Retail Marketing Management RM 8,9 Retail pricing & promotions

Retail Objectives & Pricing A. Market penetration Market skimming B. 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 LocationNo parking, poor layout, inaccessible Central business district, proximity to competition Monopoly, compatible location to target segment Service AttributesSelf-service, limited offerings, no sales Support from sales people Personalized attention to customers, home delivery, exchange facility, customized offerings AssortmentLimited varietyMediumExtensive assortment Store Environment Poor quality fixtures, limited space to move around, wall shelves, untidy Compatible store environment Inviting, impressive store décor, visual merchandise attractive

External Influences on Pricing Strategy Pricing strategy Customers Competitors Suppliers 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. Advertising; sales promotion; store atmosphere; visual merchandising Personal selling PublicityW.O.M ImpersonalPersonal Unpaid Paid

Positioning Objectives for Retailing  Merchandise category e.g.  Arcus – interiors & building related,  Food world – food.  Price / quality e.g.  Walmart – low prices  Wills lifestyle – premium apparel  Specific attribute / benefit e.g.  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