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RETAIL PRICING

Presented By: Kshipra Garg Roll No. 26

PRICING STRATEGIES IMPORTANCE Setting the proper price point is instrumental in attracting your target customer. Some customers are willing to pay more for a product as long as they feel they are getting value for their dollar. Retailers have responded to customer needs with a variety of retail formats ranging from bargain basement to high-end retailing. . Most customers however are price-sensitive and are always seeking the lowest possible price.

 Some retailers may offer “Low Price Guarantee”. .  Walmart/Canadian Tire/Business Depot utilize this EDLP strategy.EVERY DAY LOW PRICING (EDLP)  Strives for low pricing but does not necessarily mean “Lowest”.  As there are few price fluctuations. “same price”may be more descriptive.

but utilize advertising to promote frequent sales.HIGH-LOW PRICING  Retailers offer prices often higher than their competitors prices. .  This strategy once used primarily for end-of –season markdowns but due to increased retail competition are now much more frequent.

This promotes store loyalty and more frequent customer purchases.  Reduced Advertising. and stable pricing means catalogues do not become outdated as quickly.EDLP reduces the need for weekly advertising.EDLP limits fluctuations in merchandise demand due to sales. . This results in less out-of-stocks and a more satisfied customer.EDLP BENEFITS  Reduced Price Wars.Successful EDLP strategies reduce customer scepticism about initial retail prices. enabling retailers to avoid highly competitive price wars.  Reduced Stockouts.

Sales Create Excitement. the bargain basement shopper is attracted. When a sale then occurs the consumer uses the high price point as a point of reference. and crowds create excitement Sales Move Merchandise.Initial high price point targets the less price sensitive but fashion leading consumer.    .All merchandise will sell eventually.Sales draw crowns. When merchandise is blown-out. Emphasis on Quality. As markdowns begin the more price sensitive shopper seeks to purchase.HIGH-LOW BENEFITS  Same Merchandise Appeals to Multiple Markets. Sales clear out merchandise even if margins decrease.Initial high price points send a message to the consumer about the high quality of the merchandise.

.Retailers set their prices based on what they think the customer is willing to pay.The retail price is determined by adding a fixed percentage to the cost of the merchandise.  DEMAND-ORIENTED.Retailers set their prices based their competitors prices rather that cost or demand implications.PRICE SETTING APPROACHES  COST-ORIENTED.  COMPETITION-ORIENTED.

COUPONS  3.PRICE ADJUSTMENTS  In Canada retailers are relatively free to promote adjustments to their initial retail prices in order to generate sales. VARIABLE UNIT PRICING . MULTIPLE UNIT PRICING  6.  1. PRICE BUNDLING  5. MARKDOWNS  2. Common price adjustments include. REBATES  4.

end-ofseason merchandise 4. .MARKDOWNS  A reduction to an initial retail price for the purpose of clearance or promotion.  Promotion utilizes the high-low strategy to promote merchandise through sales in an effort to. 1. generate cash in order to purchase new merchandise and 3. 1.slow moving merchandise 2. obsolete merchandise 3.  Clearance sales used to get rid of. Marked down merchandise not account for approximately 20% or retail sales. make room for new merchandise 2. increase retail store traffic. merchandise priced higher than competitors.

COUPONS  Discounts are offered on specified items when purchased at a certain store.  Attracts price-sensitive shoppers. .  Protects market share.  Attracts first time shoppers.  Encourages multi-purchases of non discounted items.

.REBATES  A portion of the purchase price is returned to the customer upon proof of purchase.  Similar to couponing but the manufacturer has no handling costs.  Generally used with higher priced merchandise so that customer perceives the savings as being worth the time and effort.  Often referred to as “phantom” discounting because often the consumer does not follow through with the rebate redemption.

in different markets or in different zones.  Variable Pricing occurs when different prices for the same product are charged at different stores.  Multiple-Unit bundling is similar to price bundling but multiple units of only one product is sold.Bundling and Variable Pricing  Price bundling offers two or more products but at one price. . Usually variable pricing is a tactic used by retailers to compete with competitors for market share in specific areas. Used to increase sales volume.

Wholesaler vs.  Quantity discounts occur when ordering high quantities.  This practice is only illegal if the sale lessens competition (favouring one retailer over another). ie.Legal Issues in Retail Pricing  Price Discrimination.  Sale conditions often justify pride discrimination (qty ordered/transportation costs etc).occurs when a vendor sells identical products to two or more customers at different prices. This practice is legal provided the wholesaler performs more functions than the retailer in the distribution channel. .  Functional discounts (trade discounts) occur when prices are lowered to customers in different trades. retailer.

.Horizontal Price Fixing  This occurs when two or more retailers agree to fixed prices even though they are in direct competition with each other.  This practice reduces competition in the market and favours the retailer over the consumer.

Bait and Switch Tactics  Retailers lure customers into a store with lower than usual sales promotions (Bait). then tries to upsell the customer to a higher priced brand or informs the customer that the advertised brand is sold out. .

 Retailers have been found guilty of purposely using this tactic.  Normally these mistakes occur accidentally and sometimes are beneficial to the consumer. .Scanned versus Posted Price  This occurs when the price charged at the electronic scanner differs from the price advertised where the merchandise was purchased.