PRICING STRATEGIES

IN RETAILING
CHAPTER 4
Chapter Outline
Explain the pricing
Define pricing
Identify the objectives of pricing
Determine the factors affecting retail price strategy
Discuss the factors affecting retail price strategy:
a. Cost of product
b. Types of product
c. Characteristics of product
d. Competitors prices
e. Customers
f. Retails brand
g. Economic
h. Retail objectives
i. Government rules and regulations


CHAPTER OUTLINE
Determine price strategy
Discuss the price strategy:
a. Customary and variable pricing (Everyday Low
Pricing)
b. Leader pricing
c. Multiple unit pricing
d. Price lining
e. One price policy and flexible pricing
f. Odd pricing

DEFINE PRICING
Pricing is a fundamental aspect of
financial modeling and is one of the 4Ps
of the marketing mix


Price the only revenue generating element
amongst the 4Ps

IDENTIFY THE OBJECTIVES OF
PRICING
1. Build volume
2. Establish a distinctive image
3. Optimize price- value relationships
4. Maintain a proper image
5. Discourage customers from becoming
overly price conscious

FACTORS AFFECTING
RETAIL PRICE STRATEGY

Cost of product
Types of product
Characteristics of product
Competitors price
Customers
Price Strategy
Economic
Retails objectives
Government Rules
& Regulations
FACTORS AFFECTING RETAIL PRICE
STRATEGY
TYPES OF
PRODUCT
SHOPPING
PRODUCT
CONSUMER
PRODUCT
SPECIALTY
PRODUCT
UNSOUGHT
PRODUCT
BUSINESS
PRODUCT
BACK
COMPETITOR
RM19
RM18.90
RM19.90
COMPETITOR
Market pricing- many retailers are in
market and consumers have many to
chose from which makes prices of
products very similar
Administered pricing- seeks to attract
consumers based on uniqueness of
offering rather than price

BACK
CUSTOMERS
Price sensitivity varies by market
segment based on market orientation
1. Economic Consumers
2. Status-oriented consumers
3. Assortment oriented consumers
4. Personalizing consumers
5. Convenience oriented consumers
BACK
FACTORS AFFECTING RETAIL PRICE
STRATEGY
PENETRATION
Retailer seeks large
revenues by set LOW PRICE
and SELL many units
Profit : LOW
But total profit is high if
sales reached
SKIMMING
Set PREMIUM PRICE and
NOT MAXIMIZE sales
Achieve high profit per unit
ROI early recovery of cash
example
Retails objectives overall
objective

BACK
FACTORS AFFECTING RETAIL PRICE
STRATEGY
Retails objectives specific
objective
Maintain proper
image
Encourage
shoppers not to be
price conscious
To be perceived as
fair by all parties
Consistent in set
price
Clear out seasonal
merchandise
Minimize chance
of govt actions-
price advertising
Create & maintain
customer interest
Encourage repeat
business
Provide ample
customer service
FACTORS AFFECTING RETAIL PRICE
STRATEGY
Minimum price laws- can not sell certain
items for less than costs
Predatory pricing- seeks to reduce
competition by pricing products very low
Loss leaders - price products below costs to
attract more store traffic
Unit pricing- must provide total price and
price per a certain unit such as price per oz.
or price per lb


Govt rules & Regulations
FACTORS AFFECTING RETAIL PRICE
STRATEGY
Item price removal some states ban this
Price advertising cannot advertising a price
reduction unless it has actually been done
Price matching- legal in many states
Bait and switching illegal practice of
advertising a low price but then try to switch
customers to another product when they enter
the store or say the product is not available.
Govt rules & Regulations
FACTORS AFFECTING RETAIL PRICE
STRATEGY

Price Strategy
DEMAND
ORIENTED
PRICING
COST
ORIENTED
PRICING
COMPETITION
ORIENTED
PRICING
DEMAND ORIENTED PRICING
Estimate quantities that customers would
buy at various prices.
Price-quality Associations:
High price connote high quality
Low price connote low quality
Prestige Pricing:
Assumes consumers will not buy G&S at too
low price



BACK
COST ORIENTED PRICING
Markup-pricing
Sets price by adding
per unit merchandise cost
retail expenses
Desired profit
Selling price Merchandise Cost = markup

BACK
COMPETITION ORIENTED PRICING
Use competitors price as guide

RM19
RM18.90
RM19.90
PRICING STRATEGY
Customary and variable
pricing (Everyday Low
Pricing)
Leader pricing
Multiple unit pricing
Price lining
One price policy and
flexible pricing
Odd pricing