Page 206 - DMGT550_RETAIL_MANAGEMENT

Unit 11: Retail Pricing and Communication Mix

11.7 Summary Notes

 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.
 Retailers communicate with customers both online and offline and interactively and
passively.
 Psychological pricing is used when prices are set to a certain level where the consumer
perceives the price to be fair.

 Buyers will buy a high priced product because they believe that the high price is a good
indicator of value.
 Reference pricing is when buyers have a psychological response to the price that mirrors
the way they view a price’s relationship to a specific product.
 A practice where manufacturers or wholesalers seek to control the retail price of their
merchandise through some sort of agreements.

 Price setting is a common task for any retail buyer; it is a really massive topic to cover.
 A competitive strategy is what allows your business to successfully compete against other
rivals within the industry.

 A business employing a focus strategy targets (focuses on) a small segment of the
marketplace that is not well served by existing businesses.
 A good way to explain a technical idea is to use an analogy.

11.8 Keywords

Horizontal Pricing: This practice involves agreements between manufacturers, wholesales and
retailers to set prices. Such agreements usually are illegal under Indian sales laws.

Minimum Price Laws: These laws prevent retailers from selling certain items for less than their
cost plus a fixed percentage to cover overhead.

Price Discrimination: A pricing practice where different prices are charged from different retailers
for the same merchandise and same quality.

Psychological pricing: It is used when prices are set to a certain level where the consumer
perceives the price to be fair.

Unit Pricing: The objective of such legislation is to let the customers compare the prices of
product available in many sizes. For instance, food and grocery stores must express both the
total price of an item and its price per unit of measure.
Vertical Price Fixing: A practice where manufacturers or wholesalers seek to control the retail
price of their merchandise through some sort of agreements.

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