How Much? Survey Examines Preferred Product Pricing Strategies
A recent survey on product pricing from Retail Systems Research showed a range of factors on how and why multichannel marketers arrive at prices for their products. For instance, from the 106 marketers who responded, 73 percent said the pressure to improve their bottom lines (margin or profit) was the top business challenge driving their pricing strategies, followed by increased pricing aggressiveness from competitors (48 percent), pressure to improve sales (46 percent), increased price sensitivity of consumers (39 percent), the need to protect a brand’s image (22 percent), increased price transparency — the impact of comparative price shopping (20 percent), and a need to provide more localized pricing (16 percent). Here are some of the survey’s other noteworthy results.
* 54 percent of respondents said they use a hi-lo pricing system (a mix of regular and promo items) for their pricing strategies, followed by item pricing (48 percent), seasonal fashion/markdown (23 percent), everyday low price (17 percent), manufacturer suggested retail prices (15 percent), cost-plus or keystone (13 percent), hyper-promotional (8 percent), discount (8 percent), luxury (8 percent) and club (7 percent);
* 85 percent said the opportunity to improve margins was the leading opportunity for pricing to contribute to their companies’ business strategies in the next two years, followed by increased market share for key categories or products (37 percent), drive traffic to channels (36 percent), create more profitable promotions (33 percent), better matching of supply and demand (32 percent), increase customer profitability (31 percent), and to provide more localized offerings to customers (22 percent);
* 53 percent of respondents said their pricing is set by the buyer, followed by pricing being a separate function within merchandising (29 percent); and
* 42 percent said competitive pricing is the primary basis for setting or changing prices, followed by markup cost (37 percent), manufacturers’ suggested retail price (11 percent), “optimized” pricing based on elasticity analyses (5 percent), segment specific pricing based on “marketbasket” analyses and demographics (3 percent), vendor-supported deal pricing (1 percent), and to implement product bundling and/or multiples pricing (1 percent).