which price strategy is mostly used for moving stale, outdated, damaged merchandise? course hero

How do price wars start?

Price wars usually begin when one competitor thinks he or she can achieve higher volume instantaneously by lowering prices . Rather than sticking to their strategic guns, competitors believe they must follow suit.

Why do companies rely on price cuts?

Customer may respond to price cuts, but companies that rely on them to boost sales risk undermining the perceived value of their products and services. In addition, once customers grow accustomed to buying products and services during special promotions, the habit can be difficult to break.

Why is price important?

Price is an important factor in building long-term relationships with customers, and haphazard pricing techniques can confuse and alienate customers and endanger a small company's probability.

What is the most deadly game a small business can play?

Attempting to undercut competitors' prices may lead to a price war , one of the most deadly games a small business can play. Price wars can eradicate companies' profit margins and scar an entire industry for years.

What is markup pricing?

Pricing for the retailers means pricing to move merchandise. Markup is the difference between the cost of a product or service and its selling price.

Why do people look at prices?

Customers look at prices to determine the type of store they are dealing with. High prices frequently convey the idea of quality, prestige, and uniqueness to customers.

What is the marketplace?

the marketplace; it is a measure of a what the customer must give up to obtain various goods and services. Price also is a signal of a product's or service's value to an individual, and different customers assign different values to the same goods and services.

What are the different pricing strategies?

5 common pricing strategies 1 Cost-plus pricing —simply calculating your costs and adding a mark-up 2 Competitive pricing—setting a price based on what the competition charges 3 Value-based pricing—setting a price based on how much the customer believes what you’re selling is worth 4 Price skimming—setting a high price and lowering it as the market evolves 5 Penetration pricing—setting a low price to enter a competitive market and raising it later

How do you arrive at a value-based price?

Dolansky provides the following advice for entrepreneurs who want to determine a value-based price.

How to find the difference between a product and a comparable product?

Find all of the ways that your product is different from the comparable product. Place a financial value on all of these differences, add everything that is positive about your product and subtract any negatives to come up with a potential price. Make sure the value to the customer is higher than your costs.

What is value based pricing?

In value-based pricing, the perceived value to the customer is primarily based on how well it’s suited to the needs and wants of each customer. Dolansky says a company can gain an advantage over its competitors in the following ways.

Why is value based pricing better than price based pricing?

When a price doesn’t work, the answer isn’t just to lower it, but to determine how it can better match customer value.

Why do entrepreneurs use cost based pricing?

Dolansky says entrepreneurs often used cost-based pricing because it’s easier. They may also copy the prices of their competitors, which, while not ideal, is a slightly better strategy. In an ideal world, all entrepreneurs should use value-based pricing, Dolansky says.

What is the most important aspect of marketing?

Pricing a product is one of the most important aspects of your marketing strategy. Generally, pricing strategies include the following five strategies. Cost-plus pricing —simply calculating your costs and adding a mark-up. Competitive pricing —setting a price based on what the competition charges.

What Are Pricing Strategies?

A pricing strategy is a method used to identify the optimum price for a product or service. Pricing strategies are designed to maximize both sales and profits.

How to choose a pricing strategy?

Selecting a pricing strategy can feel overwhelming at first. So, start by calculating your COGS. Then, if you’re struggling to decide which pricing model to go with, consider using whichever pricing strategy is most popular for your type of product, service, or industry.

What is a bundle pricing model?

Whenever you offer two or more products for a single price, you’re using a bundle pricing model. A classic bundle pricing strategy example is when fast-food chains like McDonald's offer meal deals.

Why is the pricing model best in a saturated niche?

This pricing model works best in a saturated niche where consumers may choose one similar offer over another because of a slightly lower price. Just be careful not to join a ‘race to the bottom’ — this is when businesses keep undercutting each other in an attempt to win more business but inadvertently drive down profits for everyone.

What is premium pricing?

A premium pricing strategy is exactly what it sounds like. The idea is to set a high price to increase the perceived value of a product or service. It’s also known as prestige or luxury pricing. Unsurprisingly, premium pricing is most often used by luxury brands in the fashion and hospitality industries.

Why is it called "charm pricing"?

A common tactic is ‘charm pricing’ — when a price ends in 9, 99, or 95 to make it feel cheaper than it is. This works because when people read from left to right, the number appears smaller.

Why do companies use penetration pricing?

Consequently, they can offer very low prices to attract customers — and poach customers from competitors.

What is pricing strategy?

Pricing strategy is a way of finding a competitive price of a product or a service.

What are the different pricing strategies?

Pricing Strategies in Marketing. Following are the different pricing strategies in marketing: 1. Penetration Pricing or Pricing to Gain Market Share. A few companies adopt these strategies in order to enter the market and to gain market share. Some companies either provide a few services for free or they keep a low price for their products ...

What is psychological pricing strategy?

Psychological pricing Strategies is an approach of gathering the consumer’s emotional respond instead of his rational respond. For example a company will price its product at Rs 99 instead of Rs 100. The price of the product is within Rs 100 this makes the customer feel that the product is not very expensive. For most consumers price is an indicating factor for buying or not buying a product. They do not analyze everything else that motivates the product. Even if the market is unknown to the consumer he will still use price as a purchase factor. For example if an ice cream weighted 100 gms for Rs 100 and a lesser quality ice cream weighted 200 gms is available at Rs 150, the consumer will buy the 200 gms ice cream for Rs 150 because he sees profit in buying the ice cream at lower cost ignoring the quality of the ice cream. Consumers are not aware price is also an indicator of quality.

