Chapter 17 Pricing in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH, 10th Edition BERMAN EVANS

Chapter Objectives To describe the role of pricing in a retail strategy and to show that pricing decisions must be made in an integrated and adaptive manner To examine the impact of consumers; government; manufacturers, wholesalers, and other suppliers; and current and potential competitors on pricing decisions To present a framework for developing a retail price strategy: objectives, broad policy, basic strategy, implementation, and adjustments

Pricing Options for Retailers Discount orientation : Low price and low cost At-the-market orientation: Average price ,Middle class average to above average products Upscale orientation: prestigious image store

Figure 17-3: Factors Affecting Retail Price Strategy

Consumer: Price Elasticity of Demand The sensitivity of customers to price changes in terms of the quantities they will buy Elastic – small percentage changes in price lead to substantial percentage changes in the number of units bought Inelastic – large percentage changes in price lead to small percentage changes in the number of units bought

Market Segments by Price Sensitivity Economic consumers: Looking for lowest price all stores same Status-oriented consumers: Different looking for prestige brands Assortment-oriented consumers: looking for a strong selections and fair price Personalizing consumers: the buy where they feel a bond with employees Convenience-oriented consumers: nearby store

The Government and Retail Pricing Horizontal Price Fixing: Illegal agreement in fixing price among manufacturer ,wholesaler and retailer Vertical Pricing Fixing: controlling price vertically between manufacturers ,wholesaler and retailer Price Discrimination (Robinson-Patman Act) Minimum Price Laws: prevent retailer to sell blow cost for specific product Unit Pricing: Item Price Removal :To advocate price removal ,pproduct code pricing Price Advertising

Competition and Retail Pricing Market pricing – retailers often price similarly to each other and have less control over price because consumers can easily shop around Administered pricing – firms seek to attract consumers on the basis of distinctive retailing mixes ,image prices

Figure 17-4: A Framework for Developing a Retail Price Strategy

Objectives and Pricing Market Skimming Market Penetration

Price Policy Choices No competitors will have lower prices; no competitors will have higher prices; or prices will be consistent with competitors All items will be priced independently or the prices for all items will be interrelated to maintain image and ensure proper markups Prices will be constant over a year or season; or prices will change if costs change

Price Strategy Demand-Oriented Pricing : based on consumer desired Cost-Oriented Pricing based on consumer costs Competition-Oriented Pricing based on consumer competitors prices

Demand-Oriented Pricing Psychological pricing Price-quality association Prestige pricing

Price Strategy Concepts Customary Pricing Fixing price Variable Pricing Matching demand One-Price Policy Flexible Pricing Due to bargaining Odd Pricing Leader Pricing Multiple-Unit Pricing (Quantity) Price Lining (Floor and ceiling level of products)

Reasons to Use Multiple-Unit Pricing A firm could seek to have shoppers increase their total purchases of an item This approach can help sell slow-moving and end-of-season merchandise Price bundling may increase sales of related items

Price Adjustments Adaptive mechanism Markdown Additional markup Employee discount

Timing Markdowns Early markdown policy: early lower even demand is fairly Late markdown policy: Taking maximum opportunities to sell in original price Staggered markdown policy: In ascertain period Automatic markdown plan: Automatically controlled depends on stock Storewide clearance : In special events