How retailers set prices for their products?What is margin and margin?These questions concern both consumers and business beginners.
clearly understand what margin trading, obliged everyone who is going to open a retail store.The concepts of margins and markups are different, but between them and there is an obvious connection.The margin shows how much profit each brings invested in the purchase of goods dollar.A margin is the formula - surcharge / (100 + margin), it shows how much profit brings every dollar turnover.So what is to be guided by installing a particular margin on goods other than the notorious "need money"?
competition and pricing strategy
If competition in the market is very high, it is, by itself, the user selects the store with the lowest price, so with the help of regular monitoring of competitors set approximately the same prices for goods.
In markets where image matters, status or service value of goods can vary significantly.This, for example, brand clothing stores, restaurants, shops of home appliances and electronics and so on. The successful cleverly copied by competing companies, so retailers are seeking in any way to check out from the competition, have to continue to evolve in terms of service, to provide additional services and goods,there are always "explain" to the buyer why he should pay more and that makes the customer from the store, or just a guest in this restaurant special.And it is not enough vague slogan "we are working in the premium segment."
cost method of pricing
One option pricing policy of the company - is pricing based on cost of production.Price for this approach should cover all costs and include margins.This approach is acceptable if there is no full competition in this segment of the market, if the product is not everyday goods, and the buyer did not notice the price increase, if the goal is to quickly and without losses to get rid of surplus goods.To calculate the price with this approach need to understand very well what the margin trading, which consists of the cost of production, which is at the enterprise costs associated with the sale and promotion of products on the market.
Pricing based on customer value
This approach is used interpretation prices in terms of marketing.This product is as much for how much it is prepared to buy.This strategy is used in markets with inelastic demand.This sets the margin on retail jewelry, art, designer clothing, accessories and other status.Or it may be products for the poor.In this segment, demand is also inelastic, as a pensioner will not pay more, even if you improve the quality of the product or service in a shop.With the proper definition of the target audience, its needs and moods of this strategy can be very effective.The buyer does not think that such a margin in the trade and what it should be if the seller has found the necessary levers to influence the client.
lack of pricing policy
If the prices in the store are changed too often, the buyer suspects foul play and may not return.The system of bonuses, discounts must be absolutely clear to customers and store personnel, otherwise it will be like trying to confuse and deceive.
not be abused discount.Ultimately, this may lead to the fact that not enough money for the purchase of goods.This mistake beginners often make is not quite understand what margin trading.It is possible that a sufficiently decent turnover of the company barely pays for itself (well, if you pays for).
No Goods or accountant can not set prices.The first does not know anything about the cost of the second - on the positioning and the portrait of the buyer.
too frequent customer questions about why so expensive - it is a signal flaw marketers and category managers.Price does not exhibit "good luck", it must be justified.The seller must be able to convey to the buyer why this loaf special and why it is more expensive than the corner.If there is no such justification, the price will have to be reduced.Superior marketing - a talented manipulator conscious consumers.
best approach to pricing
correct approach to pricing is possible with a clear understanding of what is included in the cost of the goods, what price can be as low as possible, and what the buyer is willing to pay (not all, but a concrete representative of the target audience).Constantly should be carried out analysis of the competitive environment, the margin determined in the retail trade for similar goods.
