Rm (7) Pricing & Promos
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Retail Marketing Management
RM 8,9 Retail pricing & promotions
Retail Objectives & Pricing
Market penetration Market skimming
D.
To increase customer traffic To clear seasonal merchandise Match competitors price price Price leadership status Create entry barriers Encourage repeat buying
Retail Pricing Approaches and other Elements of the Retail Marketing Retail marketing mix variable
Price below market price
Price at market price
Price above market price
Location
No parking, poor layout, inaccessible
Central business district, proximity to competition
Monopoly, compatible location to target segment
Service Attributes
Self-service, limited offerings, no sales
Support from sales people
Personalized attention to customers, home delivery, exchange facility, customized offerings
Assortment
Limited variety
Medium
Extensive assortment
Store Environment
Poor quality fixtures, Compatible store limited space to environment move around, wall shelves, untidy
Inviting, impressive store décor, visual merchandise attractive
External Influences on Pricing Strategy
Competitors
Suppliers
Pricing strategy
Customers
Government
Retail Pricing Elements Retail objectives Sales (Rs / $) Profit (Rs. / $ / %) ROI Dependent variables Target market Retail image Retail mix Pricing policy Pricing orientation Demand based Cost based Competitive Integrated
Retail Pricing (contd…) Pricing strategies Customary pricing Variable pricing Flexible pricing One price policy Price lining ODD pricing Multiple – unit pricing Bundling Leader price Price adjustments Mark UPS Mark downs
Pricing strategies Customary pricing – retailer sets price & seeks to maintain those prices over an extended period. Prices that customers can take for granted & stable.
Variable pricing – when differences in demand & cost necessitate a change, with a view to increase demand, off season discount.
Flexible pricing – offering same products & quantities to different customers at different prices.
Price lining – retailers establish specified number of price points for each merchandise type & retailers purchase goods to fit the price points – makes price comparisons easier – can help store to upgrade / down grade customer s preference.
Pricing Strategies (contd…) Multiple unit pricing
Price of each unit in a multiple pack is less than the price of each unit if it were sold individually.
Suitable for products with high consumption rates.
Bundling
Retailers combine several elements in one basic price, invariably closely related items.
Leader pricing
When a high demand item is priced low & is heavily advertised to attract customers into the store.
Loss leader pricing – Where an item is sold below cost to build traffic & encourage purchase of other items.
EDLP – When a retailer charges the same low price everyday for long periods and seldom offers the item on sale – stable but lower than prevailing prices but not the lowest.
Cost oriented pricing • Markup pricing….a retailer sets prices by adding per unit merchandise costs, retail operating expenses & desired profit. The difference between the merchandise cost and selling price is the markup.
- Item cost Rs.20 ; it sells for Rs.25 - Markup is Rs.5 or 25% of the cost or 20% on selling price - Margin is Rs.5 or 20% of the selling price
Retail Promotion Mix Means by which retailers bring traffic into their stores & it includes advertising, sales promotion, publicity & personal selling. Retailers use a combination of location, price levels, displays, merchandise assortments, customer service & promotion as a means to generate store traffic sales.
Retail Promotion Mix Broad objective being
Bring traffic into the store Move the traffic to various selling areas of the store Entice customers into purchasing.
Paid
Unpaid
Advertising; sales promotion; store atmosphere; visual merchandising
Personal selling
Publicity
W.O.M
Impersonal
Personal
Positioning Objectives for Retailing
Merchandise category e.g.
Price / quality e.g.
Walmart – low prices Wills lifestyle – premium apparel
Specific attribute / benefit e.g.
Arcus – interiors & building related, Food world – food.
7-eleven – convenience
Lifestyle – e.g.
Shahnaz Hussain beauty saloons
Some Specific Objectives
Making consumers aware re: your low prices Make customers aware of large assortments / choice brands / quality products Increase traffic during lean times / days End of the season sales Special offers in coordination with manufacturers Image based. Typically assess & bridge gap between - Store awareness - Knowledge of merchandise on offer - Attitude of prospects towards store - Intention to visit - Whether actually visited - Whether will come back again
Factors Influencing Advertising
Age of store - New stores or those seeking to be re-build image need ↑ advertising.
Store location - Stores that are poorly located need more advertising.
Merchandise - Those selling high-image / fashion goods need ↑ advertising than a discount / convenience store
Supplier support - The more support a retailer is able to get from suppliers, the more it can advertise.
Sales Promotion in Retailing Sales promotion has been found to be a tried and trusted ally of retailers. What does it do?
Excellent demand generator Build traffic Can play an important role in loyalty programs Generate in-store excitement Assist in introducing new products
Type of sales promotion : Sponsors. Self sponsored Joint with supplier Promotion formats for retail Announce special sales – end of season / regular Organise demos / samples – initiate trial & build traffic Value-added gifts / premiums to build brand loyalty in specific categories Coupons & contest – to retain interest / repeat
Sales Promotion in Retailing (contd…) What sales promotion can’t do
Change buyers preference for un-desired product Compensate for poorly trained sales force Provide long-term support in sales Permanently stop a products declining trend push a non-seasonal item in off-season.
Factors to consider Cost of additional inventory carried, if buying more Potential in sales from promotion Margin / profitability Any potential loss due to shift in demand in favour of promoted item vs un-promoted item Effect on future sales, if any Promotion budget for advertising & in-store activity
RM 8,9 Retail pricing & promotions
Retail Objectives & Pricing
Market penetration Market skimming
D.
