There are a number of common fallacies relating to price setting. These include:
price is the only thing about which customers worry
low priced products are more successful in a recession
it is best to set your prices at the same level as your competitors
price low to gain market entry and once market entry has been obtained then increase prices
ask your customers what the price should be and price at the prices that they have told you
Whilst customers are concerned about prices, it is not the only thing that customers consider when deciding whether to purchase goods or services from a particular business. Astute customers tend to choose suppliers primarily for reliability. Other factors that enter into the buying decision include:
quality of product
technical and backup services
reputation of the retailer
location of the retail business
guarantees that are issued by the retailer
refund policy and attitude to refunds
Successful retailers know their customers and understand why particular customers are buying from them as part of the evaluation of the price setting equation. Rather than just looking at what competitors are charging the sound business practise is to determine what the required selling prices are for a retail business to cover its costs and earn a reasonable profit.
This segment will be continued on the next edition.
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