What is Retail Pricing?

The retail price is what consumers pay for the finished product when it is sold.
These customers don’t purchase the item to resell it but to use it. The
fundamental objective for a retailer when setting a price is to maximize the
profit while setting a price that customers will be ready to pay.
Retail price, manufacturer price, and distributor price are all different prices in
the retail supply chain. The final retailer will have the choice to set their pricing
based on supply and demand. A manufacturer can also propose a retail price
to match the cost of the product with its overall production strategy.

9 Successful Retail Pricing

Strategies
1. Manufacturer Suggested Retail Price (MSRP)

The Manufacturer Suggested Retail Price (MSRP) is a useful pricing strategy

to apply if you offer mass-produced goods like home appliances and
consumer electronics.
A product’s MSRP is a set price that applies to all sellers of the item. While it
removes the element of surprise from the price setting, selling your goods at
the same price as other retail stores may decrease your competitive
advantage.

2. Keystone Pricing

With this strategy, you double the wholesale cost of each product to produce a
sizable profit margin. You may do your calculations easily with a
predetermined percentage but you should be careful not to end up pricing
items too low or too high.
If you sell highly unique goods or custom items that take a long time to create,
keystone pricing is not the best choice because you won’t make enough
money. It’s also not recommended for retailers who sell uniform, widespread
products. Depending on the item’s availability and demand, it may not be
reasonable for a retail shop to mark up goods at such a high rate.

3. Discount Pricing

Discount pricing is when a retailer marks down the cost of their goods in order
to boost sales. The high-low pricing strategy is one type of discount pricing.
Products are first offered at a high price point and then marked down when
demand declines.
Electronic retail stores employ this tactic most often. Items like computers,
smartphones, and video game consoles are the most expensive when they
are first introduced. However, when newer models are released, the older
ones are discounted.

f you want to get rid of unsold inventory and boost sales, discount pricing
works well. But if you develop a reputation for often offering discounts on your
goods, clients will get used to waiting for the cheaper price or they might think
your products are of bad quality.

4. Bundle Pricing

Bundle pricing is another discount pricing strategy that is especially useful if

you sell related products that can be packaged together. By combining
products, you can customize the consumer experience and enhance sales
volumes through cross-sells and up-sells.
Deli bundles and Christmas baskets that include hand-picked wines, meats,
and cheeses, are typical instances of bundle pricing.
 5. Penetration Pricing

Penetration pricing is when a company offers a new product or service at a

lower price in order to draw in customers. The goal is to entice target
customers with a low price so they will be eager to pay full price once the
promo period has ended.

6. Psychological Pricing

Also known as charm pricing, psychological pricing is a value-based pricing

strategy when sellers charge a price for a product that ends in an odd
number.

7. Competitive Pricing

Setting lower prices voluntarily in order to obtain a competitive edge is known

as competitive pricing. It works best if you are in a sector where there are a lot
of similar products and the only thing that sets you apart from your
competition is pricing.
The competitive pricing method works best if you’re a bigger shop and can
bargain with suppliers for a reduced wholesale price while still making a
respectable profit. However, keep in mind that a price battle can force small
retailers out of business.

8. Premium Pricing

Premium pricing, which is often referred to as luxury pricing or prestige

pricing, is another value-based pricing technique where high-end businesses
charge an additional markup percentage on their products to offer their
customers a sense of status.
This approach to pricing strategy is most effective when your product quality
and customer service can match the high product price tag. Apple, Ferrari,
and Cartier are a few businesses that charge premium prices.
 9. Dynamic Pricing

Dynamic pricing is a pricing strategy in which prices are changed in response

to variations in supply and demand. The ability to apply dynamic pricing in
real-time makes this strategy ideal for eCommerce companies.
When you sell products online, you can use data and technology to sell the
same item at different prices based on the buyer.

