Principles of Retailing

Retail Pricing

Goods and services must be priced in a

way that achieves profitability for the
retailer and satisfies customers. A
pricing strategy must be consistent
with the retailer’s overall image
(positioning), sales, profit, and return
on investment goals
 A discount orientation

Retail
Pricing
Orientations With an at-the-market orientation

Through an upscale orientation

 Consumers
External Factors Effecting
Government (federal, state,
Retail Pricing and local)

Manufacturers, wholesalers,
and other suppliers

Current and potential

competitors
Customers
Price elasticity of demand:
Government
(federal, state,
and local) HORIZONTAL PRICE FIXING
VERTICAL PRICE FIXING
PRICE DISCRIMINATION
MINIMUM-PRICE LAWS
UNIT PRICING
PRICE ADVERTISING
Manufacturers,
wholesalers, and Exclusive Distribution

other suppliers

Strength of Manufacturer

Retailer image

Manufacturer image
Market pricing Administered pricing Price copying
Steps to develop Pricing Strategy

Retail Objectives

Broad Price Policy

Price Strategy

Implementation of Price Strategy

Price Adjustments
Retail Objectives

OVERALL PRICING SPECIFIC PRICING

OBJECTIVES OBJECTIVES
Retail
Objectives: OVERALL
PRICING OBJECTIVES

Sales revenue goal Profit goal

Return-on-inventory Inventory turnover

investment goal
Retail Objectives ( Over all
Objectives)

Market
penetration pricing

Market skimming
pricing
 To maintain a proper image
• Retail
Objectives: SPECIFIC To encourage shoppers not to be overly price-
PRICING OBJECTIVES conscious
To be perceived as fair by all parties (including
suppliers, employees, and customers)
To be consistent in setting prices

To increase customer trac during slow periods

To clear out seasonal merchandise

To match competitors’ prices without starting

a price war
To promote a “we-will-not-be-undersold”
philosophy
Broad price policy

No competitors will have lower prices, no competitors will have higher prices

All items will be priced independently or the prices for all items will be interrelated

Price leadership

Prices will be constant over a year or season

Price Strategy

Demand-oriented pricing

Cost-oriented pricing

Competition-oriented pricing
Demand-oriented pricing Price–quality
association

Prestige
pricing
Cost-oriented
pricing
Competitor Oriented Pricing

Pricing Below the Pricing at the Market Pricing Above the

Market Market
Competitor Oriented Pricing
Pricing Strategy CUSTOMARY AND VARIABLE
PRICING

ONE-PRICE POLICY AND

FLEXIBLE PRICING

ODD PRICING

LEADER PRICING

MULTIPLE-UNIT PRICING

PRICE LINING
Pricing Adjustments

MARKDOWNS MARKUPS
Retail Communication A retailer needs a superior
communications strategy to properly
position itself in customers’ minds, as
well as to nurture their shopping
behavior. When customers have been
attracted, the retailer must strive to create
an engaging shopping experience for
them. Various physical and symbolic cues
can be used to do this.
Retail Image
Atmosphere and Retail
Image
Exterior

Storefront Marquee
Store Layout ALLOCATION OF FLOOR
SPACE

CLASSIFICATION OF
STORE OFFERINGS

DETERMINATION OF A
TRAFFIC-FLOW PATTERN

DETERMINATION OF
SPACE NEEDS

ARRANGEMENT OF
INDIVIDUAL PRODUCTS
General Interior

FLOORING COLORS SOUNDS FIXTURES

TEXTURES AISLES OTHER

INTERIOR
Assortment display
(POINT-OF-
PURCHASE)
DISPLAYS
A theme-setting display

Ensemble display

Rack display

Dump bin
Advantages of PoP Displays are persuasive

Displays create the proper

placement for new products or
promotions
Displays offer flexibility in
messaging and placement

Displays enhance the overall

shopping experience
Dimensions of
Retail Image Price leaders
Location leaders
Atmospherics leaders
Product quality leaders
Selection leaders
Service leaders
Retail Promotional Mix

ADVERTISING PUBLIC
RELATIONS

PERSONAL SALES
SELLING PROMOTION
Advertising

Advertising is paid, nonpersonal

communication transmitted through out-of-
store mass media by an identified sponsor.
Advertising

Paid form: This distinguishes advertising from publicity (an element of public
relations), for which no payment is made by the retailer for the time or space used to
convey a message.

Nonpersonal presentation: A standard message is delivered to the entire audience,

and it cannot be adapted to individual customers (except with the Web).

