PRICING IN RETAIL

CONCEPT OF RETAIL
PRICING
 RETAIL PRICING
 Integral part of retail marketing mix
 Source of revenue for the retailer
 Communicate the image of the retail store

FACTORS THAT NEED TO BE TAKEN INTO CONSIDERATION:

 Demand for the product and the target market
 Store policies and the image to be created
 Competition for the product and the competitor’s price
 Economic conditions prevailing at that time
PRICING OBJECTIVE
 In agreement with the mission statement
 In agreement with the merchandising policies
Objectives of retail pricing

 Increasing a market share

 Maximising sales income
 Achieving a target return on investment
 Making a certain amount of profit and improve cash flow
 Reaching a desired profit margin on sales
 Stabilising price and profit margin
 Meeting, beating or discouraging competition.
Objectives of retail pricing

 Discouraging competition from lowering prices

 Skimmingthe market in order to gain early profits and liquidity (charging
high prices to relatively insensitive customers when the product is new on
the market)
 Avoiding criticism from consumers and politicians
 Pricing
in an ethically responsible manner and within the guidelines of the
Consumer Protection Act
Categories of retail pricing Objectives

 Profit-oriented
objectives: aimed at pricing merchandise in such a way that
the desired profits are made
 Sales-oriented objectives: expressed in terms of market share, rand value or
unit sales
 Status quo objectives: maintain existing retail prices or meet competitors
prices
Pricing Strategies

 Everyday low pricing (EDLP)

 High/Low pricing
 Price bundling
 Odd pricing
 Price lining
 Leader pricing.
 EDLP - is a pricing strategy used by retailers which promises
customers the lowest prices in their store without having to use a
coupon, wait for a sales event, or take any other actions to get a
reasonable price on the items they purchase.

 High/Low pricing - a firm initially charges a high price for a

product and later, when it has become less desirable, sells
it at a discount or through clearance sales

 Price bundling - a marketing strategy in which two or more

products are combined to be offered at a lower price than if
the same products were sold separately.
 Odd pricing - Odd-even pricing is a pricing strategy involving the last digit of a
product or service price. Prices ending in an odd number, such as $1.99 or
$78.25

 Price lining - Cell phones: Many cell phone providers offer the same phone at
different prices depending on its features. For example, a phone with a basic
camera is likely to have a lower cost than the same phone with a camera of
better quality

 Leader Pricing - Leader pricing strategy is a distinct pricing strategy directed at

attracting customers. The key instrument used in the approach is about setting
lower price points and reducing profit margins to introduce brands while
stimulating interest in the business or production of a particular product. 
 External Factors Affecting Retail Pricing

 Consumers
 Governmental issues
 Manufacturers/wholesalers/suppliers
 Current and potential competitors
Consumer Factors

 Price elasticity of demand – Measures sensitivity of consumers to price changes.

 A small change in prices results in a big change is quantity – very elastic
 Price sensitivity varies by market segment based on market orientation
 Economic
 Consumers
 Status-oriented consumers
 Assortment oriented consumers
 Personalizing consumers
 Convenience oriented consumers
Price Adjustments

 Markdowns

 Limiting the amount of markdowns

 Clearing out markdown merchandise
 Promotional markdowns.
markdowns

Retail buyers need to find a balance so that

markdowns are not too high or too low as a result of:

Pricing merchandise incorrectly

Not buying the correct amounts of merchandise
Not taking enough risk when purchasing merchandise.
Clearing out markdown merchandise

 Combining
unsold merchandise into of a few retail stores, or sell the
merchandise off in a consolidated sale or outlet store
 Reselling
merchandise to an off-price retailer to recover a small percentage
of the cost
 Donating merchandise to charity
 Auctioning off the merchandise on the Internet
 Storing
the merchandise until next season. May not be ideal as the terms of
inventory carrying cost may be high
Promotional markdowns

Usemark-downs to increase traffic flow in the stores, promote

merchandise and increase sales. Retailers use promotional mark-
downs around holidays or for special events.
Coupons – found:
In newspapers
In magazines
On products
In shelf dispensers
On the Internet
On mobile applications
Loyalty programmes
Pricing across channels

 Pricing strategies across channels should be integrated and transparent

 Consumers are able to check and verify prices in-store using mobile
applications
 Newthreat to retailers: showrooming i.e. shoppers view product in store
and then buy it online
 Online retailers have additional cost of delivering goods.
Consumer protection act

 Retailer
may not charge different prices to different consumers or group of
consumers. The Act does however allow retailers to offer discounted prices
to minors or adults older than 60 years
 Retailersmust also offer bundle goods separately and individually priced so
that the consumer can choose to purchase either the bundle or the
individual products
 If
a retailer has provided an estimate for a service or merchandise, the
retailer may not increase the estimated price unless the retailer has
informed the customer of the additional charges and the customer has
accepted the new estimate
Consumer protection act

 The Act
specifies that a retailer may not display goods without a price in
South African rand

Aretailer may not charge a customer a higher price than the displayed
price, in the case where there is more than one price displayed, the retailer
may not charge a price higher than the lowest price that is displayed
THANK YOU