Factors Influencing Retail Prices

Retail prices are affected by internal and external factors.
Internal Factors
Internal factors that influence retail prices include the following −
 Manufacturing Cost − The retail company considers both, fixed and variable
costs of manufacturing the product. The fixed costs does not vary depending
upon the production volume. For example, property tax. The variable costs
include varying costs of raw material and costs depending upon volume of
production. For example, labor.
 The Predetermined Objectives − The objective of the retail company varies with
time and market situations. If the objective is to increase return on investment,
then the company may charge a higher price. If the objective is to increase
market share, then it may charge a lower price.
 Image of the Firm − The retail company may consider its own image in the
market Product Status − The stage at which the product is in its product life
cycle determines its price. At the time of introducing the product in the market, the
company may charge lower price for it to attract new customers. When the
product is accepted and established in the market, the company increases the
price.
 Promotional Activity − If the company is spending high cost on advertising and
sales promotion, then it keeps product price high in order to recover the cost of
investments.
External Factors
External prices that influence retail prices include the following −
 Competition − In case of high competition, the prices may be set low to face the
competition effectively, and if there is less competition, the prices may be kept
high.
 Buying Power of Consumers − The sensitivity of the customer towards price
variation and purchasing power of the customer contribute to setting price.
 Government Policies − Government rules and regulation about manufacturing
and announcement of administered prices can increase the price of product.
  Market Conditions − If market is under recession, the consumers buying pattern
changes. To modify their buying behavior, the product prices are set less.
 Levels of Channels Involved − The retailer has to consider number of channels
involved from manufacturing to retail and their expectations. The deeper the level
of channels, the higher would be the product prices.

Pricing can be defined as the process of determining an

appropriate price for the product, or it is an act of setting
price for the product. Pricing involves a number of decisions
related to setting price of product. Pricing policies are aimed
at achieving various objectives. Company has several
objectives to be achieved by the sound pricing policies and
strategies. Pricing decisions are based on the objectives to
be achieved. Objectives are related to sales volume,
profitability, market shares, or competition. Objectives of
pricing can be classified in five groups as shown in figure 1.

1. Profits-related Objectives:
Profit has remained a dominant objective of business
activities.

Company’s pricing policies and strategies are aimed at

following profits-related objectives:

Maximum current profit

One of the objectives of pricing is to maximize current

profits. This objective is aimed at making as much money as
possible. Company tries to set its price in a way that more
current profits can be earned. However, company cannot set
its price beyond the limit. But, it concentrates on maximum
profits.

ii. Target Return on Investment:

Most companies want to earn reasonable rate of return on
investment.

Target return may be:

1) fixed percentage of sales,

(2) return on investment, or

(3) a fixed rupee amount.

Company sets its pricing policies and strategies in a way
that sales revenue ultimately yields average return on total
investment

2. Sales-related Objectives:
The main sales-related objectives of pricing may
include:
i. Sales Growth:

Company’s objective is to increase sales volume. It sets its

price in such a way that more and more sales can be
achieved. It is assumed that sales growth has direct positive
impact on the profits. So, pricing decisions are taken in way
that sales volume can be raised. Setting price, altering in
price, and modifying pricing policies are targeted to improve
sales.

ii. Target Market Share:

A company aims its pricing policies at achieving or
maintaining the target market share. Pricing decisions are
taken in such a manner that enables the company to achieve
targeted market share. Market share is a specific volume of
sales determined in light of total sales in an industry. For
example, company may try to achieve 25% market shares in
the relevant industry.

iii. Increase in Market Share:

Sometimes, price and pricing are taken as the tool to
increase its market share. When company assumes that its
market share is below than expected, it can raise it by
appropriate pricing; pricing is aimed at improving market
share.

