Exploring pricing strategies and their impact on financial performance of SMEs in Nigeria

This study explores the impact of pricing strategies on the financial performance of Small and Medium-sized Enterprises (SMEs) in Nigeria, aiming to identify effective approaches for enhancing profitability and competitiveness. Conducted in Lagos, the research employed a mixed-methods design, collecting data from 175 SMEs across manufacturing, retail, services, technology, and healthcare sectors through structured questionnaires and interviews with 15 SME owners. The scope included examining cost-based, value-based, and dynamic pricing strategies, alongside the frequency of pricing reviews. Results indicate that cost-based pricing was most common (22.9%), but value-based pricing yielded the highest financial performance rating (4.2 on a 5-point scale), followed by dynamic pricing (4.0), compared to cost-based (3.8). Regression analysis confirmed significant correlations between value-based (p<0.01) and dynamic pricing (p<0.05) with profitability. Quarterly and monthly pricing reviews (31.4% and 20.0% of SMEs) were linked to higher performance than annual reviews. Interviews highlighted that value-based pricing enhances customer loyalty, while dynamic pricing enables adaptability to Nigeria’s volatile market. The study concludes that value-based and dynamic pricing, supported by frequent reviews, significantly improve SME profitability and resilience. These findings offer practical guidance for SME owners to adopt customer-centric and adaptive pricing strategies and underscore the need for training programs to support implementation, contributing to SME sustainability in Nigeria’s challenging economic landscape.