Page 194 - DMGT550_RETAIL_MANAGEMENT

Unit 11: Retail Pricing and Communication Mix

6. The focus or niche strategy is often confused with the communication strategy. Notes
7. Organizations employing this competitive strategy usually experience a loyal customer
base.

11.3 Legal and Ethical Pricing Issues

The price of a product or service plays a large part in how well it sells. Producers and retailers
practice ethical pricing strategies to earn profits without defrauding competitors or consumers.
Despite that, competitor’s prices, convenience, availability and other factors affect consumer
impressions of fair pricing. Business laws protect competitors and consumers from many unethical
pricing strategies that unscrupulous marketers may wish to attempt.
Fair Pricing

Producers sell products at wholesale costs that pay for the labor, materials and overhead to
make the products with a reasonable margin of profit. Retailers commonly mark up the price to
two or three times the wholesale cost to pay for employees and overhead with a considerable
profit margin for the company and its shareholders. At times retailers cut prices to stimulate
sales of particular products or to sell large quantities of popular products.
Advertising Schemes

Trade laws bind companies’ advertising price comparisons. A car dealer who claims to sell for
thousands less than competitors has to be able to produce documentation of that competitor’s
prices and their own to prove it. Advertisers publishing an inexpensive product when there is
not much inventory of the product are often using the illegal bait-and-switch scheme with a
large inventory of a similar product at a much higher price.
Price Cutting

At times firms cut prices to sell off outdated stock or to make way for a new line of products.
Some vendors set prices very low for new products to introduce them to the market and inspire
customers to try them. These are both legal and ethical pricing strategies. A company uses
unethical pricing cuts to squash the sales of competitors by selling the same products for lower
prices. Federal laws protect competitors from undercutting.
Monopolizing

A monopoly exists when there is only one source of a particular product. Federal antitrust laws
protect competition in the marketplace by outlawing monopolies. The American Telephone
and Telegraph Corporation (AT&T) was a communications monopoly. The government divided
the company up in 1982, which gave rise to new competing phone companies. It is also illegal to
fix prices or divide markets among competitors to undermine competition. An assumed
monopoly exists when one firm sets pricing for the whole market.

11.4 Communication Programs to develop Brand Images and Build
Customer Loyalty

Your company brand serves as an identification of the promises you make to convey your
product/service quality, unique characteristics, and competitive superiority to your customers,
as well as being a source for financial gains. So why not make sure your brand is real/real, or
fake/real as opposed to real fake?

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