The document discusses retail pricing and factors that influence pricing decisions. It covers key concepts like price sensitivity, elasticity, and factors that affect consumer price sensitivity. It also outlines different approaches to retail pricing, such as cost-oriented and demand-oriented pricing strategies. Finally, it examines the relationship between price, quality, and consumer perceptions of value in retail settings.

1. Retail Pricing
Dr. Gopal Thapa
Tribhuvan University

2. Price
 Price is monetary value assigned by the seller to
something purchased, sold, or offered for sale, and
on transaction by a buyer, as their willingness to
pay for the benefits the product and channel
service delivers.
 David Gilbert
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3. Price Sensitivity
 It is the ratio of the percentage response in the
quantity sold to a percentage change in price or
one of the other marketing mix elements, such as
the expenditure in advertising .
 It measures the sensitivity in quantity demanded to
a change in the demand determinant.
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4. Elasticity
 Elasticity
= Percentage change in quantity demanded
Percentage change in any demand determinant
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5. Price Elasticity of Demand
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6. Factors Affecting Price Sensitivity
 Perceived substitute effect
 Unique value effect
 Importance of purchase effect
 Difficult comparison effect
 Price quality effect
 Expenditure effect
 Fairness and transparency effect
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7. Further Factors Influencing Pricing
 Perishable nature of product
 Competitive nature of industry
 Cost
 Seasonal demand
 Psychological aspects
 Influence of intermediaries
 Legislation
 Market is volatile due to:
 Short-run fluctuation in international costs
 The need to stock saleable items
 Problems of supply
 Shrinkage rate
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8. Approaches to Pricing the Retail
Product
 Cost Oriented Pricing
 Cost plus pricing
 Rate of return pricing
 Demand Orientated Pricing
 Discrimination pricing
 Backward pricing
 Skimming pricing
 Leader pricing
 Competitive pricing
 Market penetration pricing
 Psychological pricing
 Everyday low pricing
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9. Benefits of Everyday Low Pricing
 Perception of fairness
 Reduced advertising
 Improved customer service management
 Reduced stock-out and improved inventory
management
 Increased profit margins
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10. Pricing and Relationship to Value
 The majority of consumers are looking for value
when they buy a product
 Value is derived from the functions of quality and
price, as well as the added value of the image or
brand.
 This may be expressed as:
Value = Quality + Image
Price
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11. Pricing and Relationship to Value
 If a consumer believes the image and quality of a
product is good they will be willing to make
greater sacrifices in order to purchase that product.
 The interrelationship between price, quality and
value plays a significant role in store patronage
and the buying behaviour of customers.
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12. Pricing and Relationship to Value
 Value was grouped into four categories by
Zeithaml (1988).
 These are:
 value as low price;
 value as whatever is wanted from a product;
 value as the quality one gets for the price paid;
 value as what one gets for what one gives.
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13. Mark Down Policy Consideration
for Retailers
 Price competition is an important feature of the
grocery marketplace
 Virtually all retailers will have occasion to utilize
price markdowns
 It is typical for markdowns to be used as part of a
clearance sale in order to provide space for new
merchandise
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14. Reasons for Markdown Pricing
 competitor activity affecting demand;
 inadequate original pricing policy;
 merchandise did not meet consumer needs or preferences;
 economic or seasonal problems;
 overstocking of merchandise or poor stock keeping;
 quality of merchandise inferior due to manufacture or
damage;
 problems of seasonality and poor timing of offer;
 merchandise became shop-soiled or damaged on the shop
floor;
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15. Reasons for Markdown Pricing
 need to release the display space for other merchandise;
 the selling space or display of the merchandise had been
inadequate or in the wrong location;
 a policy decision taken to develop improved customer goodwill
through markdowns;
 an error by the buyer with regard to style, fashions, research of
market, etc.;
 an initial markdown being too small to achieve desired sales
results;
 sales staff not being briefed properly or encouraged to sell old
as well as new lines.
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16. Pricing Cutting consideration
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17. Any Queries?
Thank You
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