1. Chapter 17 Pricing in Retailing RETAIL MANAGEMENT: A STRATEGIC
APPROACH
11th Edition
BERMAN EVANS
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

2. 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 that consumers, government, manufacturers, wholesalers and other suppliers, current/potential competitors have on pricing decisions
To present a framework for developing a retail price strategy: objectives, broad policy, basic strategy, implementation, and adjustments
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

3. Pricing Options for Retailers
Discount orientation
At-the-market orientation
Upscale orientation
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

4. Figure 17-1: Barnes & Noble – A Huge Selection and Discounts
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

5. Figure 17-2: Comparison Shopping
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

6. Figure 17-3: Factors Affecting Retail Price Strategy
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

7. 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.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

8. Table 17-1: A Movie Theater’s Elasticity of Demand
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

9. Market Segments by Price Sensitivity
Economic consumers
Status-oriented consumers
Assortment-oriented consumers
Personalizing consumers
Convenience-oriented consumers
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

10. The Government and Retail Pricing
Horizontal Price Fixing
Vertical Pricing Fixing
Price Discrimination (Robinson-Patman Act)
Minimum Price Laws
Unit Pricing
Item Price Removal
Price Advertising
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

11. Justifiable Price Discrimination Under the Robinson-Patman Act
Products are physically different.
The retailers paying different prices are not competitors.
Competition is not injured.
Price differences are due to differences in supplier costs.
Market conditions change – costs rise or fall or competing suppliers shift prices.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

12. 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.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

13. Figure 17-4: A Framework for Developing a Retail Price Strategy
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

14. Objectives and Pricing
Market
Skimming
Market
Penetration
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

15. Figure 17-6: Specific Pricing Objectives
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

16. 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.
Price leadership will be exerted; competitors will be price leaders and set prices first; or prices will be set independent of competitors.
Prices will be constant over a year or season; or prices will change if costs change.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

17. Price Strategy Demand-oriented pricing Cost-oriented pricing
Competition-oriented pricing
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

18. Demand-Oriented Pricing
Psychological pricing
Price-quality association
Prestige pricing
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

19. Table 17-4: Markup Equivalents
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

20. Figure 17-7: How to Determine Direct Product Profitability
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

21. Integration of Approaches to Price Strategy
If prices are reduced, will revenues increase greatly? (Demand orientation)
Should different prices be charged for a product based on negotiations with customers, seasonality, and so on? (Demand orientation)
Will a given price level allow a traditional markup to be attained? (Cost orientation)
What price level is necessary for a product requiring special costs? (Cost orientation)
What price levels are competitors setting? (Competitive orientation)
Can above-market prices be set due to a superior image? (Competitive orientation)
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

22. Figure 17-8: Specific Pricing Decisions
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

23. Price Strategy Concepts
Customary Pricing
Everyday Low Pricing
Variable Pricing
Yield Management Pricing
One-Price Policy
Flexible Pricing
Contingency Pricing
Odd Pricing
Leader Pricing
Multiple-Unit Pricing
Price Lining
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

24. Figure 17-9: Wal-Mart and Everyday Low Pricing
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

25. Figure 17-10: Odd Pricing
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

26. 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.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

27. Price Adjustments Adaptive mechanism Markdown Additional markup
Employee discount
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

28. Figure 17-11: Price Change Authorization Form
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

29. Timing Markdowns Early markdown policy Late markdown policy
Staggered markdown policy
Automatic markdown plan
Storewide clearance
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

30. Figure 17-12: Giant Eagle – Going Beyond Everyday Low Pricing
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

31. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall