If you are in the retail business, you will find it tough to decide on the pricing. Too low and you would be cutting out your own profits, too high and you’d see loss your sales. So, when you are trying to decide on a retail price, you need to consider different factors. Now that you know about it let’s have a look at how you can decide on your retail pricing and make a profit out of it.
When you have a number of products, you can risk lowering your price point to get more sales. You can even mark up the price and offer a discount. Let’s look at the different price models that you can try.
Manufacturer Suggested Retail Price (MSRP)
As the name suggests, your manufacturer suggests this price for your product. The reason this was first started was to make a standardized pricing plan for all retailers. While it helps you to save time and lets you focus on other calculations, there is one drawback. More people selling at the same price means there would be more competition from different sellers.
This is by far the easiest method of determining your price point. All you need to do is double the wholesale cost of the product. So, if you are buying something for $3, the retail price should be $6. However, there can be certain situations where the keystone pricing will not work. You might need to change it according to market conditions. For example, when there’s an increase in demand, you can increase the price and make it thrice the wholesale price.
Have you seen a decrease in your sales recently, or want to turn your visitors into buyers? Well, then you’d to offer discounts on the product markup. Discount pricing can help you with that. You can use it as seasonal discounts, or increasing traffic on your site. However, if you use it too often, your brand would lose credibility. Or it might happen that people will not be interested in any discounts that you offer.
This pricing process requires you to study your competitor’s price and then set a lower price than that being offered. If you are new in the game and want to attract customers, this is a good technique to use. In order to be profitable, you need to negotiate with your suppliers to get a better price for bulk purchases. However, if you are a small retailer with low sales, then you might not be able to cut back on your own profit margins. You can also try the above competition pricing model, where you charge a price above your competition. This, however, comes with its own set of pros and cons.
Well, retail pricing is all about numbers and how well you can implement psychological tactics. Studies show that when you put in prices at odd numbers, people tend to buy more. Now, when you consider odd numbers, the number ‘9’ is a clear winner. If you end your price with 5, 7 or 9 instead of an even number, you’d see an increase in sales. So, next time mark the prices at $8.99 instead of $9.00. You might lose $0.01, but you’d earn more than that in the long run.
Pricing your retail products is a continuous process. You don’t have a specific rulebook that you can apply. You need to study the market conditions, your statistics and your target customer before you can come with a winning price. If you have used any techniques before, which had a positive result, you can also try a new spin to it, and add something more. At the end of the day, sales are what that matters.
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