reality of The Price Cut

In this part the customer perception of the price cut and its reality was analyzed. Four
interrelated questions were asked and answered by the respondents.

It is possible to observe from figure 14 that, 68.4% almost disagree about the reality of the
discount rate, they know this by comparing the same product with other boutique; 12.7%
become neutral this may indicate that they may not compare the price of the product in order
to know the reality of the discount; the remaining 19% agree about the reality of the discount
rate. The mean 3.06 is almost slightly agreed.

From this it is possible to conclude that almost 70% of the customer believed that the discount
rate sate by the boutiques was not accurate. This reduces the customer trust on the discount
and it affects the boutiques future sales. Because the customer that are deceived today my not
return again to the same boutique, not only this they may spread the information for many
other persons, which creates a greater impact on the boutique future sales.
About 77.2% the respondent were almost agreeing with the statement ‘I visit different
boutiques which display clearance sales, but the rate is not accurate rather they use it to attract
customers’; 8.9% becomes neutral; and the remaining 13.9% almost disagree about the
statement. The mean value 2.94 is lay between slightly agree and agree. (See figure 15).

From this data it is possible to infer that almost more than 75% of the respondents expect that
the discount rate sate by the boutique is only to attract the customer. I also observe before
three or four month’s one boutique displayed 100% discount, this means giving the product
for free. And in some boutiques they display clearance sales but when you inter to the
boutique they said the discount is for one or two type of their product.

About 16.43% the respondent almost agree with the statement ‘I visit different boutiques
which display discount sales and the rate is accurate in all boutiques.’ 15.2% become neutral
and finally 68.37% almost disagree with the statement and the mean 5.26 lay between
disagree and slightly disagree. (See figure 17).

From this data it is possible to conclude that almost 70% of the customers have a doubt about
the reality of the discount rate.
 CHAPTER FOUR

Conclusions and Recommendations

4.1. Conclusions

Based on the data analyzed and interpreted in the previous part the major findings of the study
were concluded as follow.

• Discount rate setting decision of the boutiques was made bay the owner(s) of
the boutique, and they set the clearance price at breakeven (no profit no loss
for) level.

• The duration of the discount period that the boutiques set was extremely
extended. Due to the resistance of the customer to use the discount the
boutiques did not complete the specified amount of inventory on the specified
period of time.

• Sells volume of the boutiques increased due to the strategy they applied.

• The customer did not trust the discount set by the boutiques. The customer
expectation implies those products sold at discount were defective or have
lower quality. And also the response shows that the discount set only to attract
customer it have only slight price difference from the normal period sales and
when compared with other boutiques not applying clearance sales.

• The customer believed that higher price signals higher quality of the product.
4.2. Recommendations

Based on the findings and conclusions reached, the following recommendations were
forwarded.

• In order to develop better discount rate that attracts the customer, the
participation of the sellers, buyers and other concerned body is essential.
Because different idea generated from different participants who have
different back ground and experience is essential. Especially the
participation of the buyer is important in order to know their willingness to
pay for the product and it helps to understand their behavior.

• The boutique should apply the real rate of the discount they displayed,
because it helps to create loyal customers for the boutique. The discount
rates they apply have its own impact on the present as well as future sales of
the boutique. So applying the correct amount helps to attract more loyal
customer for the future and it also helps the boutique to accomplish their
objective on time. Deceiving customers create a great loss of future sales of
the boutique because once the customer know they are deceived they did
not come again, as will they distort your boutique image by telling the thing
they face for other person. using deception have only short term benefit for
the boutique so by applying the real displayed discount the boutique can
generate long term benefit and increase their market share.

• The boutique should not stay on sale for long period of time because the
customer familiarized and consider the price cut as normal price of the
product. This have its own impact on future sales, customer want to
purchase the product at the same price even after the discount period
because the y adapt the discount price for a long period of time. And the
customers perceive the product as low value product. In order to make short
the discount period the boutique should use correct discount and tray to
communicate the clearance sells effectively to the actual and potential
customers.
 Bibliography

1. Stephen A. Smith and Dale D. Achabal Source, Mar., 1998, Clearance Pricing and

Inventory Policies for Retail Chains, Management Science, Vol. 44, No. 3, pp.