3. Competition-related Objectives:
Competition is a powerful factor affecting marketing
performance. Every company tries to react to the
competitors by appropriate business strategies.

i. To Face Competition:
Pricing is primarily concerns with facing competition.
Today’s market is characterized by the severe competition.
Company sets and modifies its pricing policies so as to
respond the competitors strongly. Many companies use price
as a powerful means to react to level and intensity of
competition.

ii. To Keep Competitors Away:

ADVERTISEMENTS:

To prevent the entry of competitors can be one of the main

objectives of pricing. The phase ‘prevention is better than
cure’ is equally applicable here. If competitors are kept
away, no need to fight with them. To achieve the objective, a
company keeps its price as low as possible to minimize profit
attractiveness of products. In some cases, a company reacts
offensively to prevent entry of competitors by selling product
even at a loss.
iii. To Achieve Quality Leadership by Pricing:
Pricing is also aimed at achieving the quality leadership. The
quality leadership is the image in mind of buyers that high
price is related to high quality product. In order to create a
positive image that company’s product is standard or
superior than offered by the close competitors; the company
designs its pricing policies accordingly.

iv. To Remove Competitors from the Market:

The pricing policies and practices are directed to remove the
competitors away from the market. This can be done by
forgoing the current profits – by keeping price as low as
possible – in order to maximize the future profits by charging
a high price after removing competitors from the market.
Price competition can remove weak competitors.

Company wants to achieve following objectives by the

suitable pricing policies and practices:
i. To Win Confidence of Customers:
Customers are the target to serve. Company sets and
practices its pricing policies to win the confidence of the
target market. Company, by appropriate pricing policies, can
establish, maintain or even strengthen the confidence of
customers that price charged for the product is reasonable
one. Customers are made feel that they are not being
cheated.
ii. To Satisfy Customers:
To satisfy customers is the prime objective of the entire
range of marketing efforts. And, pricing is no exception.
Company sets, adjusts, and readjusts its pricing to satisfy its
target customers. In short, a company should design pricing
in such a way that results into maximum consumer
satisfaction.

5. Other Objectives:
Over and above the objectives discussed so far, there are
certain objectives that company wants to achieve by pricing.

They are as under:

i. Market Penetration:
This objective concerns with entering the deep into the
market to attract maximum number of customers. This
objective calls for charging the lowest possible price to win
price-sensitive buyers.

ii. Promoting a New Product:

To promote a new product successfully, the company sets
low price for its products in the initial stage to encourage for
trial and repeat buying. The sound pricing can help the
company introduce a new product successfully.

iii. Maintaining Image and Reputation in the Market:

Company’s effective pricing policies have positive impact on
its image and reputation in the market. Company, by
charging reasonable price, stabilizing price, or keeping fixed
price can create a good image and reputation in the mind of
the target customers.

iv. To Skim the Cream from the Market:

This objective concerns with skimming maximum profit in
initial stage of product life cycle. Because a product is new,
offering new and superior advantages, the company can
charge relatively high price. Some segments will buy
product even at a premium price.

v. Price Stability:
Company with stable price is ranked high in the market.
Company formulates pricing policies and strategies to
eliminate seasonal and cyclical fluctuations. Stability in price
has a good impression on the buyers. Frequent changes in
pricing affect adversely the prestige of company.

vi. Survival and Growth:

Finally, pricing is aimed at survival and growth of company’s
business activities and operations. It is a fundamental
pricing objective. Pricing policies are set in a way that
company’s existence is not threatened.
What is retail promotion mix?
Retail promotions involve the management of elements of the promotional mix, which
include advertising, sales promotions, digital and direct marketing, personal
selling, sponsorship and public relations.

Retail promotion is a strategy to increase consumer demands and sales. The idea behind
offering effective retail promotion services is to engage directly with the end consumer and
influence their purchase decision. The challenge today, however, is a string of available retail
strategies to reach the customer
What is a promotional mix?

A promotional mix is your company’s strategy for marketing your business to a target
audience. It is the combination of all marketing tools and methods you want to use to
promote your products, drive return customers and disseminate information about the
company and brand. Each business’ promotional mix should be different depending on
their branding strategy, ideal customer persona and access to resources. A promotional
mix is an essential part of a company’s overall marketing plan alongside the product
presentation, price point and location.

