Every organization functions to earn profits and so is the retail industry.
Cost-plus pricing works on the following principle:
Manufacturer Suggested Retail Price [MSRP] (also called List Price or Recommended Retail Price).
According to the manufacturer-suggested retail pricing strategy, the retailer sets the final price of the merchandise as suggested by the manufacturer.
The retailer sells his merchandise at a price suggested by the manufacturer.
Condition 1 - The retailer sells the product at the same price as suggested by the manufacturer.
Condition 2 -The retailer sells the merchandise at a price less than what was suggested by the manufacturer - such a condition arises when the retailer offers “Sale” on his merchandise.
Condition 3 - Retailers initially quote an unreasonably high price and then reduce the price on the customer’s request to make him realize that a favour has been done to him - a condition of Bargain - where the customer negotiates with the retailer to reduce the price of the merchandise.
The cut-throat competition in the current retail scenario has prompted the retailers to guarantee excellent customer service to the buyers for them to prefer them over their competitors.
According to pricing below competition policy, the price of the merchandise is kept less than what is being offered by the competitors.
According to prestige pricing mechanism, the price of the merchandise is set slightly above the competitors.
The retailer can charge higher price than the competitors only under the following circumstances:
Certain price of a product at which the consumer willingly purchases it is called psychological price.
The consumer perceives such prices to be correct.
A retailer sets a psychological price which he feels would meet the expectations of the buyers and they would easily buy the merchandise.
According to multiple pricing, the retailer sells multiple products (more than one) for a single price.
The retailers combine few products to be sold for a single fixed price.
3 Shirts for R 100, or 3 Perfumes for R 20, and so on.
According to discount pricing, the retailer sells his merchandise at a discounted price during off seasons or to clear out his stock.
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