Introduction

The right price is one consumers are

willing and able to pay and retailers are willing
to accept in exchange for merchandise and
services!

The right price allows the retailer to make a fair

profit while providing the consumer with value
satisfaction before, during, and after the sale!
External Influences on Pricing Strategy

Competitors

Pricing
Suppliers Government
strategy

Customers
 Retail Pricing Elements
Retail objectives:
- Sales (Rs / $)
- Profit (Rs. / $ / %)
- ROI
Dependent variables:
- Target market
- Retail image
- Retail mix
- Pricing policy
Pricing orientation:
- Demand based
- Cost based
- Competitive
- Integrated
Retail Pricing (contd…)
Pricing strategies
- Customary pricing
- Variable pricing
- Flexible pricing
- One price policy
- Price lining
- Multiple – unit pricing
- Bundling
- Leader price
-

Price adjustments
- Mark UPS
- Mark downs
 Pricing strategies
Customary pricing – retailer sets price & seeks to maintain those
prices over an extended period. Prices that customers can take
for granted & stable.

Variable pricing – when differences in demand & cost

necessitate a change, with a view to increase demand, off season
discount.

Flexible pricing – offering same products & quantities to different

customers at different prices.

Price lining – retailers establish specified number of price points

for each merchandise type & retailers purchase goods to fit the
price points
– makes price comparisons easier
– can help store to upgrade / down grade customer s preference.
Pricing Strategies (contd…)

Multiple unit pricing

 Price of each unit in a multiple pack is less than the price of each
unit if it were sold individually.

 Suitable for products with high consumption rates.

Bundling
 Retailers combine several elements in one basic price, invariably
closely related items.
 Leader pricing

When a high demand item is priced low & is heavily

advertised to attract customers into the store .

Loss leader pricing – Where an item is sold below cost to

build traffic & encourage purchase of other items.

EDLP – When a retailer charges the same low price everyday

for long periods and seldom offers the item on sale – stable but
lower than prevailing prices but not the lowest.
Skimming Pricing

Itis a pricing strategy wherein firms charge

premium prices and attract customers less
sensitive to price than to service , assortment
and status.
Penetration Pricing

Itis a pricing strategy in which the retailer seeks

to achieve large revenues by setting low prices
and selling high unit volume.
Psychological pricing

Pychological pricing is used when prices are set to a

certain level where the consumer perceives the price
to be fair. The most common method is odd-
pricing using figures that end in 5, 7 or 9. It is believed
that consumers tend to round down a price of Rs.
99.95 to Rs. 99, rather than Rs.100.
Cost oriented pricing

Markup pricing….a retailer sets prices by adding

per unit merchandise costs, retail operating
expenses & desired profit. The difference between
the merchandise cost and selling price is the
markup.

- Item cost Rs.20 ; it sells for Rs.25

- Markup is Rs.5 or 25% of the cost or 20% on selling price
- Margin is Rs.5 or 20% of the selling price
Markdown pricing…. Downward adjustments in the original
selling price or Reduction in the initial retail price.

# Markdown % = (original price – reduced price) /

reduced price
Ex. You bought 100 sweaters and 80% sell at $50 each while
the remainder sell at $30 each
Ans.: Markdown amount – 20 sweaters were marked down
$20 each so $20 X 20 = $400
Net Sales Revenue is (80 X $50) + (20 X $30) = $4600
Markdown % = $400
$4600 X 100 = 8.69%

Remember: Retail Reductions = Markdowns + shortages +

employee discounts + customer discounts