285-300

2. Gabriel R. Bitran and Susana V. Mondschein, Jan., 1997, Periodic Pricing of

Seasonal Products in Retailing, Management Science, Vol. 43, No. 1, pp. 64-79

3. Rajiv Lal, summer, 1990, Price Promotions: Limiting Competitive Encroachment,

Marketing Science, Vol. 9, No. 3, pp. 247-262

4. B. Peter Pashigian, Dec., 1988, Demand Uncertainty and Sales: A Study of

Fashion and Markdown Pricing, the American Economic Review, Vol. 78, No. 5,

pp. 936-953

5. Edward P. Lazear, Mar., 1986, Retail Pricing and Clearance Sales,The American

Economic Review, Vol. 76, No. 1, pp. 14-32

6. J. Paul Peter and Jerry C. Oison, 1996, Consumer Behavior and Marketing

Management, 4th edition, publisher United States of America.

7.
Philip Kotler and Kevin Lane Keller, 2006, Marketing Management, 12th edition,
Pearson prentice Hall United States of America.
8. Philip Kotler, (1994), marketing management analysis planning, implementation

and control, 8th edition, prentice-Hall, Inc. United states of America

9. Philip Kotler, (2000), Marketing Management, Tenth Edition, Prentice-Hall, Inc.

United states of America

10. Rajagopal, Consumers response to seasonal clearance sales: Experimental

analyses of consumer personal treat in self service store, March, 09, 2006,

January, 05, 2010, Http://www.geoccities.com/prof_rajagopal/homepage.html

11. Robert M. Anderson and Roberto C. Raimondo, Jan., 2005, Market Clearing and

Derivative Pricing, Economic Theory, Vol. 25, No. 1, pp. 21-34

12. Accessed may 25, 2010. http://www.scribed.com/

13. Accessed may 21, 2010. http:// www.mit.edu/rpindyck/

14. Accessed may 15, 2010. http://www.campus.udarton.edu

 Addis Ababa University

Faculty of Business and Economics

Masters of Business Administration (MBA) Program

To be answered by boutique owner (s) and/or seller(s)
This questionnaire is designed to collect primary information about the clearance sales
practice. It will be distributed to those boutiques which are applying clearance sales
strategy in Arada Sub-City. The research is undertaken as academic requirement of
Masters Degree in Business Administration. It is also significant to gain practical
knowledge on the topic (the emerging market clearing practice in Ethiopia) under
investigation and help other prospective researchers as a starting line to carry out
further investigation. I want to assure that this research is only for academic purpose
which is authorized by Addis Ababa University.

Note that;

There is no need of writing your name

In all cases where answer options are available please circle the
letter of your selection.
For open ended questions, please inter your response on the space
provided.

Contact address:

If you have any query, please do not hesitate to contact me and I am available as your
convenience at (Mobile: 09-10 07 08 80/09-10 79 96 66. e-
mail:[email protected]/[email protected])
 Back ground information

1. Sex a. Male b. Female

2. Age
a. Below 20 f. From 40-45
b. From 20-25 g. From 45-50
c. From 25-30 h. From 50-55
d. From 30-35 i. Above 55
e. From 35-40
3. Educational background
a. Below grade 10 e. Degree
b. Grade 10 completed f. Masters degree
c. Grade 12 completed g. Doctor
d. Diploma
h. Other please specify_____________________________
4. For how long you operate in this business?

a) >20 years
b) 15 to 20 c) 10 to 15 e) 1 to 5 years
years years f) < a year
d) 5 to 10 year

