Price is the value placed on what is exchanged, it is the point at which the exchange between the buyer &seller

takes place, where supply& demand are equal.  Arriving at the right price for a product or service is one of the most difficult task today various factors need to be considered before setting up an appropriate price.  Pricing is an integral part of retail strategy and cannot work in isolation. Cost and Operating expenses need to be considered while establishing the retail price.

Price is an integral element of retail

marketing mix. it is the factor which is the source of revenue for the retailer. The price of a merchandise also communicates the image of the retail store to the customers.  Various factors like the target market, store policies competition and economic condition need to be taken into consideration while setting up an appropriate price for a product.

Factors to be considered while setting up an appropriate price are:

y The primary factor that need to be considered while

arriving at a pricing strategy is the business model that the retailer has chosen to follow. y The next factor to be taken into consideration is the demand for the product and the target market. y The store policies and the store image. y Competition for the product & competitor s price for the similar products. y The economic conditions prevalent at times play a major role in pricing policy.

FACTORS TO BE CONSIDERED WHILE PRICING A PRODUCT.

Retail business model

Uniquenes s of the product

Nature of competitio n

Store policies and image

Economic conditions

The first element to be considered in the cost of goods which is the cost of merchandise and various other expenses, which are involved in the movement of goods from the manufacturer to the actual store. These expenses may be fixed or variable.

Fixed costs are referred to as overhead, are the expenses that don t vary according to the production amounts-such as rent for office space, office equipments,insurance,utilities etc.

These are the expenses that do vary with the amount of service provided or goods produced. They include costs such as hourly pay for a contractor on a specific project, raw-materials etc.

Before determining the price of the product, one needs to determine the cost of the product and take into consideration the Break-Even point.

It is the point at which the retailer neither

makes or loses money in producing a product or delivering a service. It is the process used to uncover the break even numbers. Before calculating the break-even point, it is necessary to determine the fixed as well as the incremental cost per unit[variable cost]

To calculate the Break-even point, the point at which the business will neither make a profit or a loss, the following formula can be used:

 Break even revenue =

Fixed costs 1-Variable cost per unit

It is the difference between the cost of the product and the final

selling price. The mark up can be in rupee terms or in terms of percentage. Mark ups can also be calculated on the cost of the product or the retail price. A markup can be expressed as an either a rupee amount or as a percentage of selling price. A rupee markup occurs when the retailer adds a fixed amount to the cost of the product. a) Markup% (at retail)=(retail selling price-merchandise cost) Determines the retail selling price. b) Markup% (at cost)=(retail selling price-merchandise cost) Determines the merchandise cost.

Cumulative markup:

The cumulative markup is calculated for a group of products.

Initial markup:

It is the difference between the cost price of the merchandise and the initial retail price.

Maintained markup: It is the difference between the gross merchandise cost and the actual selling price.

The pricing policy adopted by the retailer can be: Cost-oriented pricing Demand-oriented pricing Competition-oriented pricing

Cost-oriented pricing:
y In Cost-oriented pricing, A basic mark-up is

added to the cost of the merchandise to arrive at a price.

y Here retail price is considered to be the function

of cost and markup.

y Thus,

Retail price = Markup =

Cost + Markup Retail price - Cost

Demand-oriented pricing
y This policy focuses on the quantities that the

customers would buy at various prices. y It largely depends upon the perceived value attached to the product by the customer. y As, sometimes high priced product is perceived as being of high quality and a low priced product is perceived as being of low-quality. y An understanding of the target market and the value proposition is the key to demand oriented pricing.

Competition-oriented pricing
y When the prices adopted by the competitors play

a key role in determining the price of the product, then it is said to be competition oriented pricing.
y Here the retailer may price the product at par with

the competition.
y That is; above the competitor s price or below the

price.

THE PRICING STRATEGIES BEING ADOPTED BY THE RETAILER INCLUDES:

1.MARKETSKIMMIMG 2.MARKET PENETRATION 3PRICE BUNDLING

4.LEADER PRICING 5.MULTI-UNIT PRICING 6.EVERY DAY LOW PRICING

7. ODDPRICING 8.SINGLE PRICING 9.MULTIPLE PRICING

then to reduce them gradually.

The strategy is to charge High prices initially and

dependent on the Inelasticity of Demand for the product.

The success of a price skimming strategy is largely

strategy is to benefit from short-term profits and from effective market segmentation.

The main objective of employing a price skimming

share by charging Low Prices

This strategy aims at acquiring a larger market

on relatively a small market share often use this strategy.

This strategy will only be possible where the

Retailers who wish to enter a new market or build

demand of the product is believed to be Highly Elastic .

This form of pricing is variation of multiple

pricing where various products are bundled together and sold as a one unit. For e.g.: Fast Food Restaurants putting together and offering products under a Happy-pricemenu

In this strategy, retailer sells one or few items on deep

Discounted Prices to increase traffic and sales on complementary items. The key to a successful leader pricing is that the product must appeal to: a)A large number of people b)It should appear as a bargain Items best suited for leader pricing are those frequently purchased by shopper,e.g.bread,eggs,milk etc.

to the customers who buy in quantity or who buy in product bundle. This involves value pricing for more than one or the same.
For e.g. One T-shirt being offered for 255.99 and two

In this pricing strategy, the retailers offer Discounts

T-shirts for 355.99. Like maggie noodles: 4 individual packs is available for Rs 40 and a pack of 4 is available for Rs 36 giving a discount of Rs 4.

continually price their products lower than other retailers in the area.
The objective is to assure the buyers that they need

It is the strategy adopted by the retailers who

not wait for sale or promotion to achieve the attractive prices across the range of products they want to buy.
For e.g. EASY DAY AND BIG BAZAAR uses such

strategy to promote their products.

Retail prices are set in such a manner that

the prices end in odd numbers.

For e.g. such as 99.99 or Rs.199,Rs.299 etc. This strategy is used to denote a lower sale

price.

In this strategy, retailer charges the same price for the

same product under similar circumstances.

This policy is also referred to as one-price policy. For e.g. The DOLLAR SHOPS which charges one

price for the variety of items sold.

Under this pricing strategy, the customer is given

a discount for making quantity or bulk purchases.

For e.g. A can of soft-drink may be priced as Rs.15

while a pack of three may be sold for Rs.40.