Transcript Pricing_and_Small_Retailers(2).ppt

Pricing and Small Retailers:
Questions to Consider
By Jason Mariner, Kelly
McCrary, & Leah Clark
Developing a Price Strategy
• You are a local Corvallis
Hardware dealer, Home Depot
just moved in, what do you do?
• Small business opportunities.
• Offer what the Big Box can’t…
Part 1: Developing Your Pricing Strategy
• Do you have an overall pricing
philosophy? What is it?
– High-end pricing philosophy
– Low-end pricing philosophy
– Medium pricing philosophy
Part 2: Pricing Philosophy and Setting
Retail Prices
• What are people looking for when shopping at
your store?
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Economic consumers
Status-oriented consumers
Assortment-oriented consumers
Personalizing consumers
Convenience-oriented consumers
Part 2: Pricing Philosophy and Setting
Retail Prices
• How do you compute prices?
– Suggested Market Price
– Competitive pricing
• When setting prices, do you take all
operating costs into account?
– Salaries and Wages
– Rent and maintenance
– Credit card processing
Part 3: MSRP, Fair Pricing and the
Competition, cont’d
• How often do small retailers change regular
prices and run sales? Does this vary by product
category?
– There should be goals as to how often to change prices
and whether the frequency of changes should vary by
category.
– Varies among different types of retailers like stationary
stores, produce stores, and computer retailers.
– There should also be goals about the frequency of sales.
Also varies among retailers like supermarkets, Wal-Mart,
and Saks.
Part 4: Planning for Shrink, Price Lining
and Advertising
• Do small retailers plan
for stock shortages (due
to shrinkage and clerical
errors) when setting
prices? How?
– Yearly, $35 billion in U.S.
retail sales are lost due to
inventory shrinkage (theft)
and billions more are lost
due to clerical errors by
workers.
• Do you advertise
prices? Where?
– Every retailer, regardless
of positioning and size,
is capable of some form
of price advertising.
• Using price lining, yes
or no?
– A price floor and a price
ceiling are set for each
product category, and
then selected price
points are set within the
range.
Part 4: Planning for Shrink, Price Lining
and Advertising, cont’d
• Do you let customers bargain over the
prices of any items?
– Depends on the type of firm, some have fixed prices and
permit absolutely no bargaining while others have fixed
pricing but allow bargaining for other items or services.
– There are also firms that encourage customer bargaining.
Part 3: MSRP, Fair Pricing and the
Competition
• How do small retailers use
manufacturer suggested list
prices?
– More consumers expect regular
prices to be below those
suggested by manufacturers; as a
result, many retailers are not
using list prices as their regular
prices.
• Are prices "fair" to
customers? What does "fair"
mean to small retailers?
– Within this analysis of “fairness”
there are two different
perspectives: consumer
perspective & retailer perspective
• Do small retailers visit
competitors to check prices?
Do they look at their
competitors ads? If they
check prices, how do they
react to what they learn?
– A "no" answer is myopic and will
lose customers. Pricing should
encompass two concepts:
Absolute prices & Relative prices
Part 5: Markups, Inventory Valuation and
Odd Pricing
• How do you use prices in competing with
larger retailers?
– Run sales offer regular savings on selected
items
• Have you formed a buying group
(cooperative) with other small retailers
to get better terms on your purchases?
– Small retailers can gain in their own dealings
with the suppliers by forming buying groups
Part 5: Markups, Inventory Valuation and
Odd Pricing
• Do you use odd prices ($59.95) rather
than even prices ($60)?
– Most people do not consider a nickel off to be
much of a bargain
• Initial markup vs. maintained markup
– Initial markups need to be higher than
maintained markups if a retailer is to meet
revenue and profit goals.
Part 6: Everyday Low Pricing and
Displaying Prices
• What payment
method(s) do you
accept?
– Are prices of individual items
high?
– Is the total customer bill (the
sum of the individual items
bought on one shopping trip)
high?
– Am I interested in increasing
the impulse purchases
shoppers make?
– Do competitors accept credit
cards?
• How are prices
displayed in your
store?
– Exterior store windows
– Interior store displays
Part 6: Everyday Low Pricing and
Displaying Prices
• What do you think about everyday low
pricing?
– Each retailer must strive to set its REGULAR
PRICES in a way that appeals to the chosen
customer market and that fairly reflects the
merchandise, customer service, ambience, etc.
offered by that retailer.
Sources
• Article:
– http://retailindustry.about.com/library/uc/be/uc
_be_pricing6.htm
• Shopping Mania Girl:
– http://youtube.com/watch?v=rSXRNJ_DzAY