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The 7 Best Practices for Retail Price Management

Retail pricing is an essential component of every company that sells items to clients. After all, while customers consider various aspects when making purchase decisions, their price for an item is virtually always among their top priorities.

You may take several techniques when it comes to determining prices for items sold by your merchant, depending on your short- and long-term company goals. However, usually, the retail price you set for any specific item has to include the cost of the item as well as whatever markups you make to benefit from selling that item.


What objectives for retail price management?

It should not come as a surprise that every merchant strives to maximize earnings and maintain strong profit margins. However, the retail industry is volatile, and your goals as a firm might vary in a matter of weeks or months. Depending on the kind of business that you run and the time of year, your primary goal may be to keep your store open for a few months until you can attract more consumers during the busy season.


While setting the retail pricing objectives for your retailer, it’s essential to consider factors besides just the profit margins and the markup percentages.

The most simple way to do that is to ask these important questions.

  • What is the mission of your brand?

  • As a retailer, what are your plans?

  • Who are your core customers?

By honestly answering these questions, you can understand what is important to you in the short and long term. After all, a retailer seeking high-profit margins in a short time to fund the construction of additional stores would have a very different price goal than a premium brand seeking to keep its products covered by customers.


Given below are some Best Practices for Retail Price Management

Let's take a look at the most common pricing strategies that retailers use.

Every pricing strategy has a different short- and long-term outcome with different strategies and objectives.


  • Suggested retail price management by manufacturers

Consumers are probably most familiar with this retail pricing control method. The Manufacturer Suggested Retail Price Management technique seeks to unify the pricing of products sold in numerous places. It is frequently employed for mass-produced commodities such as consumer electronics or home appliances. This method is also known as cost-based pricing since it considers the cost of creating the goods, a profit margin for both the manufacturer and the retailer, and the prices of comparable products. In most cases, the producer sells the goods to the store at nearly half the MSRP, allowing the merchant to profit from the sale.

Pros: This strategy removes the guesswork from pricing fixing for merchants, saving them time and resources.

Cons: Offering some items at the MSRP might reduce your competitive edge on such products—after all, how can you differentiate yourself if you sell the same thing at the same price as other retailers?


  • Optimizing wholesale or production cost of a product to determine the retail price.

This practice derives from the MSRP (manufacturer suggested retail price), often double the wholesale price.

Pros: Like the MSRP, this strategy saves merchants time and resources because it doesn't involve too many computations to calculate a product's retail price.

Cons: While keystone pricing may work for certain things, it is unlikely to work for others. If you set the price too low for products worth more, you won't be able to obtain the profit margins you could on that item. On the other hand, for some things, keystone pricing may be excessively high, affecting your sales—especially if a local competitor is selling the item for a lower price.

  • Bundle pricing for retail price management

Bundle pricing, also known as multiple pricing, is when you sell many items for a single price—for example, three-pack socks or five-pack underwear. Retailers frequently favour package pricing because it simplifies their marketing efforts by advertising a single price point rather than numerous price points. Customers also appreciate package offers because they think they are receiving more bang for their dollars.

Pros: Bundle pricing often leads to larger-volume purchases of specific products or product groups, so if you have the unsold inventory you’re trying to move, this could be a clever tactic to employ.

Cons: When you offer things in a bundle package at a cheap price, it may be more difficult to sell them separately at their original price. This is related to cognitive dissonance, in which consumers think they are receiving less value for their money since they are comparing it to the prior package offer (even if the bundle deal was more expensive than the individually priced item).


  • Discount pricing strategy for retail price management

As the name implies, discount pricing is the practice of selling things at a discount, whether through sales codes or coupons emailed directly to the client, in-store discounts, or even store-wide markdowns. Although businesses dislike the concept of discounting things since it reduces their profit margins, giving the odd sale may do wonders for bringing in more consumers and attracting new kinds of customers seeking a bargain.

Pros: Discount pricing can help merchants get rid of slow-moving or out-of-season products.

Cons: Offering discounts too regularly might reduce your brand's perceived value in the eyes of customers, making them hesitant to pay the total price for your goods and services.

  • Penetration pricing for retail price management

Penetration pricing is a strategy often favoured by newer businesses about to enter the market. It is the practice of initially keeping product prices low to present the brand and its products to as many people as possible.

The notion is that through developing consumer word of mouth, merchants may save money on advertising and customer acquisition expenditures in the long run.

Pros: Lowering pricing than the established competitors can help businesses hit the right note with customers, allowing them to create a devoted client base from the start.

Cons: If you transition from your initial cheap rates to standard pricing too quickly, it has the potential to backfire and alienate the clients you have gained.

  • Loss-leading pricing for retail price management

This is the strategy of drawing people in by giving a discount on the desired product, then pushing them to buy more things in addition to the initial one while they're in your business. Retailers believe that utilizing loss-leading pricing would offset their profit loss on the reduced item by selling more goods that the buyer had not previously considered purchasing.

Pros: This strategy frequently boosts the average transaction value (ATV), or the amount spent by a customer in a single shopping trip.

Cons: It's critical to achieve the correct balance in customer service while using loss-leading pricing. Just as you don't want your consumers to feel pressured into purchasing products they don't need, you also don't want to risk losing money by selling only the reduced items and not much else.

  • Charm pricing


Pros: Psychological pricing is especially effective for firms looking to increase sales volume by encouraging customers to make impulse purchases of low- to mid-priced products.

Cons: Not all brands should use psychological pricing. In contrast, if you are a premium or luxury company, using psychological pricing might have the opposite impact of what you intended by making you appear "cheap" or "gimmicky" in the eyes of your clients.


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