Speaking about retail, we should pay attention about applying right retail pricing strategy. Why? Because by following excellent manner of pricing strategy the sellers are able to increase the profitability of sales. Pricing becomes bottom line for every retailers, particularly to set the optimized price of the products or services. So how to set excellent retail pricing strategy ?
First you should understand and analyze your sales. Of course, you can use the computer program and any tool to perform formula of markdown pricing. As entrepreneur, you should be familiar with math formula to budget the cost such as operating expense and cost of goods . Here are the best retail pricing strategies those may be used to succeed your business:
To calculate, the calculation must be based on industry standard of determining a profit margin.In addition, mark up definition is a percentage of cost that is added to get optimum pricing. Profit margin is addressed to determine how many goods/services of retail business are sold out. By dividing earnings by revenues, you easily measure the profit margin. It’s so easy, right?
Initial mark up must be higher than price reductions, discounts, shrinkage and other operating costs. If you have numerous types of products, different mark up can be best solution to earn satisfied profit, but it depends on your business’ performance, competitors and market or niche. That’s why it’s better to analyze the price resistance levels.
This is most suitable retail pricing strategy for small business or smaller retail shops. Why? as smaller retails shops those are used to have minimum cost of advertisement by do pricing below some specified amount. You may avoid price war by using this strategy that are also called as Manufacturer suggested retail price (MSRP), so you are able to stabilize your profit among your competitors.
This strategy is aimed to retailers with huge competitors. The points you should do are to make best price and service to lead over your competitors.
If you have very strategic location or unique costumers due to your exclusive and high quality products. So stocking the enough amount of your products on this location because no competitors can be your barriers.
Remember the odd pricing on commercial advertising on TV? The price is aimed to perceive the price to be fair for costumers. That’s why you should to round down a price of $11.95, instead of $11.95.
This strategies can be your main consideration to earn more profit of your retail business. But there are other strategies those you should care. They are discount, multiple and keystone pricing. Finally making the ideal pricing strategy is not easy to do. They are more factors to determine for retail pricing, beside the cost factor. It will be wise if you get experience and management by practicing good retail price. Experiences must be best teacher!