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Transcript of 17-1 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall Pricing in...
17-1 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Pricing in Retailing RETAIL
MANAGEMENT:A STRATEGICAPPROACH11th Edition11th Edition
BERMAN EVANS
17-2 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Chapter 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
17-3 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Pricing Options for Retailers
Discount orientation At-the-market orientation Upscale orientation
17-4 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-1: Barnes & Noble – A Huge Selection and Discounts
17-5 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-2: Comparison Shopping
17-6 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-3: Factors Affecting Retail Price Strategy
17-7 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Price Elasticity of DemandPrice 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.
17-8 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 17-1: A Movie Theater’s Elasticity of Demand
17-9 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Market Segments by Price Sensitivity Market Segments by Price Sensitivity
Economic consumers Status-oriented consumers Assortment-oriented consumers Personalizing consumers Convenience-oriented consumers
17-10 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
The Government and Retail PricingThe Government and Retail Pricing
Horizontal Price Fixing Vertical Pricing Fixing Price Discrimination (Robinson-Patman
Act) Minimum Price Laws Unit Pricing Item Price Removal Price Advertising
17-11 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Justifiable Price Discrimination Under the Justifiable Price Discrimination Under the Robinson-Patman ActRobinson-Patman Act
♦ Products are physically different.♦ The retailers paying different prices
are not competitors.♦ Competition is not injured.♦ Price differences are due to
differences in supplier costs.♦ Market conditions change – costs rise
or fall or competing suppliers shift prices.
17-12 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Competition and Retail PricingCompetition and Retail Pricing
Market pricingMarket pricing – Retailers often price similarly to each other and have less control over price because consumers can easily shop around.
Administered pricingAdministered pricing – Firms seek to attract consumers on the basis of distinctive retailing mixes.
17-13 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-4: A Framework for Developing a Retail Price Strategy
17-14 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
MarketSkimming
Market Penetration
Objectives and PricingObjectives and Pricing
17-15 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-6: Specific Pricing
Objectives
17-16 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Price Policy ChoicesPrice Policy Choices
No competitors will have lower prices; no competitors will have higher prices; or prices will be consistent with competitors.
All items will be priced independently or the prices for all items will be interrelated to maintain image and ensure proper markups.
Price leadership will be exerted; competitors will be price leaders and set prices first; or prices will be set independent of competitors.
Prices will be constant over a year or season; or prices will change if costs change.
17-17 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Price StrategyPrice Strategy
Demand-oriented pricing Cost-oriented pricing Competition-oriented pricing
17-18 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Demand-Oriented PricingDemand-Oriented Pricing
Psychological pricingPsychological pricingPrice-quality associationPrestige pricing
17-19 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 17-4: Markup Equivalents
17-20 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-7: How to
Determine Direct
Product Profitability
17-21 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Integration of Approaches to Price StrategyIntegration of Approaches to Price Strategy
If prices are reduced, will revenues increase greatly? (Demand orientation)
Should different prices be charged for a product based on negotiations with customers, seasonality, and so on? (Demand orientation)
Will a given price level allow a traditional markup to be attained? (Cost orientation)
What price level is necessary for a product requiring special costs? (Cost orientation)
What price levels are competitors setting? (Competitive orientation)
Can above-market prices be set due to a superior image? (Competitive orientation)
17-22 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-8: Specific Pricing Decisions
17-23 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Price Strategy ConceptsPrice Strategy Concepts
Customary Pricing Everyday Low Pricing
Variable Pricing Yield Management Pricing
One-Price Policy Flexible Pricing
Contingency Pricing Odd Pricing Leader Pricing Multiple-Unit Pricing Price Lining
17-24 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-9: Wal-Mart and Everyday Low Pricing
17-25 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-10: Odd Pricing
17-26 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Reasons to Use Multiple-Unit PricingReasons to Use Multiple-Unit Pricing
A firm could seek to have shoppers increase their total purchases of an item.
This approach can help sell slow-moving and end-of-season merchandise.
Price bundling may increase sales of related items.
17-27 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Price AdjustmentsPrice Adjustments
Adaptive mechanismMarkdownAdditional markupEmployee discount
17-28 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-11: Price Change Authorization Form
17-29 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Timing MarkdownsTiming Markdowns
Early markdown policy Late markdown policy Staggered markdown policy Automatic markdown plan Storewide clearance
17-30 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 17-12: Giant Eagle – Going Beyond Everyday Low Pricing
17-31 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in
any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United
States of America.