This document discusses retail pricing policies and practices. It describes various methods for determining retail pricing, including demand-oriented pricing, cost-oriented pricing, and competitive pricing. It discusses factors that influence retail pricing decisions, such as political, economic, competitive, and cultural forces. Pricing objectives like profit maximization and market penetration are also covered. The document outlines retail pricing policies and strategies like EDLP, high-low pricing, and seasonal sales. It addresses challenges in measuring customer sensitivity to pricing changes and difficulties in applying pricing frameworks.
This following presentation defines Pricing Strategy; A Cost-Based Price Strategy, price set up by calculate production cost, promotion cost, and overhead cost, then adding the desired profit to those calculation. A Demand-Based Price Strategy, price set up after analyzing consumer desires and determines the range of prices acceptable to the target market. A Competition-Based Price Strategy, the marketer sets prices in accordance with competitors.
This following presentation defines Pricing Strategy; A Cost-Based Price Strategy, price set up by calculate production cost, promotion cost, and overhead cost, then adding the desired profit to those calculation. A Demand-Based Price Strategy, price set up after analyzing consumer desires and determines the range of prices acceptable to the target market. A Competition-Based Price Strategy, the marketer sets prices in accordance with competitors.
Theoretically, retailers maximize their profits by setting prices based on the price sensitivity of customers and the cost of merchandise and considering the prices being charged by competitors. Initial markup – retail selling price initially set for the merchandise minus the cost of the merchandise
Digitally empowered, price-conscious consumers have rocked retailers’ worlds. High profile announcements by mega-retailers to drive sales and combat “showrooming” have been showcased in the media and at conferences around the world.
RSR’s fifth annual benchmark study on retailers’ pricing capabilities moves beyond the hype to the truth.
Pricing Understanding and Capturing Customer Value - MarketingFaHaD .H. NooR
outline
What Is a Price?
Customer Perceptions of Value
Company and Product Costs
Other Internal and External Considerations Affecting Price Decisions
Customer Value-based pricing uses the buyers’ perceptions of value, not the sellers’ cost, as the key to pricing. Price is considered before the marketing program is set.
Value-based pricing is customer driven
Cost-based pricing is product driven
Non price competition is among the characteristics of Oligopoly market where firms compete to win the market share by aggressive advertisement programs rather than price. The climax of Non-price competition is the formation of Cartels which are illegal in most economies.
KSS Retail: The Evolution of Retail PricingKSSretail
Summary version of presentation by Lyle Walker, VP Marketing, KSS Retail, at "Pricing & Revenue Management Strategy for Retail," a conference produced by IQPC. April 26 - 28, 2011, Lake Buena Vista, FL.
From Retail to Wetail: the future of retail communicationAlessandro Panella
The retail landscape has changed dramatically over the last 10 years. New technologies have forced retailers to rethink their business models and the way they will engage with consumers and shoppers in the future.
“I think that a lot of retailers are facing up to the fact that the world is omni-channel or multichannel. The point is that retailers have to realize that they need to engage with shoppers whenever and wherever those shoppers are thinking about purchasing.” says Bryan Roberts from Kantar Retail in the latest Brand Z report about the most valuable Retailer Brands in 2012.
During that period of time we’ve seen a pure-play e-commerce retailer, Amazon, become the most valuable retailer brand in the world. The role of the physical store has changed – moving away from merchandising products to offering unique brand experiences. To put it in the words of Vittorio Radice, CEO of leading Italian department store La Rinascente, “We want to be the place where we know that the people shopping there are not actually shopping for products, they‘re shopping for an experience.”
This transformation is happening everywhere. Discounters have recognized the need to reinvent themselves and provide better quality and service instead of just cheap prices as evidenced by the move of Aldi Süd in Germany who is planning to grow the share of branded products in its assortment to as much as 25%. Shoppers should no longer be called shoppers if one thinks about the traditional definition: “One who visits stores in search of merchandise or bargains.” The times when people were searching for just merchandise or bargains are gone. The explosion of social media and the many possible brand interactions have created a new breed of shoppers. These people want to have a say in what is sold, they join forces to gain better prices and are more than happy to share their experiences if they feel listened to.
So how do retail brands strive in such an environment? How will they engage with the new breed of shoppers? What does the future of retail communication look like? These are just some of the questions we will raise in this study and we hope that you’ll find the answers interesting.
