RETAILING – UNIT 6: PRICING April 13, 2018

TODAY’S AGENDA

Introduction to new unit – Pricing

The Importance of Price

The Objective of Pricing

Work Period – Last chance to get Unit 1 – 4 Assignments handed in!

UNIT 6: PRICING Unit Overview Handout

THE IMPORTANCE OF PRICE

In our previous units, you learned how retailers purchase items to sell.

Before inventory can be sold, a business must decide on what price to charge for the items.

Price is the amount of money a customer must pay for a product.

Price is the value of money placed on a good or a service.

Value is the comparative worth of a product.

Each individual customer uses personal criteria to determine value.

Some customers may be willing to pay more for a product if they believe the value is high.

PRICEThe price of a product can be adjusted much more quickly than other business decisions.

Prices are flexible.

A company can lower the price in order to increase sales enough to keep the business going, or increase the price when sales and demand for their products are going good.

The price paid by the customer will determine the

profitability of the business.

PRICE

Retailers do not set prices at random. There are several basic factors that are considered when setting a price.

Retailers ensure that the price accomplishes the following:

Covers the cost of the product.

Covers the cost of operating the business and other expenses.

Generates enough profit.

Is an amount customers are willing to pay.

DIFFERENCE BETWEEN COST VS. PRICE

Cost is how much the retailer had to pay to purchase, produce or make the product they are selling.

Price, on the other hand, is how much the retailer is charging the customer for their product.

The difference between your price and your cost is your profit (or how much money you are gaining or making in the sale)

Price – Cost = Profit

THE OBJECTIVES OF PRICING

Why do retailers set prices? What is the point?

To Maximize Profits

Profit is by far the most important pricing objective.

The business carefully studies the target market to determine what customers will pay for the product, and sets prices that will help them achieve large financial gain.

THE OBJECTIVES OF PRICING

To Increase Market Share

Market share is the percentage of a market taken up by one business based on their number of sales.

Businesses want to have the highest possible sales volume in the market.

This usually means low prices and a large share of the market.

This gives a general idea of the size of a company in relation to its market and its competitors.

For example, Google takes up 70% of the search engine market.

THE OBJECTIVES OF PRICING

To Maintain an Image

Many consumers believe that high prices equal higher quality.

Price is a positioning statement and will indicate who the competitors are, as well as who the customers are.

For example…

Which pair of jeans is $31.99 and which pair is $110.00?

High-end

premium jeans

are often

manufactured

overseas just like

less expensive

jeans.

END OF TODAY’S LESSON Work Period

This is your last chance to get any missing

Unit 1 – 4 Assignments handed in to me

before your Report Card.