5. What was your company past trend in the selling?

d) No profit no loss
a) Highly profitable
e) Not profitable
b) Profitable
c) Not that match
 6. Who set the discount rate?
a) The owner of the company
b) The seller of the company
c) Outside consultant
d) By developing a committee containing all parties
e) If other please specify______________________________

Basic information

7. Why you use market clearing practice?

a) To change the business c) To sell seasonal products
b) To clear the bulky inventory d) To close the business
e) To replace the existing product by the upcoming product
f) To sell old-fashioned closes
g) If other, please specify_________________________
8. How you decide the clearing price?
a) At a very high d) At break-even g) At a profit
loss e) Randomly h) At higher profit
b) At a loss f) At a specific
c) At a specific loss profit

i) If other, please specify_________________________

9. Do you apply clearance sells strategy before this time?
a) Yes b) No
10. If your answer on question 9 is yes, how many times in a year?
a) Once in a year c) three times
b) two times d) four times
e) If other, please specify_________________________
11. In which season most of the time you apply this strategy?
a) During summer c) During winter
b) During autumn d) During spring
12. What is the impact of clearance sells on your sales volume? May sales volume is:
a) Significantly increase d) No change
b) Increase e) Slightly Decrease
c) Slightly increase f) Decrease
13. How you communicate the clearance sales practice to the customer?
a) Through TV advertising
b) Through radio advertising
c) Through magazine advertising
d) By displaying notice on the boutique
e) If other, please specify_________________________
14. How long this clearance practice lasts?
a) Less than a month d) 7- 11 months
b) 1-4 months e) ≥12 months
c) 4-7 months
15. To what extent your customer trusts the discount rate?
a) Very much d) I don’t know
b) Much e) No trust
c) Not that much
16. Do you believe that, the customer know the original price of the product?
a) Yes c) I don’t know
b) No
17. Do you think that the quality of product and its price have a direct relationship?
a) Yes c) I don’t know
b) No
18. When you apply this strategy, which group of buyers you expect as a target
customer?
a) Higher income group c) Lower income group
b) Medium income group d) I don’t know
19. Which income group are your target customers before you apply clearance pricing
strategy?
a) Higher income group c) Lower income group
b) Medium income group d) I don’t know
20. At what occasions your organizations apply clearance sales strategy?
a) During the holyday b) During the ordinary day

21. Is there any customer complaining about the correctness of the discount?
a) Yes c) I don’t know
b) No
22. If your answer on question 20 is “yes" what mechanism you use to convince
them?
a) By telling the original price
b) By showing the original selling price
c) By telling them to see the same product from other related boutiques
d) We can’t say any thing
e) If other, please specify_________________________
23. When you make a price cut, did your customer have confidence on the quality of
the product?
a) Yes c) I don’t know
b) No
24. If your answer on question 23 is “no" what mechanism you use to convince them?
a) By telling them about the product
b) Telling them to see the same product in other shops
c) Telling them to come with your friends or other person who knows about the
product
d) By telling them to return the product if it is not feet with your expectation
e) If you believe buy it other ways leave it
f) We can’t say any thing
g) If other, please specify_________________________

25. Do your customers ask questions about your reason of setting clearance sells?
a) Yes b) No
26. If your answer for question 25 is “yes;” how many of them?

a) All of them c) Some of them

b) Many of them d) None of them

27. Do you achieve the goal that you set?
a) Yes b) No
28. If your answer on question 27 is “no" Please specify the reasons?
________________________________________________________________________
________________________________________________________________________
________

29. How do you think about the relationship between selling price and sales volume?
a) Direct c) Have no relationship
b) Indirect d) I don’t know
30. Does the strategy that you use help to increase the sales volume?
a) Yes b) No
31. If your answer on question 30 is No what is the reason
_____________________________________________________________________
_____________________________________________________________________
_________________________________________

32. What problems you face during the implementation of the strategy?
i. ______________________________________________________________
ii. ______________________________________________________________
iii. ______________________________________________________________
iv. ______________________________________________________________
33. How do you think about your customers’ sensitivity to clearance selling price?
a) Very good
b) Good
c) Fairly good
d) Not that much
e) Not good
f) Very bad
 ( )

