Retail Pricing Strategies

RETAIL PRICING
Research on price In Buying Decisions
reveals Different Motivations for Different
market Segments.
CONSUMER PURCHASE & PRICING:
Price Elasticity Of Demand – Sensitivity to
Price Changes. Small % Change in Price
Substantial % Change in Demand – High
Price Elasticity. Urgency to purchase is low
or acceptable substitutes exist.
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Large % Change in Price Small % Change in
Demand – Demand In-Elastic. Urgency to
purchase is high or there are no acceptable
substitutes. Occurs with Brand or Retailer
Loyalty.
Unitary Elasticity - % Change in Price
directly off-set by % Changes in Quantity
Demand
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In Retailing computing Price Elasticity is
Difficult due to other factors of Product
Mix also interplay. Demand hard to
predict. Price Sensitivity varies by Market
Segment based on Shopping Orientation:-
Economy: Shop around for Lowest Price.
Segment Growing rapidly.
- Status: Perceive Retailers as different, Look
for Prestige Brands and customer Service.
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- Assortment oriented: Seek Retailers with
Strong Assortment in Product Categories
and look for Fair Pricing
- Convenience Oriented: Shop only when
they Must at nearby locations with long
hours. Prepared to pay higher Prices.
 - Loss Leaders: Price below cost to attract

more customers.
 - Predatory Pricing: Seek to Reduce
Competition by selling at very low Pricing
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Unit Pricing: Indicate Pricing at a unit, e.g.,
per Kg – to enable quick comparisons by
customers.
Sharp Practices:
Bait and Switch Advertising:
Lures customer with exceptionally low
prices. On contact customer informed of
stock-out and offer another product.
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Market Pricing: High Competition,
customers seek lowest pricing. Price
increase leads to brand switching.
Administered Pricing: Strong product
Differentiation, Control by retailer on Price
charged. For customers Image, Assortment,
Personal service more important than
Price, e.g. Fashion apparel stores, upscale
restaurants.
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PRICING OBJECTIVES:
Market Penetration – Achieve large revenues
by setting Low prices and sell high unit
volumes – an aggressive strategy to
discourage competition
Market Skimming – Profit is Objective.
Charge Premium Prices and attract
Customers seeking Service, Assortment &
Status. Does not maximize Sales. ROI or
early Cash Recovery Objectives met.
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Prestige Pricing:
Premium pricing to convey exclusive image
for the product or Service. Evoke
perceptions of Quality and Prestige.
Habeebs Parlour, Delhi Golf Club, Luxury
hotels.
Odd – Even Pricing:
Odd Pricing to indicate lower “Good” deal.
Even Pricing to indicate higher quality.
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Bundled Pricing:
Offering two or more Products or Services at
one price.
Fixed & variable Pricing:
Variable pricing for highly differentiated or
unbranded products. Fixed pricing for
Branded products.