Retail Prcing Strategies

7/31/2019 Retail Prcing Strategies

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RETAIL PRCING

STRATEGIES

Submitted by:Viplav vinod


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Introduction

Concept of retail pricing

Integral part of marketing mix.

Source of revenue for retailer

Communicate the image of the retail store.

Factors that need to be taken under considerations

Demand for the product and the target market Store policies and the image to be created Competition for the product and the competitors price Economic conditions prevailing at that time


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ELEMENTS OF RETAIL PRICE

1. Cost of goods : Cost of MerchandiseExpenses incurred towards transportationTaxes, duties levies etc.

2. Expenses Incurred : Fixed expensesVariable expenses

3. Fixed Expenses : Expenses that do not vary with quantum ofbusinesseg. Shop rent, Head Office costs etc

4. Variable expenses : Level of sales directly effects variable expenses.eg. Merchandise margins, product mix costs

Their Management either enhances or destroyprofitability


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Pricing Strategies

Demand-oriented

Cost-oriented

Competition-oriented


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Demand-Oriented

Estimate how much customers will buy atvarious

price levels.

Set prices to achieve sales goals Determine prices acceptable to target market

Demand ceiling

Demand floor Psychological Pricing

Price/quality relationship

Odd pricing


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Cost-Oriented

Takes into account the cost of

merchandise, retail operating expenses,

and desired profits

Markup covers operating expenses and

profits

Markup = Selling price (retail price) Cost of

Goods


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COMPETITION ORIENTED

PRICING

Competition is the criteria of fixing the price

Competitors play a key role in determining price

Retailer fixes price on par with the competitors

Retailer fixes price above the competitors price Retailer fixes price below the competitors

price.


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APPROACHES TO PRICING

STRATEGY

Market Skimming

Market Penetration

Leader Pricing

Price Bundling

Multi-Unit Pricing

Discount Pricing

Everyday Low Pricing

Odd Pricing


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MARKET SKIMMING

Strategy to charge a high price initially

Gradually reduce it if necessary

Policy is a form of price discrimination over time

To be effective several conditions are to be considered

MARKET PENETRATION

Opposite of Market Skimming

Aim to capture a large market share by charging low price

Low prices stimulate purchases

Low prices discourages competitors from entering the market

Economies of scale is required in manufacturing or retail to be effective


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LEADER PRICING

Retailer sells few items at deep discounts

This increases traffic and sales on complementary items.

The product must appeal to a large number of people

The concept should appear as a bargain Items best suited for this type of pricing are those that are bought frequently

Example : bread, eggs, biscuit, milk etc.

PRICE BUNDLING

Retailer bundles a few products and offers them at a particular price Price bundling helps sale of related items

Example: A PC at a fixed price including a printer and a web camera

Value Meal offered by McDonalds


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MULTI UNIT PRICING

Retailer offers discounts to customers who buy in large quantities orwho buy a product in bundle

This involves value pricing for more than one of the same item

Multi unit pricing helps move products that are slow moving

Example: Offer price of one T-shirt for Rs.255.99 and two T-shirtsfor Rs.355.99

DISCOUNT PRICING

Used as a strategy by outlet stores who offer merchandise at thelowest market prices


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EVERY DAY LOW PRICING

Popularly known as EDLP

Strategy adopted by retailers who continually price their products

lower than the other retailers in the area Example: Food Bazaar, Wal-Mart and Toys R Us regularly use

this strategy

ODD PRICING

Strategy is to set retail prices in such a manner that the price ends in oddnumbers

Example: Rs.99.99, Rs.199.99 or Rs.299.99.


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Retail Prcing Strategies

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