Out-of-store mass media: These include newspapers, radio, TV, the Web, and other
mass channels, rather than personal contacts. In-store communications (such as
displays) are considered sales promotion.

Identified sponsor: The sponsor’s name is clearly divulged, unlike publicity

Objectives of Advertising

▶ To grow short-term sales

▶To increase customer traffic

▶ To develop and/or reinforce a retail image

▶ To inform customers about goods and services and/or

company attributes

▶ To stimulate demand for private brands

 ➢ TV
Media
➢ Daily papers
➢ Weekly papers
➢ Shopper papers
➢ Web
➢ Phone directories
➢ Direct mail
➢ Radio
➢ Transit
➢ Outdoor
➢ Local magazines
➢ Flyers/circulars
➢ Social Media
Message & Payment
Public relations

Public relations entails any communication that fosters a favorable image for the retailer among
its publics (consumers, investors, government, channel members, employees, and the general
public). It may be nonpersonal or personal, paid or nonpaid, and sponsor controlled or not
controlled.
Public relations To increase awareness of the retailer and its
: Objectives strategy mix
To maintain or improve the company image

To show the retailer as a contributor to the

community’s quality of life
To demonstrate innovativeness

To resent a favorable message in a highly

believable manner
To minimize total promotion costs
 Personal selling

Personal selling involves oral communication with

one or more prospective customers for the purpose of
making a sale. Retail salespeople include anyone who
interacts face-to-face (or via the phone) with the
shopper in a way that encourages that shopper to
make a purchase. The level of personal selling used by
a retailer depends on the image it wants to convey, the
products sold, the amount of self-service, and the
interest in long term customer relationships as well as
customer expectations.
Objectives of Personal Selling

To persuade customers to buy (since they often enter a store after seeing an ad)

To stimulate sales of impulse items or products related to customers’ basic purchases

To complete customer transactions

To provide proper levels of customer service

To improve and maintain customer satisfaction

To create awareness of items also marketed through the Web, mail, and telemarketing
Advantages of Personal Selling

A salesperson can adapt a message to the needs of the individual customer

A salesperson can be flexible in offering ways to address customer needs

The time commitment of the customer is higher than with advertising

There is less audience waste than with advertising; most people who walk into a store are
potential customers
Customers respond more often to personal selling than to ads

Immediate feedback is provided.

Personal Selling Functions
Sales promotion

Sales promotion encompasses the paid communication activities other than

advertising, public relations, and personal selling that stimulate consumer
purchases and dealer effectiveness. The purpose of a promotional campaign
is to build sales in the short term—or sometimes as a longterm strategy of
constant promotional pushes to reach sales goals.
Objectives of Sales Promotion

TO INCREASE TO MAINTAIN TO EMPHASIZE TO COMPLEMENT

SHORT-TERM SALES CUSTOMER LOYALTY NOVELTY OTHER PROMOTION
VOLUME TOOLS
Advantages of Sales Promotion

It often has eye-catching appeal

Themes and tools can be distinctive

The consumer may receive something of value, such as coupons or free merchandise.

It helps draw customer traffic and maintain loyalty to the retailer

Impulse purchases are increased

Customers can have fun, particularly with promotion tools such as contests and demonstrations.
Types of Sales Point-of-purchase
Promotion
Contests
Sweepstakes
Coupons
Frequent shopper programs
Prizes
Samples
Referral gifts
Special events
Retail Determining Determining promotional objectives

Promotional
Strategy Establishing Establishing an overall promotional budget

Selecting Selecting the promotional mix

Implementing Implementing the promotional mix

Reviewing Reviewing and revising the promotional plan

and revising
Strategy: Increase sales.

Determining Stimulate impulse and reminder buying

Promotional
Objectives Raise customer traffic

Get leads for sales personnel

Present and reinforce the retailer image

Inform customers about goods and services

Popularize new stores and Web sites

Capitalize on manufacturer support.

Strategy: Establ All-you-can-afford
ishing overall method,
promotional
budget
Incremental method

Competitive parity
method

Percentage-of-sales
method
Strategy: Sel
ecting
Promotional Public
Mix Advertising
relations

Personal Sales
selling promotion
Strategy: I MEDIA DECISIONS
mplementa
TIMING OF THE PROMOTIONAL MIX
tion
CONTENT OF MESSAGES

SALES PROMOTION TOOLS

RESPONSIBILITY FOR COORDINATION

MAKEUP OF SALES FORCE