Pricing of a product is vital for a retailer. It determines the profitand is one of the major marketing mix tools. Therefore retailers have to bevery careful while choosing the pricing strategy to achieve profit goal. Theyneed to design good pricing strategy for particular brands, categories, storesand markets. Before we determine which retail pricing strategy to use insetting the right price, we must know the costs associated with the products.Two key elements in factoring product cost are the cost of goods and operatingexpenses. The costs of goods include the price paid for the product, plus anyshipping and handling expenses. The cost of operating expenses includesoverhead, payroll, marketing and office supplies. To succeed in business,retailers need to assess their distribution channel and research on marketpotential to pay.


PricingStrategies


Pricing of products depends on the strategies ofthe retailers. To introduce a new product, the retailer can opt between runningpromotions and low pricing in the initial stage until the demand rises for theproduct in the market. To maintain a decent profit, the retailers can use'Manufacturer Suggested Retail Price' (MSRP) and they can avoid price wars.Retailers considering a "competitive pricing strategy" need to pricecompetitively and provide outstanding customer service to stand above thecompetition.


Before pricing product, the retailers have to consider the location,exclusivity and/or unique customer service which would help to justify the higherprices. Some of the supermarkets are usually located in places where the upperclass families reside. In such localities the retailer can charge higher pricesto the products as the upper class families would buy products by brands evenwhen the price is a little high. Therefore retailer has to know the consumerbehaviour.


Retailers would give a discount offers to the customers depending ontype of customer targeted and type of item offered. Example: Retailer can offera cash discount as reward to the customers who pay cash promptly or on time,quantity discount to large volumes buyer, seasonal discount to the customerswho purchase as per season and charge less when the customer purchases a bundleor several related items together.


Some of the retailers have assumption that they can win theircompetitors in the market by fixing a low price. However lowest pricingstrategy does not allow retailers to attain profit in the long run. It isbetter for retailers to avoid the low pricing strategy and start with lookingat the demand in the market by examining three factors:


Competitor's Price: Retailers need to look at the competitor'spricing, cost, market price, discount offers and promotions to compete withtheir competitors.


Ceiling Price: The retailer should not fix the price aboveceiling price as the ceiling price is the highest price the market will bear.If the product price is above the ceiling price then customers will not be ableto purchase such products.

 

Price Elasticity of Demand: To make effective decisions, retailers have to accurately predict market demand. As demand is intrinsically connected to price, price elasticity is an essential computation for today's successful retail marketers.


Retailers need to consider few factors before fixing price to their products as per locality, customer preference, and standard of living of customer and brand preferences. Smart use of pricing strategies can attain optimized profit and revenue.


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