Skip to main content

Retail Pricing Models

By

Retail Pricing - Different Types of Pricing Models

The sale of goods from fixed points (malls, department stores, supermarkets and so on) to the consumer in small quantities for his own consumption is called as retail. According to the concept of retailing, a retailer doesn’t sell products in bulk; instead sells the merchandise in small units to the end-users.

Retail Pricing

Cost Plus Pricing Mechanism

Every organization runs to earn profits and so is the retail industry.
Cost plus pricing works on the following principle:
  • Cost Price of the product + Profit (Decided by the retailer) = Final price of the merchandise.
According to cost plus pricing strategy the retailer adds some extra amount to the actual cost price of the product to earn his share of profits. The final price of the merchandise includes the profit as decided by the retailer.

Cost Plus Pricing

  • Cost plus pricing strategy takes into account the profit of the retailer.
  • Cost plus pricing is an easy way to calculate the price of the merchandise.
  • The increase in the retailer price of the merchandise is directly proportional to the increase in the cost price.
  • The customers however do not have a say in cost plus pricing.
Manufacturer Suggested Retail Price (Also called List Price or Recommended retail price)
According to manufacturer suggested retail pricing strategy the retailer sets the final price of the merchandise as suggested by the manufacturer.

MSRP

  • The retailer sells his merchandise at a price suggested by the manufacturer.
Condition 1
  • The retailer sells the product at the same price as suggested by the manufacturer.
Condition 2
  • The retailer sells the merchandise at a price less than what was suggested by the manufacturer - Such a condition arises when the retailer offers “Sale” on his merchandise.
Condition 3
  • Retailers initially quote an unreasonably high price and then reduce the price on the customer’s request to make him realize that a favor has been done to him. A condition of Bargain - where the customer negotiates with the retailer to reduce the price of the merchandise.

Competitive Pricing

The cut throat competition in the current retail scenario has prompted the retailers to guarantee excellent customer service to the buyers for them to prefer them over their competitors.
  • The price of the merchandise is more or less similar to the competitor’s but the retailers add on certain attractive benefits for the customers. (Longer payment term, gifts etc.)
  • The retailers ensure that the customers leave their store with a smile to have an edge over the competitors.
  • He tries his level best to offer better services to the customers for a better business in future.

Pricing Below Competition

According to pricing below competition policy
  • The price of the merchandise is kept lesser than what is being offered by the competitors.

Prestige Pricing (Pricing above competition)

According to prestige pricing mechanism, the price of the merchandise is set slightly above the competitors.
The retailer can charge higher price than the competitors only under the following circumstances:
  • Exclusive Brands at the store.
  • Brand image of the store
  • Prime location of the retail store
  • Excellent customer service
  • Merchandise not available at any other store
  • Latest Trends

Psychological Pricing

  • Certain price of a product at which the consumer willingly purchases it is called psychological price.
  • The consumer perceives such prices to be correct.
  • A retailer sets a psychological price which he feels would meet the expectations of the buyers and they would easily buy the merchandise.

Multiple Pricing

  • According to multiple pricing, the retailer sells multiple products (more than one) for a single price.
  • The retailers combine few products to be sold for a single fixed price.
  • 3 Shirts for $100/- or 3 Perfumes for $20/- and so on.

Discount Pricing

According to discount pricing, the retailer sells his merchandise at a discounted price during off seasons or to clear out his stock.

Labels:

Comments

Post a Comment

Popular posts from this blog

HUMAN RESOURCE PLANNING AT WIPRO

By
HUMAN RESOURCE PLANNING AT WIPRO Overview of Wipro Wipro started   as vegetable oil company in 1947  Azim Premji, a graduate in Electrical Engineering from Stanford University, at the age 21, repositioned and transformed Wipro (Western India Vegetable Products Ltd) into a consumer goods company  Producing hydrogenated cooking oils, laundry soap, wax and tin containers. 1975 - Wipro Fluid Power to manufacture hydraulic and pneumatic cylinders. At that time, it was valued at $2 million. 1977 - Entry into information technology sector. 1979 - developing its own computers 1981 - selling the finished product. 1980 - moved in software development 2000 - Wipro Ltd ADRs were listed on the New   York Stock Exchange. Employs more than 1,00,000 people in over 50 countries.  A career at Wipro means to learn and grow continuously, opportunities to work on the latest technologies alongside the finest minds in the industry, competitive salaries, stock options and
1 comment
Read more

Retailer: Characteristics, Functions and Services

By
Characteristics, Functions and Services of a Retailer In the fast changing globalized and a technology-driven business world, Retail industry over last few decades has witnessed a sea change. World’s largest retail giant of the present times Walmart is operating worldwide by establishing hypermarkets in various countries by taking the help of sophisticated means of communication as well as information systems technology. A careful analysis of the trends reveals that in the Fortune 500 list of organizations, 50 are from retail industry and the top rank is occupied by the world’s No. 1 retail giant Walmart. The statistics convincingly reveal how fast the retail industry has grown and paved the path for expansion of business as well as employment opportunities. Characteristics of a Retailer In the entire distribution chain, a retailer is considered to be the final link, who deals directly with the customer. A retailer purchases in bulk from the wholesalers and sell
Post a Comment
Read more

Three Tips for Motivating Your Customer Service Team

By
Three Tips for Motivating Your Customer Service Team Scripting exactly what customer service employees should do in every situation drains the initiative out of even the most highly motivated workers ! But when you set up a system that enables you to trust your employees to exercise their own judgment and learn from their experience, they may well deliver a far better customer experience. (1) Establish guardrails !  People handling calls should understand where they have latitude and where they don’t. Within those guardrails, your team should be free to exercise judgment. (2) Seek feedback.  Ask customers for feedback after each transaction. Circulate the comments to team leaders so they can see where they’re succeeding, where they still have work to do, and what, specifically, your customers point out. (3)Coaching and support.  Free your supervisors and experienced customer care professionals from some tasks so they can devote time to coach
Post a Comment
Read more