profi ts of each might be similar, but they are
selling to different target markets and offering
other differences in the total marketing mix. In
developing a pricing strategy, the retailer must
price merchandise low enough to generate sales
but high enough to cover costs and make a
satisfactory profi t.
Pricing below the market is a policy in
which retail prices are set below those of the
competition. Price-cutting policies were originally
introduced by supermarkets, and then spread to
apparel and other product sectors. Retailers may
use this below-market pricing policy if they
are in an inconvenient location
are a self-service organization
concentrate on high-volume sales
stock private label merchandise
lower their costs by using innovative
technology to receive fl oor-ready
merchandise from manufacturers
forego some promotional efforts
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Original (list) retail prices are often higher
than actual selling price points. Value pricing is
the selling of items below the price suggested by
vendors of the goods. This price-cutting policy
is used by discounters, especially on national
brands. However, some vendors and retail stores
imply that list prices for merchandise are higher
than they really are. The goods are then marked
down to a normal level, but with value pricing
implied. This practice can cause retailers to loose
credibility with consumers. Shoppers have learned
that items on sale are not always a good buy.
To ensure price competitiveness, some
retailers promise to match the lowest advertised
price that shoppers show them from ads. In fi ercely
competitive situations, competing stores might
engage in a price war. That is when they drastically
lower their prices to try to undersell each other.
The theory is that the retailer with the lowest prices
will attract customers from the other competitors,
and ultimately force them out of business.
Some retailers use a “price line” selling
policy, in which they offer their merchandise for
sale at a limited number of predetermined price
points. For example, a store may offer women’s
sweaters at $29, $39, and $49 only. The store’s
buyers actively seek out merchandise that can
be sold to consumers at these prices.
Everyday low pricing (EDLP), another
strategy for retail positioning, promotes the idea
that consumers can shop in the store at any time,
knowing that they will get a fair price that gives
good value for the money. This strategy has been
used recently by some discount chains. It tries
to instill a sense of trust and consistency toward
pricing, while providing a reasonable profi t to the
retailer. High seasonal markups are eliminated,
as well as bargain prices during promotional
sales. Stores that use this strategy may enjoy
more credible pricing, reduced advertising costs,
a steadier fl ow of sales, and better partnerships
with vendors. However, higher sales volumes and
lower operational costs may not match the overall
reduction of prices. Also, the many shoppers
who shop sales events and enjoy “the thrill of a
bargain” may be disenchanted by this approach.
Place Strategy
Place strategy relates to site location and
physical site design, which should complement
13-18 A large sign outside the store
tells consumers passing by about price
reductions on goods inside the store.
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