Retail Pricing Strategies
Those who are into business and marketing and retail, need not be told how unpredictable and volatile are the market forces. The stock market, shares, retail values and so on are changing constantly. In such a scenario, pricing goods purchased from a retailer can be a tough call, with so many market forces coming into play. Still, a person has to make profit, and since the economies all over the world have been growing, so over the years, store owners, shop owners and businessmen have devised ways and strategies, to maintain profit. Pricing the goods is one of the major areas through which maximum profit can be ensured.
Strategies for Retail Pricing
For factoring cost of a product, the 2 key elements are operating expense and cost of goods. A primary thumb rule is that the retail price of the products or items has to be enough to cover the costs of obtaining goods along with the expenditure in connection with the operating business.
Below Par
One of the oft used strategies is to set the price less as compared to the competitors. If the retailer negotiates the best prices, develops a marketing strategy focusing on price specials and cuts down on cost, only then this can work.
Up and Above
This is a strategy where the price set is pretty high, but it is for luxury items and high-end products - jewelry, property and the like. This is mostly put to use in case the value of the product is based and recognized by the premium and luxury.
It is about the Psyche
Another retail pricing strategy is psychological pricing. When the consumer wants to see the prices to be fair, after the prices are set at a certain level, that is when this is put into use. Within this, the most common practice is to set a price which is an odd one. For instance if the price is $8.95, the price is rounded off to $8, instead of $9 or rather than $30, it is made $29.90 by retail stores. It makes a psychological impact on consumers, like he or she did not spend whole $30 for a commodity.
Cost Plus
On account of a number of advantages like ease in calculation and administration, overall simple, many sellers opt for cost plus pricing. A number of variations are involved in cost plus pricing, though the most widely used method is calculation of the cost of the product and addition of some amount for profit. Here, with this method, the price of a product or service using direct costs, indirect costs and fixed costs is decided. It need not necessarily be related to the production and sale of the service or the product. This strategy has got a lot of bashing, but is one of the most convenient retail marketing idea.
Suggest the Price
The manufacturer's suggested retail price MSRP or recommended retail price (RRP) is one of the retail pricing strategies where the manufacturer suggests the retailer to sell the product or service at a specific price. The purpose is to standardize price over different locations.
The retail pricing formula can be chalked out with the help of markup pricing, involving mark up on cost and retail. The former can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the price of the merchandise. On the other hand, the markup on retail can be obtained by dividing the dollar markup by retail.
In addition to these retail pricing strategies, there are a few more like multiple pricing, where more than a single product is sold for the same price and discount pricing, which is self-explanatory in itself. At the end of the day it is the service or product supplier's take as to which strategy to use and get good profit. Of course the strong connection between retail pricing and market power cannot be sidelined! I sign off here!