Benefits of a strong promotional mix

Using a promotional mix is a key part of business strategy and allows you to be mindful
of how you distribute resources and invest in marketing. Spreading awareness of your
products, brand and events through a promotional mix comes with several key benefits:

Educating your customer

The most effective promotional strategies educate your subscribers and target market
about the products and services you want to sell. A well-designed promotional mix
informs your customer base of the most beneficial aspects of doing business with your
company and positions you as an industry expert.

More effective marketing

Your promotional mix is what spreads awareness of your various creative marketing
campaigns, emphasizing different company initiatives to various audiences based on
their preferences and buying behavior. The right combination of promotional strategies
enables you to reach a specific type of customer at the right stage in the buying process
to drive purchases. The promotional mix ensures that all of your marketing efforts are
working together toward a shared goal, preventing you from wasting time or resources.
Targeted messaging

The promotional mix identifies different segments within your target market so you can
customize advertisements, emails and other messaging. It creates a feedback loop that
helps you learn about your customers and provide them with personalized promotional
materials that can maintain their interest in your products and make them want to
continue interacting with your brand’s content.

Building trust through communication

A good promotional mix allows you to seek out leads through the most appropriate
channels, enabling interested customers to communicate with your business. The
promotional mix is an important tool in nurturing relationships with sales leads and an
existing audience base. Automated responses to audience interactions, scheduled
follow-ups and other strategies in your promotional mix build trust and consistency by
facilitating communication with your audience.

Differentiating from competitors

Your promotional mix allows you to be strategic about how you approach customers so
your marketing efforts aren’t lost in a crowd of other competitor advertisements.
Customers can interact with your promotion mix and immediately see the value your
company offers compared to competitors. A good promotional mix also keeps your
products at the top of a customer’s mind through strategic interactions and reminders,
making interacting with your business part of their regular buying habits.

Elements of a promotional mix

Your business’ promotional mix is comprised of all of the tools and strategies involved
with communicating information to a target audience with the goal of increasing profits
and engaging your customer base. The strategies you use in your promotional mix can
be divided into four key categories:
Advertising

Advertising refers to all of your company’s paid messaging that promotes your brand
name or products to customers. Advertising campaigns can use many different
channels for outreach, such as social media, search engine results, magazines,
newspapers, radio, television and billboards. Advertising is the most general part of the
promotional mix because it isn’t highly personalized and aims to target a wide market of
people through the media they consume going about their day.

Direct sales

Direct selling encompasses all of the one-on-one interactions between your

company’ssales representatives and target customers. Unlike advertising, which uses
general exposure to convince people to do business with your company, direct sales
involves tracking down qualified sales leads who might be interested in making a
purchase and delivering a pitch explaining how a product or service can benefit that
specific customer. Talented, persuasive salespeople can increase your profits using the
direct selling method by going door-to-door, cold calling or working at a table, booth,
kiosk or store location to upsell visitors and finalize purchases.

Sales promotions

Sakes promotions are limited-time deals and incentives designed to boost traffic and
sales for a short period of time. Holiday sales, limited-time discounts, contests,
sweepstakes, free samples and coupons are all examples of sales promotions.
Companies use other marketing channels to spread awareness of sales promotions
with the hope that short-term deals can convince people to try the product or service,
then consider making additional purchases at full price after the promotion ends.
Businesses also use sales promotions to move large amounts of products or improve
cash flow during slow periods.

Public relations
A company’s public relations is another critical part of the marketing mix, especially for
businesses that are serious about creating a cohesive brand and spreading awareness
of their company’s mission in addition to their products and services. Public relations
can include media attention, community partnerships and interactions with consumers
on social media. The goal of public relations tools is to create excitement about product
launches and company initiatives. Another role of public relations is to handle any
negative feedback and carefully curate the company’s response to issues in a way that
satisfies public opinion.

