Retail Pricing 1
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Retail Pricing 1 Presentation Transcript

  • 1. RETAIL PRICING
    An Effort by,
    Anirban Pal (C-08-08)
    AnirudhBhandegaonkar (C-08-09)
  • 2. 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!
    • 3. 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 strategy
    Suppliers
    Government
    Customers
  • 4. 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
  • 5. 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
  • 6. 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.
  • 7. 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.
    • 8. 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 – stablebut lower than prevailing prices but not the lowest.
  • 9. 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.
  • 10. 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.
  • 11. 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.
  • 12. 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
    • 13. Markup is Rs.5 or 25% of the cost or 20% on selling price
    • 14. 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
  • 15. Thank You