1.
Retail Pricing
Dr. Gopal Thapa
Tribhuvan University

2.
Price
 Price is monetary value assigned by the seller to
something purchased, sold, or offered for sale, and
on transaction by a buyer, as their willingness to
pay for the benefits the product and channel
service delivers.
 David Gilbert
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3.
Price Sensitivity
 It is the ratio of the percentage response in the
quantity sold to a percentage change in price or
one of the other marketing mix elements, such as
the expenditure in advertising .
 It measures the sensitivity in quantity demanded to
a change in the demand determinant.
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4.
Elasticity
 Elasticity
= Percentage change in quantity demanded
Percentage change in any demand determinant
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5.
Price Elasticity of Demand
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6.
Factors Affecting Price Sensitivity
 Perceived substitute effect
 Unique value effect
 Importance of purchase effect
 Difficult comparison effect
 Price quality effect
 Expenditure effect
 Fairness and transparency effect
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7.
Further Factors Influencing Pricing
 Perishable nature of product
 Competitive nature of industry
 Cost
 Seasonal demand
 Psychological aspects
 Influence of intermediaries
 Legislation
 Market is volatile due to:
 Short-run fluctuation in international costs
 The need to stock saleable items
 Problems of supply
 Shrinkage rate
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8.
Approaches to Pricing the Retail
Product
 Cost Oriented Pricing
 Cost plus pricing
 Rate of return pricing
 Demand Orientated Pricing
 Discrimination pricing
 Backward pricing
 Skimming pricing
 Leader pricing
 Competitive pricing
 Market penetration pricing
 Psychological pricing
 Everyday low pricing
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9.
Benefits of Everyday Low Pricing
 Perception of fairness
 Reduced advertising
 Improved customer service management
 Reduced stock-out and improved inventory
management
 Increased profit margins
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10.
Pricing and Relationship to Value
 The majority of consumers are looking for value
when they buy a product
 Value is derived from the functions of quality and
price, as well as the added value of the image or
brand.
 This may be expressed as:
Value = Quality + Image
Price
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11.
Pricing and Relationship to Value
 If a consumer believes the image and quality of a
product is good they will be willing to make
greater sacrifices in order to purchase that product.
 The interrelationship between price, quality and
value plays a significant role in store patronage
and the buying behaviour of customers.
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12.
Pricing and Relationship to Value
 Value was grouped into four categories by
Zeithaml (1988).
 These are:
 value as low price;
 value as whatever is wanted from a product;
 value as the quality one gets for the price paid;
 value as what one gets for what one gives.
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13.
Mark Down Policy Consideration
for Retailers
 Price competition is an important feature of the
grocery marketplace
 Virtually all retailers will have occasion to utilize
price markdowns
 It is typical for markdowns to be used as part of a
clearance sale in order to provide space for new
merchandise
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14.
Reasons for Markdown Pricing
 competitor activity affecting demand;
 inadequate original pricing policy;
 merchandise did not meet consumer needs or preferences;
 economic or seasonal problems;
 overstocking of merchandise or poor stock keeping;
 quality of merchandise inferior due to manufacture or
damage;
 problems of seasonality and poor timing of offer;
 merchandise became shop-soiled or damaged on the shop
floor;
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15.
Reasons for Markdown Pricing
 need to release the display space for other merchandise;
 the selling space or display of the merchandise had been
inadequate or in the wrong location;
 a policy decision taken to develop improved customer goodwill
through markdowns;
 an error by the buyer with regard to style, fashions, research of
market, etc.;
 an initial markdown being too small to achieve desired sales
results;
 sales staff not being briefed properly or encouraged to sell old
as well as new lines.
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16.
Pricing Cutting consideration
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17.
Any Queries?
Thank You
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