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- (Mobile. 09 10 07 08 80 or E-mail
[email protected] )

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 Addis Ababa University

Faculty of Business and Economics

Masters of Business Administration (MBA) Program

To be answered by customers of the boutique
This questionnaire is designed to collect primary information about the clearance sales
practice. It will be distributed to those customers who are actually enjoying the
clearance sales. The research is undertaken as academic requirement of Masters Degree
in Business Administration. It is also significant to gain practical knowledge on the
topic (the emerging market clearing practice in Ethiopia) under investigation and help
other prospective researchers as a starting line to carry out further investigation. I want
to assure that this research is only for academic purpose which is authorized by Addis
Ababa University.

Note that;

There is no need of writing your name

Answer all the questions based on the instruction
In all cases where answer options are available please circle the
For those questions given in the table Please indicate by ticking in the right
column, the extent to which you agree with the given statement in relation to
clearance sales, where: 1=strongly agree; 2= agree; 3=slightly agree;
4=neutral; 5=slightly disagree; 6=disagree; 7= strongly disagree
 Back ground information

34. Sex a. Male b. Female

35. Age
a. Below 20 f. From 40-45
b. From 20-25 g. From 45-50
c. From 25-30 h. From 50-55
d. From 30-35 i. Above 55
e. From 35-40
36. Educational background
i. Below grade 10 m. Diploma
j. Grade 10 completed n. Degree
k. Grade 12 completed o. Masters degree
l. Certificate p. Doctor
q. Other please specify_____________________________

Basic information

Q Awareness of the customer about the product 1 2 3 4 5 6 7

1
1 I know the quality of the product I bought, because I use it before.
2 My friend tell me about the product quality and also recommend me
to buy it
3 I know the price of the product before because I bought the same
product prior to this time
4 I am the customer of this boutique and I know about the product
quality and price
5 I buy a product by comparing the price and the quality of the
product from different boutiques, whether there is a price discount
or not.
6 I buy this type of product for the first time and I don’t know before
about the price or the quality of the product
Q Customers Attitude towards clearance price and perceived quality 1 2 3 4 5 6 7

1 I believe that higher price indicates higher quality of the product,

because the price increases due to the quality of the product.
2 I am forced to come in this boutique by seeing the displayed
discount in order to buy product at a lower price.
3 I buy more products than what I plan, because the price cut is
good in relation to the quality of the product.
4 I expect that they discount the price because the product is
defective or have a low quality.
Q Customer attitude about the reality of the price cut 1 2 3 4 5 6 7
1 When I compare the price of the product which sold at discount
with other boutique which sell the same product, the discount rate
is not accurate.
2 I visit different boutiques which display discount sales, but the
rate is not accurate rather they use it to attract customer.
3 I visit different boutiques which display discount sales and the
rate is accurate in some boutiques.
4 I visit different boutiques which display discount sales and the
rate is accurate in all boutiques.

Page 94 of 99
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1 2 3 4 5 6 7

Page 95 of 99
1. ? . .

2. ? . 2 . 2 -25 . 25-3

. 3 -35 . 35-4 . 4 -45

. 45-5 . 4 -55 . 55

3. ? . 1 .

. 1 .

. 12 .

. .

. ? --------------------------------------------------
-----------------

Page 96 of 99
Q1 1 2 3 4 5 6 7

Q2 1 2 3 4 5 6 7

Q3

Page 97 of 99
3

Interview question for the seller(s) and/or the owner(s)

What do you mean by replacing existing product by the new product?

Do you extend the discount period that you sate? What is the reason?

What problem you face when you apply clearance sales?

Interview question for the customer

Why boutiques applying clearance sales?

What do you think about the previous price and the current price of the product?

What do you think about the reality of clearance sales?

Page 98 of 99
Page 99 of 99