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Retail Pricing 1




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    Retail Pricing 1 Retail Pricing 1 Presentation Transcript

      An Effort by,
      Anirban Pal (C-08-08)
      AnirudhBhandegaonkar (C-08-09)
    • 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
      Pricing strategy
    • 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.
      • 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 – stablebut lower than prevailing prices but not the lowest.
    • Skimming Pricing
      It is a pricing strategy wherein firms change premium prices and attract customers less sensitive to price than to service , assortment and status.
    • Penetration Pricing
      It is a pricing strategy in which the retailer seeks to achieve large revenues by setting low prices and selling high unit volume.
    • Psychological pricing
      Pychologicalpricing 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.10.
    • 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
    • Thank You