1. Challenges- Pricing decision
Pricing decision is important:
Customers are better informed
Have better alternatives to choose from
Want to seek good value
Value is the ratio of what customers receive (the perceived benefits) to what they have to pay for it.
Value= Perceived benefits/Price
Thus retailer can increase sale either by increasing perceived benefits or by reducing price

2. Challenges- Pricing decision
For some customers- good value- paying lowest price-other benefits are not important to them
For some- ready to pay extra – if they are getting their moneys worth –quality
Prices are higher than benefits- sales and profit –decrease
Prices are low- sales increase , but profits may decrease due to low profit margin

3. Considerations in setting Retail Pricing
Retail Price
Price sensitivity
Competition
Economic constraints
Cost

4. Customer price sensitivity and cost
Price sensitivity : how many units will be sold at different price levels. If customers are not price sensitive, sales will not decrease significantly and vice versa
No of factors affect price sensitivity
More substitutes for a product, more likely it will be price sensitive.
Necessities are inelastic (insensitive), Eg medicines
Products that are expensive relative to consumer income are price elastic . Eg cars

5. Competition If product is unique with no competitors- premium price
If similar products in the market, competitors price needs to be considered.

6. Ethical pricing issues
Price discrimination: occurs when retailer charges diff prices for the identical products/services sold to different consumers.
Predatory pricing: arises when a dominant retailer sets prices below its costs to drive competitors out of business. Retailer hopes to raise prices in the near future and regain lost profits.
Horizontal price fixing: involves agreements between retailers that are in direct competition with each other to set the same prices

7. Ethical pricing issues
Bait and switch tactics: deceptive practice, wherein the customers are lured into the stores by advt a product at lower than normal price (bait) and once they are into the store, induce them to purchase a higher price model (switch). Can occur by having inadequate inventory of the advt .

8. Economic constraints
Economic slowdown: prices are lowered to generate demand

9. Pricing strategies

10. EDLP: Every day low pricing: Followed by supermarkets, home improvement stores. Term is misleading because they may not be lowest in the market. offer lowest price for the products they sell. Eg Big bazaar
Adv: Assures customers of low prices, reduces advt and operating expenses, reduce stock out and improves inventory management

11. Pricing techniques for increasing sales
Leader pricing: involves a retailer pricing certain items lower than normal to increase customer traffic flow or to boost the sales of complementary products. These products are called as “loss leaders”.

12. Odd pricing: refers to the practice of using a price that ends in an odd number, typically a 9
Assumption that shoppers don’t notice the last digits of the price . 9 endings signifies low prices would create a positive price image