Theoretically, retailers maximize their profits by setting prices based on the price sensitivity of customers and the cost of merchandise and considering the prices being charged by competitors. Initial markup – retail selling price initially set for the merchandise minus the cost of the merchandise
Digitally empowered, price-conscious consumers have rocked retailers’ worlds. High profile announcements by mega-retailers to drive sales and combat “showrooming” have been showcased in the media and at conferences around the world.
RSR’s fifth annual benchmark study on retailers’ pricing capabilities moves beyond the hype to the truth.
Pricing Understanding and Capturing Customer Value - MarketingFaHaD .H. NooR
outline
What Is a Price?
Customer Perceptions of Value
Company and Product Costs
Other Internal and External Considerations Affecting Price Decisions
Customer Value-based pricing uses the buyers’ perceptions of value, not the sellers’ cost, as the key to pricing. Price is considered before the marketing program is set.
Value-based pricing is customer driven
Cost-based pricing is product driven
Non price competition is among the characteristics of Oligopoly market where firms compete to win the market share by aggressive advertisement programs rather than price. The climax of Non-price competition is the formation of Cartels which are illegal in most economies.
KSS Retail: The Evolution of Retail PricingKSSretail
Summary version of presentation by Lyle Walker, VP Marketing, KSS Retail, at "Pricing & Revenue Management Strategy for Retail," a conference produced by IQPC. April 26 - 28, 2011, Lake Buena Vista, FL.
From Retail to Wetail: the future of retail communicationAlessandro Panella
The retail landscape has changed dramatically over the last 10 years. New technologies have forced retailers to rethink their business models and the way they will engage with consumers and shoppers in the future.
“I think that a lot of retailers are facing up to the fact that the world is omni-channel or multichannel. The point is that retailers have to realize that they need to engage with shoppers whenever and wherever those shoppers are thinking about purchasing.” says Bryan Roberts from Kantar Retail in the latest Brand Z report about the most valuable Retailer Brands in 2012.
During that period of time we’ve seen a pure-play e-commerce retailer, Amazon, become the most valuable retailer brand in the world. The role of the physical store has changed – moving away from merchandising products to offering unique brand experiences. To put it in the words of Vittorio Radice, CEO of leading Italian department store La Rinascente, “We want to be the place where we know that the people shopping there are not actually shopping for products, they‘re shopping for an experience.”
This transformation is happening everywhere. Discounters have recognized the need to reinvent themselves and provide better quality and service instead of just cheap prices as evidenced by the move of Aldi Süd in Germany who is planning to grow the share of branded products in its assortment to as much as 25%. Shoppers should no longer be called shoppers if one thinks about the traditional definition: “One who visits stores in search of merchandise or bargains.” The times when people were searching for just merchandise or bargains are gone. The explosion of social media and the many possible brand interactions have created a new breed of shoppers. These people want to have a say in what is sold, they join forces to gain better prices and are more than happy to share their experiences if they feel listened to.
So how do retail brands strive in such an environment? How will they engage with the new breed of shoppers? What does the future of retail communication look like? These are just some of the questions we will raise in this study and we hope that you’ll find the answers interesting.
Today, nearly 43% of the world is connected to the internet1, enabling us to talk, share photos, and conduct business halfway across the globe. As a result, we have seen more technological advancements in the past 10 years than we’ve witnessed in the past 10,000 years. And in the next five years, we’ll see even more advancements.
In this overview provided by BI Intelligence, Business Insider’s premium subscription research service, we identify the key trend in each of our top vertical areas including Mobile, E-Commerce, Digital Media, Digital Financial Services, and the Internet of Things.
2. Learning outcomes At the end of this session students should be able to: Describe the various methods of determining retail pricing Understand the theories and concepts relating to retail pricing Discuss the relationships between pricing policies, positioning and customer demand Apply pricing strategies and tactics 2
3. Some influences on retail pricing decisions Environment influences Political forces Economic forces Competitive forces Supplier power Cultural forces Legal forces Technological forces 3
5. Possible pricing objectives (not mutually exclusive!) Long term profit maximisation Short term profit maximisation Market penetration Market defence Market stabilisation/disruption Market image (Quality/value/societal?) Pricing integrity Clearance pricing (adapted from McGoldrick, 2002, p370) 5
6. Retail pricing policies Three main categories: Demand oriented pricing - price determined by what the customer will pay. Cost oriented pricing - identify the cost of the product and add a mark-up to cover selling costs Competitive pricing (but who are the competition –supermarkets for electronics? E-retailers?) 6
8. Pricing strategies and tactics Tactical Loyalty points/bonuses (&/or strategic?) Loss leader pricing (and strategic?) Multibuy and linked purchases (and strategic?) Seasonal sales (tactical &/or strategic?) Note: these strategies and tactics must be consistent with other elements of the marketing mix 8
9. Pricing strategies in food retailing ASDA: different approach from category to category with longer-term promotional prices (relying on supplier relationships). Promotes EDLP (McGoldrick argues that supermarket retailers really don’t do EDLP!) Tesco: takes the high ground on price cuts, uses a mix of short term price promotions and flashes competitive pricing stance on shelf. For example- offers extra loyalty points as promotion Sainsbury: focuses on quality, uses multibuy promotions (but note success of “bundling” at M and S now copied by Tesco, Waitrose) (from The Grocer, 2000, Kent and Omar P357) 9
10. Are shoppers insensitive to pricing changes? They can be desensitised Product differentiation Multiple dimensions of quality, preferences Loyalty to products, brands, stores Local competitive situation and actions Reduced levels of price awareness But problems of measuring customer sensitivity! 10
11. Dimensions of retail pricing McGoldrick’s multi-dimensional framework The comparative dimension of retail pricing represents the many differences in price between those of the retailer and those of direct and indirect, local and national competitors using price, cost and mark-up 11
12. Dimensions of retail pricing The retail price affects: Sales (short term) Price image development (long term) Positioning (long term) 12
13. Dimensions of retail pricing Comparative dimensions - price audits, subjective comparisons, multi-segment pricing Geographic dimensions - differences between stores in same chain, local differences Assortment dimensions - leader lines, key value items Time dimensions - adjustments over time (eg EDLP v Hi-Low, Seasonal sales, mega days, temporary offers 13
14. Retail Positioning COMPARATIVE DIMENSION Comparisons with rival companies Price auditing Subjective comparisons Multi-segment pricing GEOGRAPHICAL DIMENSIONS Differences between stores in same chain Area price differences Local pricing PRICE COST MARK-UP ASSORTMENT DIMENSION Mark-up differences within the range Leader line and KVI’s Price awareness Unit pricing Price endings Price lining TIME DIMENSION Price adjustments over time Price images Hi-Los vs EDLP Temporary offers Seasonal sales Price Image Development 14
15. Consider the difficulties Comparative dimension Information may be difficult to obtain Price audits – (e.g. Which?, trade audits (AC Nielsen), retailers own comparison audits) But which goods? Which stores? Which regions? When monitored? Effect of own brand? Weightings? Objective or subjective? Geographical Assortment Time 15
16. Sales/clearance Needed because of: Fashion cycles Seasonal changes Competitor actions Changing consumer confidence Need for clearance of excess stock BUT –have become a strategy for some retailers 16
17. Sales/clearance Should sale be: Seasonal clearance? Long/short duration? Eg 24 hour, 3 day spectacular? Perpetual? Limited to specific items/departments? Limited in depth (fashion norm in Europe is 30-40% impact on margin but Zara 15-20%) 17
18. Are shoppers insensitive to pricing changes? They can be desensitised Product differentiation Multiple dimensions of quality, preferences Loyalty to products, brands, stores Local competitive situation and actions Reduced levels of price awareness But problems of measuring customer sensitivity! 18
19. Price audits-eg Which?, trade audits (AC Nielsen), retailers own comparison audits But which goods? Which stores? Which regions? When monitored? Effect of own brand? Weightings? Objective or subjective? 19
20. Seminar 1 Read the article ‘Is the price right’ Retail Week (03.12.10) and add your views to the comments in the discussion forum. http://www.lexisnexis.com:80/uk/nexis/search/homesubmitForm.do 2. Search retail texts for information about ‘seasonal sales’ in readiness for next week. 20
21. Seminar 2 – not for 2011 Case study: ‘Supermarkets put 160% premiums on ‘green’ groceries’ Express your opinion on whether or not a premium price on organic food is justified Suggest ways of applying the multidimensional framework of retail pricing to supermarket organic foods at a supermarket of your choice 21