To increase customer traffic To clear seasonal merchandise Match competitors price price Price leadership status Create entry barriers Encourage repeat buying
Retail Pricing Approaches and other Elements of the Retail Marketing Retail marketing mix variable
Price below market price
Price at market price
Price above market price
Location
No parking, poor layout, inaccessible
Central business district, proximity to competition
Monopoly, compatible location to target segment
Service Attributes
Self-service, limited offerings, no sales
Support from sales people
Personalized attention to customers, home delivery, exchange facility, customized offerings
Assortment
Limited variety
Medium
Extensive assortment
Store Environment
Poor quality fixtures, Compatible store limited space to environment move around, wall shelves, untidy
Inviting, impressive store décor, visual merchandise attractive
External Influences on Pricing Strategy
Competitors
Suppliers
Pricing strategy
Customers
Government
Retail Pricing Elements Retail objectives Sales (Rs / $) Profit (Rs. / $ / %) ROI Dependent variables Target market Retail image Retail mix Pricing policy Pricing orientation Demand based Cost based Competitive Integrated
Retail Pricing (contd…) Pricing strategies Customary pricing Variable pricing Flexible pricing One price policy Price lining ODD pricing Multiple – unit pricing Bundling Leader price Price adjustments Mark UPS Mark downs
Pricing strategies Customary pricing – retailer sets price & seeks to maintain those prices over an extended period. Prices that customers can take for granted & stable.
Variable pricing – when differences in demand & cost necessitate a change, with a view to increase demand, off season discount.
Flexible pricing – offering same products & quantities to different customers at different prices.
Price lining – retailers establish specified number of price points for each merchandise type & retailers purchase goods to fit the price points – makes price comparisons easier – can help store to upgrade / down grade customer s preference.
Pricing Strategies (contd…) Multiple unit pricing
Price of each unit in a multiple pack is less than the price of each unit if it were sold individually.
Suitable for products with high consumption rates.
Bundling
Retailers combine several elements in one basic price, invariably closely related items.
Leader pricing
When a high demand item is priced low & is heavily advertised to attract customers into the store.
Loss leader pricing – Where an item is sold below cost to build traffic & encourage purchase of other items.
EDLP – When a retailer charges the same low price everyday for long periods and seldom offers the item on sale – stable but lower than prevailing prices but not the lowest.
Cost oriented pricing • Markup pricing….a retailer sets prices by adding per unit merchandise costs, retail operating expenses & desired profit. The difference between the merchandise cost and selling price is the markup.
- Item cost Rs.20 ; it sells for Rs.25 - Markup is Rs.5 or 25% of the cost or 20% on selling price - Margin is Rs.5 or 20% of the selling price
Retail Promotion Mix Means by which retailers bring traffic into their stores & it includes advertising, sales promotion, publicity & personal selling. Retailers use a combination of location, price levels, displays, merchandise assortments, customer service & promotion as a means to generate store traffic sales.
Retail Promotion Mix Broad objective being
Bring traffic into the store Move the traffic to various selling areas of the store Entice customers into purchasing.
Paid
Unpaid
Advertising; sales promotion; store atmosphere; visual merchandising
Personal selling
Publicity
W.O.M
Impersonal
Personal
Positioning Objectives for Retailing
Merchandise category e.g.
Price / quality e.g.
Walmart – low prices Wills lifestyle – premium apparel
Specific attribute / benefit e.g.
Arcus – interiors & building related, Food world – food.
7-eleven – convenience
Lifestyle – e.g.
Shahnaz Hussain beauty saloons
Some Specific Objectives
Making consumers aware re: your low prices Make customers aware of large assortments / choice brands / quality products Increase traffic during lean times / days End of the season sales Special offers in coordination with manufacturers Image based. Typically assess & bridge gap between - Store awareness - Knowledge of merchandise on offer - Attitude of prospects towards store - Intention to visit - Whether actually visited - Whether will come back again
Factors Influencing Advertising
Age of store - New stores or those seeking to be re-build image need ↑ advertising.
Store location - Stores that are poorly located need more advertising.
Merchandise - Those selling high-image / fashion goods need ↑ advertising than a discount / convenience store
Supplier support - The more support a retailer is able to get from suppliers, the more it can advertise.
Sales Promotion in Retailing Sales promotion has been found to be a tried and trusted ally of retailers. What does it do?
Excellent demand generator Build traffic Can play an important role in loyalty programs Generate in-store excitement Assist in introducing new products
Type of sales promotion : Sponsors. Self sponsored Joint with supplier Promotion formats for retail Announce special sales – end of season / regular Organise demos / samples – initiate trial & build traffic Value-added gifts / premiums to build brand loyalty in specific categories Coupons & contest – to retain interest / repeat
Sales Promotion in Retailing (contd…) What sales promotion can’t do
Change buyers preference for un-desired product Compensate for poorly trained sales force Provide long-term support in sales Permanently stop a products declining trend push a non-seasonal item in off-season.
Factors to consider Cost of additional inventory carried, if buying more Potential in sales from promotion Margin / profitability Any potential loss due to shift in demand in favour of promoted item vs un-promoted item Effect on future sales, if any Promotion budget for advertising & in-store activity
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