compare prices between several retailers in
shopping malls or on the Internet to obtain the
best “deal.” With many retailers in one location
and having similar merchandise, it is easy for
consumers to do comparative shopping. Most
retailers mark down some items, or run sales
on slow-moving goods, 13-17. This attracts
customers into their sites to buy additional
higher-profi t items.
There are usually market constraints on
pricing, with certain price ranges for particular
items in various market segments. General price
levels can be categorized as low or budget,
mid, or high. The “right price” is the amount
consumers are willing to pay for certain products
and retailers are willing to accept. It is the price
that is satisfactory to the customer both before
and after the sale. In summary, it is a price that
brings about the sale, generates a profi t, satisfi es
customer expectations, and meets competitive
situations.
The Price/Quality
Relationship
Quality and price usually, but not always,
correlate. Consumers generally equate high
prices with high-quality goods, and low prices
with low-quality goods. Upscale retailers offer
high-quality goods at moderate to high prices,
and retailers that target a wider customer base
offer lower-quality merchandise at lower prices.
Prestige pricing is a policy of setting high
prices on items to attract customers who want
quality goods or the status of owning expensive
and exclusive merchandise. Retailers price
products to be consistent with consumers’
expectations. Some retailers set prices above
those of competing retailers to convey an
image of superior product quality or prestige.
This also differentiates the products and stores
in the minds of potential customers. Retailers
who use this pricing policy usually have a very
good location, a high level of service, and carry
exclusive brand names.
Items of relatively low quality may be highly
priced if there is a reason, such as styles in the
introductory phase of the fashion cycle. However,
most retailers do tie their price ranges to quality
standards. A policy of stocking only top-quality
merchandise permits high price ranges. A retailer
that features intermediate quality usually sets
some bottom limits that it will not go below.
Retailers that emphasize lower “serviceable”
quality tend to also emphasize their low prices.
The class distinctions that have previously
distinguished various price/quality retailers from
each other are now eroding due to constant
price promoting. Price promoting is advertising
special price reductions of goods to bring in
shoppers, 13-18. This builds traffi c (numbers
of retail shoppers) to buy other items as well.
Shopping traffi c has been shown to move up
and down in direct relation to promotion pricing
of merchandise. Shoppers have been exposed
to so much price promoting that they have
developed sophistication in seeking low prices.
Upscale retailers seem less compelled and
less inclined to indulge in price promoting than
mainstream retailers because they continue to
enjoy their own prestige and attraction. However,
upscale stores have recently engaged in more
price promoting than they have done in the past.
Specifi c Pricing
Approaches
All retailers would like to sell large volumes
of goods at high prices for huge total profi ts.
However, the marketing triangle has shown that
price and quantity sold are inversely related
to each other. Most retailers either seek high
unit markups on low volumes of goods, or low
markups on high sales volumes. The overall
13-17 Signs that indicate a lowering of prices
are used to attract shoppers into stores.
Chapter13.indd 262 Chapter13.indd 262 3/21/2008 3/21/2008