What is the price of a product?

The pricing of any product is extremely complex and intense as it is a result of a number of calculations, research work, risk taking ability and understanding of the market and the consumers. The management of the company considers everything before they price a product, this everything includes the segment of the product, the ability of a consumer to pay for the products, the conditions of the market, action of the competitor, the production and the raw material cost or you can say the cost of manufacturing, and of course the margin or the profit margins.

What is product line pricing?

Products line pricing is defined as pricing a single product or service and pricing a range of products. Let us take and understand this with the help of an example. When you go for a car wash you have an option of choosing a car wash for Rs 200 or a car wash and a car wax for Rs 400 or the entire package including a service at Rs 600. This strategy reflects a strategic cost of making a product popular and consumed by the consumer with a fair increment over the range of the product or the service. In another example if you buy a pack of chips and chocolate separately you end up paying a separate price for each product; however of you buy a combo pack of the two you end up paying comparatively less price for both and if you buy a combo of both in a higher quantity you end up paying even lesser.

Why are premium products so expensive?

Well this strategy works just the other way round. Premium products are priced higher due to their unique branding approach. A high price for premium products is an extensive competitive advantage to the manufacturer as the high price for these products assures them that they are safe in the market due to their relatively high price. Premium pricing can be charged for products and services such as precious jewelry, precious stones, luxurious services, cruses, luxurious hotel rooms, business air travel, etc. The higher the cost the more will be the value of the product amongst that class of audience.

Why is pricing important in marketing?

Pricing completely depends on the 4P pricing strategy in marketing which is very important and it needs to be considered before pricing any product. The management of the company needs to price their products and services very effectively as they do not want to enter into any situation where their sales take a hit due to relatively high price when compared with their competitors , neither would the company want to keep a price too low to maximize profits or enter into losses. Hence pricing needs to be done very smartly and effectively making sure the management of the organization considers every aspect before they price a product.

What are your retail pricing objectives?

It should come as no surprise that every retailer seeks to maximize profits and keep profit margins high .

What are the factors that affect retail pricing?

Factors that affect retail pricing. Although retail pricing is a complex topic with many different components, the factors that affect how you price your products can be broadly categorized as either internal or external. Internal factors are elements of your business that are generally under your control, such as the costs ...

Why do retailers prefer bundle pricing?

Retailers often prefer bundle pricing because it streamlines their marketing campaigns, as they have to promote a single price instead of several price points. Customers also love bundle deals, since they believe they’re getting more bang for their buck.

Why is offering lower prices better than established competition?

Pros: Offering lower prices than the established competition can help retailers strike the right chord with shoppers, helping them to build a loyal customer base from day one.

Why is channel based pricing important?

Pros: For retailers looking to promote one channel over another—say, to drive their e-commerce operations or to draw more people into stores—channel-based pricing can be used as a great incentive for customers to choose that particular channel.

Why is psychological pricing important?

Pros: Psychological pricing is especially useful for brands that want to increase their overall sales volume by driving customers to make impulse purchases of cheap to mid-range items.

What is retail pricing?

Retail pricing is a core aspect of any business that sells products to customers. After all, consumers may care about a number of factors when making purchasing decisions, but the price they will pay for an item is almost always among their top concerns. When it comes to setting prices for products offered at your retailer, ...

What is pricing strategy?

Pricing strategy must consider that it costs to manufacturer to develop a product; it requires expense on distribution and promotion. A lot of pricing strategies are on hand and are practiced throughout the world. The main criterion to adopt a particular strategy is “what objectives’ a firm decides to achieve?” A price strategy can be demand, cost and/ or competitive in nature. As charging too high or too low may cause loss to the firm, pricing should take demand, cost and/or competition into account.

Why do retailers charge more than the market price?

On the other hand, stores with inconvenient location and absence of value-added characteristics can charge less than the market price.

What is mark up pricing?

The percentage varies strikingly among industries, among member outlets and even merchandise of the same retail firm. One popular form of such pricing strategy is to mark up pricing. In mark up pricing, a retailer sets the prices of the merchandise by adding per unit merchandise costs, retail store operating expenses and determined profit.

What is the purpose of pricing objectives?

2. Pricing Objectives: Pricing objectives are generally considered as part of the general business strategy and give direction to the retail pricing process. While deciding on pricing objectives, a retailer must understand that pricing strategy must reflect the retailer’s overall goals that can be stated in terms of profit and sales.

What happens if the retail price is too low?

If the price is set too low, retailer may not be able to cover its store expenses. If the merchandise is priced too high retailer may price himself out .

What is the difference between price and cost?

A pricing strategy must be consistent over a period of time and consider retailer’s overall positioning, profits, sales and appropriate rate of return on investment. Lowest price does not necessarily be the best price, but the lowest responsible price is the best right price. The difference between price and cost is profit which can be very high when the sales person wants to exploit an urgent situation.

Why is it important for retailers to understand pricing?

Retailers should understand the importance of pricing because it has direct relation with consumer purchases and perceptions. During pricing decisions, retailers should also under the price elasticity of customers to price changes in terms of the quantities bought.