Putting It Together: Retail Pricing and Sales Strategies In this module we have covered a significant number of concepts that drive retailer’s pricing decisions. We started with a set of tactical pricing techniques that included keystone, premium, discount, psychological and bundle pricing. We began to understand that pricing is a component of an overall strategy folded in to the retail mix–the six P’s of retail. We encountered additional variables of… Read More »Putting It Together: Retail Pricing and Sales Strategies

History of Odd Pricing One of the latest pricing strategies used by retailers is based on the concept of KVCs and KVIs. Key Value Categories and Key Value Items are a holistic method of pricing that do not rely exclusively on cost, demand or competition to make pricing decisions. In the 1970s and 1980s, mass merchants developed the concept of “Key Items.” Key Items were identified by retailers during the… Read More »History of Odd Pricing

Price Lining Price lining is a technique used by retailers to group common items at set price-points. Rather than setting the retail price based on cost or competition, price lining is a way to simplify the pricing of assorted goods by establishing tiered price points that can support assortments of goods. This technique fits well with a traditional retail assortment structure of “Good-Better-Best”. At the local hardware store, the retailer… Read More »Price Lining

Loss Leader A loss leader (also leader) is a pricing strategy where a product is sold at a price at or below its market cost to stimulate other sales of more profitable goods or services. “Loss lead” describes the concept that an item is offered for sale at a reduced price and is intended to “lead” to the subsequent sale of other services or items, the sales of which will be made in… Read More »Loss Leader

Pricing Techniques What you’ll learn to do: Examine pricing techniques used by retailers to increase sales and profits Are the business objectives of increasing sales and increasing profits mutually exclusive? We may think that the easiest way to increase sales is to lower prices, and that will only serve to lower profits. Conversely, will higher prices lower sales but increase profits? We have seen how retailers do the math to calculate… Read More »pricing techniques used by retailers to increase sales and profits

Liquidating Markdown Merchandise Once retailers decide to markdown a product or product category, it remains in inventory until sold out. How do retailers handle the process from initial markdown to final liquidation? The first method we discussed in an earlier section. Most retailers will have a set process, including markdown percent thresholds, that will be used to sell through markdown merchandise. For example, the first markdown could be set at… Read More »Liquidating Markdown Merchandise

Reducing Product Markdowns Every retail buyer or store owner wants to reduce markdowns. The old-school adages that address this issue is “buy the right stuff” or “buy less and sell more.” Markdowns should not be regarded as necessarily a bad thing—they are a constant factor in retailing and a cost of doing business. Therefore, markdowns should be part of the retailers seasonal and annual plan and factored in to financial… Read More »Reducing Product Markdowns

Demand-Oriented Pricing In addition to cost-oriented or competition-oriented pricing, demand-oriented pricing is also seen in the retail industry. It is a strategy based on known periods or high or low demand and the elasticity of price during those periods. We will explain this strategy using a few examples. One of the simplest examples would be the pricing and selling dynamics at your local farmer’s market. Early in the morning when… Read More »Demand-Oriented Pricing

Competition-Oriented Pricing Let us examine another method to develop retail pricing strategy based not on cost but instead based on competition. Competitor-based pricing, or market pricing, uses competitor’s pricing, promotions and inventory position to set a retailer’s pricing strategy. Depending on the retailer’s overall pricing strategy and business objectives, pricing may be higher, lower, or matching that of competitors. Today prices are very transparent to most consumers. Anyone with a… Read More »Competition-Oriented Pricing

Break-Even Point When we bring the topic of break-even analysis in to our discussion, we will need to add some additional components to our thinking. A retailer will need to understand that there is more than just selling an item for more than it costs (or even the added cost of acquiring the product and having it transported to the retailer and further distributed to stores or direct to customers).… Read More »Break-Even Point