The document discusses retail pricing strategies. It begins by defining the goals of setting the right price that is acceptable to both consumers and retailers. It then outlines various external factors that influence pricing decisions. The document goes on to explain different pricing elements, objectives, and dependent variables that must be considered. It provides details on several specific pricing strategies retailers can employ, such as customary pricing, variable pricing, price lining, and leader pricing. It also discusses cost-oriented pricing approaches like markup pricing and markdown pricing. The overall document serves as a guide for retailers to understand how to establish prices for their merchandise.

1. RETAIL PRICINGAn Effort by,Anirban Pal (C-08-08)AnirudhBhandegaonkar (C-08-09)

2. IntroductionThe 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 StrategyCompetitorsPricing strategySuppliersGovernmentCustomers

4. Retail Pricing ElementsRetail objectives: - Sales (Rs / $) - Profit (Rs. / $ / %) - ROIDependent variables: - Target market - Retail image - Retail mix - Pricing policyPricing 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 strategiesCustomary 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 pricingPrice 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.BundlingRetailers combine several elements in one basic price, invariably closely related items.Leader pricingWhen 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 PricingIt is a pricing strategy wherein firms change premium prices and attract customers less sensitive to price than to service , assortment and status.

10. Penetration PricingIt is a pricing strategy in which the retailer seeks to achieve large revenues by setting low prices and selling high unit volume.

11. Psychological pricingPychologicalpricing 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 pricingMarkup 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 priceMarkdown pricing…. Downward adjustments in the original selling price or Reduction in the initial retail price.# Markdown % = (original price – reduced price) / reduced priceEx. You bought 100 sweaters and 80% sell at $50 each whilethe remainder sell at $30 eachAns.: Markdown amount – 20 sweaters were marked down$20 each so $20 X 20 = $400Net Sales Revenue is (80 X $50) + (20 X $30) = $4600Markdown % = $400$4600 X 100 = 8.69%Remember: Retail Reductions = Markdowns + shortages + employee discounts + customer discounts

15. Thank You