Price is a measure of value and the
only element of the marketing mix that
represents revenue
 

O Ús the most flexible marketing mix element
O Can be changed quickly unlike product
features, channel commitments and
promotions
O Communicates the intended value positioning
to the market
O Decisions are complex and difficult


   

O Úntroduction
O Setting the Retail Price
O Factors impacting price setting
O Retail mark-ups
O Adjusting the price


 
  

O ×he right price is one consumers are willing
and able to pay and retailers are willing to
accept in exchange for merchandise and
services!
O ×he right price allows the retailer to make a
fair profit while providing the consumer with
value satisfaction before, during, and after
the sale!




 

O Price-setting methods:
O Price-setting objectives: O Markup
O Sales O Competitive
O Profit O Vendor
O Competition
O Price-setting policies:
O Price-setting determinants: O One-price
O Demand O Variable-price
O Competition O Odd-price
O Cost O Unit-price
O Product O Price Lining
O Legal
©



 

O Discount adjustments O Markdown strategies
O Markon Adjustments O Promotional
O Markdown O Price-line
Adjustments O Markdown Control
O Causes of markdowns
O ×iming of markdowns
O Size of markdowns


 
 
O ½conomists don¶t understand price
O Consumers don not accept prices as given
O Consumers interpret price according to prior
knowledge and experience and purchase
decisions are based on perception of price
O Consumers have lower and upper threshold
prices ± below which the price signals inferior
quality, above which it signals inferior value


 
 
O Price cues: consumers process prices left to
right rather than rounding (Stiving and Winer
1997, ½mpirical analysis of price endings with
scanner data)
O Hence £299 is closer to £200 than to £300
O Prices ending in odd numbers convey a
deduction or discount (Anderson and
Simester 2003, ½ffects of $19 price endings
on retail sales). Firms with high price images
should avoid this
{  


  
 

O What value are we providing for customers
O Customer perception of our product
O Perception relative to competitors
O Product costs
O Margin required
O Sales/marketing objectives
O Pricing objectives
   

 

 





Discount


 

O   invoice costs, carriage inwards,
depreciation on unsold goods
O [   ± sales minus cost of goods sold
O r   ± gross margin as % of sales
O J  ± amount added to cost of goods to give
required selling price (can be expressed as % of cost)
O ‰
  sales less cost of goods less operating
expenses
O J   total reduction on normal RSP for all items
sold
O J 



 high on slow moving lines (furniture),
low on fast moving lines (grocery)


 

1. Select the price objective
2. Determine demand
3. ½stimate costs
4 Analyse competitors¶
Costs, prices and offers
5. Select a pricing method
6. Set final price
Maybe survival, maximum current profit
maximum market share, market skimming, product
quality leadership
Understand price sensitivity, test prices, test
consumer purchase intentions at different price
levels, analyse past prices and sales volumes
Fixed, variable, total, break even
Analyse prices and benefits and possible
pricing reactions. Same price, higher or lower based
on required margin and estimated demand
3Cs (customer demand, cost function, competitor
prices) framework for mark-up pricing, target return
pricing, perceived value pricing, value pricing,
going rate pricing
Based on all the above plus, other marketing
Activities eg promotion, overall pricing policy
M
  



 
O Based on demand rather than supply factors
O Use price tactically according to market
demand
O Knowledge of consumers
O Respond to competitive pressure
O Stimulate demand for other/related items
O Achieve market presence
O Discrimination, backward, skimming, leader,
competitive, penetration, ½DLP
 




O Price elasticity of demand

Percentage change in quantity demanded

Percentage change in price
3

 
O Stimulate overall demand selling selected
lines (widely and frequently purchased) at or
below cost
O Úncrease store visits, build brand image and
perception of value
O Can lead to consumer selectivity in lines
purchased
x

O Retailers and suppliers work in collaboration to
understand costs and develop ways to reduce them
through initiatives such as joint logistical planning
O Provides transparency in overall cost negotiations
O ½asy comparison of supply chain cost structures
O ½stablishes stability and supply capacity of suppliers
{ [
 
O A supply chain initiative which aims to remove
unnecessary transportation costs and improve
efficiency of the supply chain
O Provides efficient transportation ± suppliers for
whom transportation is not core can transfer cost
and responsibility to retailer
O Úmproved availability ± more product available on
shelf
O Lower prices for consumers ± through lower
transport costs
O ½nvironmental benefits