The document details various factors and strategies influencing retail pricing, including predatory and prestige pricing, as well as various pricing models like demand-oriented, cost-oriented, and competition-oriented pricing. It emphasizes the importance of pricing objectives aligned with business strategies and the impact of markdowns and additional markups on sales. Additionally, it outlines the ROI measurement processes and success factors crucial for effective category management in retail.

1. CATEGORY MANAGEMENT
Pricing
1

2. Factors affecting retail price
2
qGovernment bodies and laws
qSuppliers
qManufacturers
qCompetitors
qConsumers

3. Pricing Options
3
 Predatory Pricing: It involves large retailers that
normally seek to produce competition by selling
merchandise at very low prices and create the
situation where it becomes difficult for small
retailers to stay.
 Prestige pricing: It assumes that customers will not
buy merchandise displayed if price fixed are too
low. It is based on the price-quality association.

4. Pricing Options
4
 Price lining: A pricing practice where by retailers sell
merchandise at a limited rate/limited range of price
points, where each point represents a different level of
quality.

5. Pricing Objectives
5
 Pricing objectives are generally considered as part
of the general business strategy and give direction to
the retail pricing process
 While deciding on pricing objectives, a retailer must
understand that pricing strategy must reflect the
retailer’s overall goals that can be stated in terms of
profit and sales

6. Pricing Objectives
6
 Achieving pre-determined return on investment (ROI)
 Building company’s image, goodwill and brand’s
name
 Building sustainable competitive advantage
 Creating curiosity and interest about goods and
services
 Creating store traffic
 Early recovery of cash
 Having price leadership

7. Pricing Objectives
7
 Increasing company’ growth
 Increasing market share
 Justifying social responsibility of business
 Making the newcomers’ entry in the industry difficult
 Matching with competitors’ prices
 Maximizing long-term profit volume
 Maximizing short-term profit volume
 Partial Cost Recovery

8. Types of Pricing
8
 Horizontal pricing: This practice involves
agreements among manufacturers, wholesalers,
retailers to set certain prices. These agreements
usually are illegal under Indian sales act.
 Vertical Price Fixing: A practice where
manufacturers or wholesalers seek to control the
retail prices of their merchandise through some sort
of agreements.

9. Types of Pricing
9
 Price Discrimination: A pricing practice where
different prices are charged from different retailers
for the same merchandise and same quality
 Minimum Price Laws: These laws prevent retailers
from selling certain items for less than their cost plus
a fixed percentage to cover overhead.

10. Types of Pricing
10
 Unit Pricing: The objective of such legislation is to let
the customers compare the prices of product available
in many sizes. For instance, Food and Grocery stores
must express both the total price of an item and its
price per unit of measure.
 Item Price Removal: A pricing practice whereby
prices are marked only on shelves or signs and not on
individual item.

11. Retail Pricing process
11

12. Pricing Strategies
12
 Demand Oriented Pricing: Under demand oriented pricing, prices
are based on what customers expect or may be willing to pay. It
determines the range of prices affordable to the target market.
Under this method, retailers not only consider their profit structure
but also calculate the price-margin effect that any price will have
on sales volume.
For example, if customers are highly sensitive to price tags, a price
cut can enhance the sales volume so much that profits actually go
up. On the other side, if customers are less bothered about ‘price’,
increasing the sales price will directly result into increased profits.

13. Pricing Strategies
13
 Cost Oriented Pricing: Under this form of pricing policy, a
retailer decides a floor price of the merchandise a minimum
price suitable to the organization to achieve its financial goals.
A retailer under this method sets the price to cover production
cost, operating costs and a pre­determined percentage for
profit
The gap between merchandise price and selling price is the
mark up. For instance, a retailer purchases a wooden Almirah
for Rs 3000/- and sells it for Rs 5000/-, the extra Rs 2000/- is
charged to cover its store’s operating costs and profit. In this
case, the mark up is 80% or 66.67 percent on cost
Gross Margin (In Rs.) = Net sales – Total Cost of goods

14. Pricing Strategies
14
 Competition Oriented Pricing: As the very name
suggest, under this pricing policy, retailers set the
prices of merchandise after considering competitors’
prices rather than demand or supply considerations.
The company following this policy may not react to
changes in demand or an increase in cost of
merchandise
(i) Competitive pricing below the Market rate
(ii) Competitive pricing above the market rate

15. Pricing Adjustments
15
 Mark Down: Mark down is a most common technique to push
retail sales that offers particular merchandise at a price less
than the merchandise’ marked price (normal price).
 The reasons for several types of merchandise include:
(i) Overstocking / over buying
(ii) Season (climate) change
(iii) Clear out store worn / slow moving merchandise
(iv) Clear out old fashioned / old trend merchandise
(v) To generate customer traffic
Temporary, Seasonal and Permanent Markdowns

16. Pricing Adjustments
16
 Additional Markup: Unlike the markdown where the prices
are reduced, the additional mark up is intended to increase
the retail price above the original mark up due to certain
reasons like:
 (i) When the demand for merchandise offered is exceptionally
high
 (ii) Due to monopoly like situation
 (iii) When competitors are not able to meet the consumers’
demand
 (iv) In case private labels are performing well in retail market
and have good demand, retailer would like to have quick and
fast returns.

17. ROI
 ROI measurement is an important part of the
Category Management Pricing process
 Design and implementation of disciplined ROI
management processes and measurment systems, if
not in place, should be a priority for a retailer
 ROI measurement gives an idea of the resources
allocated vis-a-vis the revenue generated
 Retailers should fix a ROI target

18. Maximum ROI success factors
 There must be a clearly defined customer alignment
strategy
 Should define desired outcomes, value proposition
alternatives and guiding the allocation of resources
 Based on retailer segmentation , retailers are
categorized into several tiers, with resource
deployment guidelines defined for each tier
 Organizational skills must be well developed and
effectively applied

19. Maximum ROI success factor
 The account profiling process must include all insights that can
influence the probability for achieving an acceptable return-
on-investment
 There must be a defined value proposition that differentiates
from primary competitors, and is effectively communicated to
the retailer
 There must be a multi-level account penetration plan
 There must be a system to measure performance and return-
on-investment

20. Resource allocation cycle model