How to establish your business’ promotional mix

Every business has different needs when it comes to their promotional strategies. Use
these steps as a guide to build an efficient and useful promotional mix at your business:

1. Select a target audience

Choose a target customer base and perform market research to learn about what
influences them to do business with a company. Understanding what media channels
your ideal audience uses will help you select the most high-yield methods for
communicating with paying customers.

2. Decide on a budget

Some elements of the promotional mix are much more expensive than others, so make
sure you have a clear budget before you begin planning various marketing ideas. When
setting your marketing budget, calculate how much business you expect to generate
from each element of the promotional mix so that you can determine if your tactics have
a high enough return on your investment to be worthwhile.

3. Set a timeline
Determine whether you have short-term profit goals you need to meet or want to work
on long-term brand awareness. Setting a timeline for different promotional goals will
help you determine what kinds of campaigns would work best in your promotional mix.

4. Measure your effectiveness

Record consumer data and measure the impact of various promotional tools on your
overall sales. Regularly analyzing your sales data and customer behavior can help you
identify the most influential promotional strategies and eliminate parts of the promotional
mix that aren’t generating the expected impact.

Promotional Objectives

• Increase sales
• Stimulate impulse and reminder buying

• Raise customer traffic

• Get leads for sales personnel

• Present and reinforce the retailer image

• Inform customers about goods and services

• Popularize new stores and Web sites

• Capitalize on manufacturer support

• Enhance customer relations

• Maintain customer loyalty

• Have consumers pass along positive information to friends and others

Public Relations

• Public Relations - Any communication that fosters a favorable image for the
retailer among its publics
• Nonpersonal or personal

• Paid or nonpaid

• Sponsor-controlled or not

• Publicity – Any nonpersonal form of public relations whereby messages are

transmitted through mass media, the time or space provided by the media is not
paid for, and there is no identified commercial sponsor

Public Relations Advantages

• Image can be presented or enhanced

• More credible source

• No costs for message’s time or space

• Mass audience addressed

• Carryover effects possible

• People pay more attention than to clearly identified ads

Disadvantages

• Some retailers do not believe in spending on image-related communication

• Little control over publicity message

• More suitable for short run

• Costs for PR staff, planning activities, and events

Advertising
•Paid, nonpersonal communication transmitted through out-of-store mass media by
an identified sponsor

Key Features
• Paid form

• Nonpersonal presentation

• Out-of-store mass media

• Identified sponsor

Advertising Advantages

• Attracts a large audience

• Gains pass along readership (for print)

• Low cost per contact

• Many alternatives available

• Control over message content; message can be standardized •

Message study possible

• Editorial content surrounds ad

• Self-service operations possible

Disadvantages

• Standardized messages lack flexibility

• Some media require large investments

• Geographic flexibility limited

• Some media require long lead time

• Some media have high throwaway rate

• Some media limit the ability to provide detailed information

Personal Selling
Oral communication with one or more prospective customers for the purpose of
making a sale

Personal Selling Advantages

• Message can be adapted

• Many ways to meet customer needs

• High attention span

• Less waste

• Better response •

Immediate feedback

Disadvantages

• Limited number of customers handled at one time

• High costs

• Doesn’t get customer in store

• Self-service discouraged

• Negative attitudes toward salespeople (aggressive, unhelpful)

Sales Promotion

Encompasses the paid communication activities other than advertising,

public relations, and personal selling that stimulate consumer
purchases and dealer effectiveness
Sales Promotions Advantages

• Eye-catching appeal •

Distinctive themes and tools

• Additional value for customer

• Draws customer traffic

c • Maintains customer loyalty

• Increases impulse purchases

• Fun for customers

Disadvantages

• Difficult to terminate

Possible damage to retailer’s image

• More stress on frivolous selling points

Short-term effects only

• Used as a supplemen