Factors Affecting Pricing Policy
A number of factors can affect your pricing strategy. Most retailers follow a fixed mark-on pricing strategy; others follow a market accepted priced strategy. For me, when a retailer uses market accepted price, his pricing strategy is focused on the customers.
Market accepted selling price – retailer’s mark-on % = Budgeted Cost.
As a buyer for the business, we will already know how to price a product. Using this method, gives me a clear indicator of how much I should be willing to pay. Once I have a targeted retail price, I can focus on negotiating with the supplier. Often in the course of the negotiation, we can create a win-win-win situation for all parties. I will have negotiated a cost acceptable to my business, and one which I can retail it at a fair price to my customers. In order to get my price, I might give my supplier a bulk order or we may do a product promotion. I might have to drive a hard bargain, but it’s nothing personal, just sound business practice.
Other factors that affect your pricing strategy are the economics of your business. Depending on the current situation of your business’s performance, your mark-on has to ensure sufficient profits to sustain your business. Sometimes, to increase your sales volume, you can lower your mark-on to price selected merchandise.
Understanding your product and your customers should give you some pricing parameters. This depends on your market or niche, and the kind of retail operation you have. It also depends on the products that you sell. Is it price sensitive? Is it a seasonal product? By understanding your customers, you will know how to price your product. Your experience and knowledge of your market should give you an indication of the price resistance levels. If market conditions make it impossible to maintain your current price level, by all means push your price to the next level.
The presentation of the product also plays an important role in your product pricing strategy. This depends on your retail store concept, merchandise display, and use of point-of-sales materials. Any seasoned buyer would already know how they plan to present the merchandise, and at what price they intend to sell. If you want your customers to accept your price, it has to be realistic and fair. You can further seal the sale if you have a clearly defined purchase return policy.
