“Price is what you pay. Value is what you get.” – Warren Buffett
What are the retail prices for the items in your store? How do those prices affect customers? Retail managers and business owners need to be familiar with how pricing works and how to set the right price for their products. This article will discuss retail prices and pricing strategies and when they provide retail outlets with a competitive advantage!
What are Retail Prices?
The retail price is the final price when a product is sold to customers. It means that consumers or end-users do not buy the product with the intention of re-selling it.
The price is also what a consumer is willing to pay for a product directly related to their perception of the value being communicated. Factors like branding and value proposition play a role in how customers perceive value.
It All Starts With Basic Pricing
Suggested Retail Price: The manufacturer suggested retail price (MSRP) The price, often known as the MSRP, is the suggested selling price of a product at the point of sale set by its manufacturer. Some merchants refer to the MSRP as the list price or Recommended Sale Price (RSP).
Discount pricing: “Discounting” refers to various techniques and strategies businesses use to encourage interest, clear out overstock, or boost sales. Consumers’ perception that they’re getting an excellent bargain for an item or service is essential for discount pricing’s success.
Wholesale pricing: the wholesale price businesses charge retailers who buy products in large volumes. Retail prices are what retailers set as the final selling price for consumers.
Pricing Techniques & Strategies
The retail industry uses different pricing methods, strategies, and techniques to achieve set objectives. Large corporations such as Lowes, Walmart, Target, Costco or Amazon use pricing as part of their marketing strategy since it affects customers relations and company image. In contrast, smaller retailers generally use price to remain competitive. Nonetheless, whether you are a large department store or a small retailer when prices are fair and competitive, consumers return, and profits go up.
Break-even pricing
Break-even retail price is the amount of money, or change in value, required to cover the costs of buying an item. It can also refer to the cost of producing a product that must cover the product’s sale.
When is it used?
Break-even pricing is frequently utilized as a competitive approach to gain market share rapidly. However, implementing a break-even price strategy might give the impression that the product is low quality.
Competitive pricing
Competitive pricing is an approach that finds the best price points to take advantage of a market’s relative position with the competition.
When is it used?
Competitive retail pricing is a strategy used by businesses selling similar products. Competitive pricing is generally used once a price for a product has reached equilibrium.
Dynamic pricing
Dynamic pricing, also called real-time pricing, is a more flexible price that adjusts according to demand. Dynamic pricing is a method for setting the cost of a product or service that is highly adaptable. Businesses can use this approach to change prices on the fly in response to market demands.
When is it used?
If the competition is selling items at a significantly higher price, a dynamic pricing approach may be used undercut the competition and attract business. The price can change based on the purchasing habits/needs of the consumers.
Price Anchoring
A price anchor is a pricing technique that exploits buyers’ natural inclination to trust their first knowledge in making purchasing decisions. For example, many retail stores will establish a visible initial rate for a product but then announce that it is “on sale.”
When is it used?
Anchoring establishes a price point on which customers may rely when making purchases. For example, when you see a product on sale for $45, the regular price is $50. Therefore, the anchor price becomes $50, and the lower price item is $45.
Bundle pricing
Bundle pricing is a marketing technique where individual goods are grouped and sold at one price. A bundle has now been established as its distinct product and purchased as such.
When is it used?
Bundle pricing is a strategy of offering a collection of complementary goods at one price. Or, it can be used to improve the price of low-volume items. When selling these complimentary items together, you provide customers with all the features they need to get the most from your product. This strategy is also used to reduce retail store inventory or overstock.
Cost-plus pricing
Cost-plus pricing, aka markup pricing, is a strategy used to increase the price of products. It’s when a certain percentage is added on top of the cost it takes to make one unit of a product (unit cost).
When is it used?
Cost-plus pricing is sometimes employed by retail enterprises such as clothing retailers, grocers, and department stores. In these instances, the offered items vary, and each has its own markup percentage.
Value-based pricing
Value-based pricing is a strategy where the product price is determined by what consumers perceive as the value of that product. For instance, customers are more likely to purchase a high-value good if they perceive it to be underpriced rather than a low-value good when it is overpriced.
When is it used?
When customers perceive a product’s value to be high, it’s essential to use price-value analysis. The technique is typically used with items with a certain level of prestige or is unique. For example, well-known designers of clothing utilize Value-based pricing.
Price skimming
A pricing approach in which the producer begins with a high introductory price to acquire consumers with a passionate desire for the product (brand) and the financial means to purchase it, then gradually reduces the cost to attract subsequent market sectors.
When is it used?
Price skimming is a strategy used when a new product enters a market. The objective is to gather as much revenue as possible while consumer demand is high and competition has not joined the market.
Penetration pricing
Penetration pricing is the initial offering of a product. Businesses employ this marketing technique to entice clients to try a new product by providing a reduced price. As a result, a new product helps it break into the market and attract customers away from rivals.
When is it used?
Penetration pricing is frequently used to promote the launch of a new product at a retail store. It works best in a market with limited product variety, usually because the product demand is price elastic. Products with elastic prices are heavily influenced or very sensitive to changes in market prices. For example, if there are only three competitors and the cost of one of the products changes, customers will buy that product over the others (quality being similar).
Price Matching
Price matching is a policy set by some retail stores that states if you discover the same item for less somewhere else, they will match or exceed the price. Price matching is available online and in-store, generally before buying.
When is it used?
Pricing matching prevents businesses from losing market share to customers by allowing for the management of the competition. When making their final purchase selection, online customers place a high value on pricing.
It’s essential to choose the pricing techniques that will work best for your business and products. If you’re not sure which pricing strategy to use, consult with an experienced retail consultant who can help you make the right decision for your company. With careful planning and execution, you can implement one of these methods and improve your bottom line. Have you tried using a specific pricing technique in your store? What was the outcome?
Thank you for reading our article!
#TimeWellScheduled is a secure, online time and attendance software that is 100% tailored to meet your scheduling needs! In addition, #TimeWellScheduled facilitates employee attendance tracking & payroll tasks and enhances staff management capabilities. Plus, our service is free for up to 10 employees!
Click: here to download our (Excel) employee scheduling template; IT’S FREE!
