Question

What are the five factors retailers consider in setting retail prices ? Explain each of them briefly .

THIS RETAIL MANAGEMENT

Answer 1

Five factors that retailers consider for pricing a product are:
1. Cost: First and foremost work out the costs involved with running your business. These include your fixed costs and the variable cost. The cost of the product is a calculated one which takes into account all the investment that goes into getting the product to your store, the manufacturer's price including the depreciating capital expense too.
2. Customers: Understanding the customer's requirement for buying the product and the cost they are willing to pay is a factor which needs to taken into account. This factor defines the quality, precision of the product and cost too. Before the product is price it is also important o check out which is your targeted customer segment.
3. Positioning: After you have decided who should be your customer you need to check how do you want to position your product so that the targeted set of customers can opt to visit your store and have a look at your product. Position of your company and your product may also be a deciding factor for the same. I improve the positioning you may need to advertise and get attention of your target segment.
4. Competitors: Based on your position in the market and any competitive product that is available in the market you need to decide how you want to price your product. You may try to become high volume low margin, or low volume high margin based on your products and competitors' products relative position.

5. Profit: The most important question retailers should decide is how quickly they want to breakeven. This should also factor in the above four factors to get a reasonable pricing of the product. They should take into ccount the seasonal thrust causing the sales as well as the customer need, to go ahead with variable pricing, so that they can take advantage to maximize their profit

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