PRICING IN RETAILING

                                                        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

Pricing Options for Retailers

•Discount orientation

•At-the-market orientation

•Upscale orientation

Factors Affecting Retail Price Strategy

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

•Status-oriented consumers

•Assortment-oriented consumers

•Convenience-oriented consumers

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.

Pros and Cons of Everyday Low Pricing

Pros:

•Reduced advertising expense

•More predictable sales levels

•Fewer peaks and ebbs of sales distribution

Cons:

•Decreased excitement

•Potentially less store traffic due to specials

•Less “cherry-picking” by consumers who only purchase specials