RETAIL PRICING POLICIES
Pricing
Retailers are also guided by a number of price-setting policies that
supplement and modify price-setting methods.
Most retailers follow a single pricing policy, charging all customers the
same price for the same product under similar circumstances. In contrast to
many foreign consumers, most consumers are accustomed to paying the
established price marked on the merchandise. Price "haggling" or
"bargaining" is usually limited to big-ticket items, such as automobiles and
appliances, and used merchandise. Bargaining over the price for big-ticket
items often centers on the allowance the customer can receive for a tradein. A single-price policy facilitates the speed at which each transaction can
be made, helps simplify the retailer's various accounting records, and
reduces the retailer's need for makes a self-service strategy possible
A flexible pricing policy allows the customer to negotiate the final selling
price. The best bargainers receive the lowest prices. Retailers that use a
Variable price policy deal in merchandise with one or more of the following
characteristics (1) high initial markups, (2) need for personal selling, (3)
unstandardized product features, (4) service requirements, and (5)
infrequent purchase rates. Flexible pricing gives the retailer the ability to
adjust to the consumers purchase motivations, but it can increase the
retailer's labor costs, selling time, and dissatisfaction among any customers
who were unable to negotiate the same low price as some other customers.
A multiple-price policy attempts to increase both unit and dollar sales volume .
This pricing strategy gives customers a discount for making quantity
purchases that is, the retailer offers a reduced price if consumers are willing to
purchase several units at the multiple-unit price.
Odd pricing is the strategy of setting prices that end in odd numbers eg.95c,
$24.95 by setting prices below even dollar amounts the retailer is relying on a
psychological ploy that customers perceive odd prices as substantially below
even prices. The theory is that customer thinks of $2.00 (in the case of $2.95)
instead of the higher $3.00
price. If a retailer wants to project an image of prestige even pricing is
recommended.
Unit pricing- given the wide range of package shapes and sizes together with
the diversity of price tags and product labels, many customers can’t determine
which purchase is the better value for money. As a result, some retailers use unit
pricing to eliminate uncertainty. Unit pricing is the retailing practice of showing
prices on a per unit basis. Customers are then able to compare prices and select
the best value.
Price lining
Price lines are specific pricing points established within pricing zones. A
menswear retailer may attempt to establish three pricing zones for men’s suits.
*The low range under $150
*The mid range between $150-250
*The high range above $250.
Also suppose the retailer has targeted the mid-price customer . Then the retailer
might establish price lines at $139.95.$199.95 and $229.95.
Everyday Low pricing is the policy of maintaining price points at the same low
year-round. By avoiding the pricing Yo-yo of mark-ups and markdowns the
retailer can establish price credibility through consistency. It usually involves
cutting prices by 20-40%. This pricing strategy requires the retailer to be able to
achieve everyday low costs. Cost reductions are possible because of fewer staff
for ticketing and reticketing of stock, less labour for display set up and
maintenance, reduced advertising and promotional costs, fewer returns and
markdowns when items are returned.
Leader pricing is the strategy of selling key merchandise items below their
normal mark-up, or in some cases below cost. The main objective of leader
pricing is to attract customers to the store, in the hope that they will purchase
other merchandise that has normal mark-ups.
Price matching.
A promise to match the lowest advertised price a customer can find .It is a stores
insurance policy that assures customers they will not miss out on the price deals
offered by other retailers.