fusion point research Marketing Research Reports

Marketing to Pricing Leaders in Retail

Understanding Their Role

Pricing is a critical function for retailers, and they spend considerable effort reviewing and improving their pricing strategies and tactics. The pricing strategy must fit with the organization's overall goals and positioning in the marketplace. The pricing strategy is inseparable from the product assortment offered, and from the customer segments a retailer pursues. Examples of strategic approaches from large US retailers include:

 

  • Walmart's Low Price Guarantee: "Walmart lowers thousands of prices every week, on average. If you happen to find a lower price, we'll match it right at the register." 1
  • Costco's strategy of "bringing our members the best possible prices on quality brand-name merchandise." 2
  • Department stores like JC Penney and Macy's use of higher list prices combined with coupons, markdowns and advertised sales events. 3
  • Discount stores like TJ Maxx's offering "brand name and designer fashions at prices generally 20%-60% below department and specialty store regular prices." 4
  • Specialty fashion and luxury stores such as Saks Fifth Avenue and Neiman Marcus offering high quality products at premium prices.5

 

Tactical pricing initiatives exist within the organization's overall strategy, and can be quite sophisticated. Driven by technology, retailers must understand five pricing issues:

 

  • Price sensitivity at an item level
  • Value of different brands within a category
  • Which products are often sold with other products
  • Which products drive sales of other products (basket drivers)
  • Which products drive traffic to stores.6

 

Changing the price of a key product can have an impact on much more than the sales and profit of that individual item.

“The luxury customer is looking for quality and knows the difference between 'better' and 'best'. Price is important, but quality is remembered long after price is forgotten...."

 - Richard Marcus, former CEO of Neiman Marcus. 7

 

"Setting the suggested retail price is critical for us. We establish retail prices months before a product is launched, so we need a forward view of what the market will bear." - Mike Ray, CEO of Vera Bradley.8

 

1 See: http://challenge.walmart.com/lowpriceguarantee

2 See: www.costco.com/about.html

3 Isaacson, Bruce. "Lessons in Pricing Strategy from JCPenney." MMR Strategy Group. (2013). Available at: http://mmrstrategy.com/lessons-in-pricing-strategy...

4 See: http://tjmaxx.tjx.com/store/jump/topic/how-we-do-i...

5 Petro, Greg. "Department Store Pricing -- No Easy Task (Part 4 Of 4)." Forbes. (2013). Available at: www.forbes.com/sites/gregpetro/2013/01/10/departme...

6 See, as an example: http://kssretail.com/services/assortment-analytics

7 Petro, Greg. "Department Store Pricing."

8 Petro, Greg. "Pricing Part 3: How Does A Brand Know When The Price Is Right?" Forbes. (2013). Available at: http://www.forbes.com/sites/gregpetro/2013/01/03/p...

 

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Pricing is vital to the success of retailers. The pricing strategy must fit with the retail organization’s position in the market, and pricing tactics are used to maximize revenue and profits.
fusion point research Marketing Research Reports
Pricing is vital to the success of retailers. The pricing strategy must fit with the retail organization’s position in the market, and pricing tactics are used to maximize revenue and profits.
  • Walmart's Low Price Guarantee: "Walmart lowers thousands of prices every week, on average. If you happen to find a lower price, we'll match it right at the register."
  • Costco's strategy of "bringing our members the best possible prices on quality brand-name merchandise."
  • Department stores like JC Penney and Macy's use of higher list prices combined with coupons, markdowns and advertised sales events.
  • Discount stores like TJ Maxx's offering "brand name and designer fashions at prices generally 20%-60% below department and specialty store regular prices."
  • Specialty fashion and luxury stores such as Saks Fifth Avenue and Neiman Marcus offering high quality products at premium prices.
  • Price sensitivity at an item level
  • Value of different brands within a category
  • Which products are often sold with other products
  • Which products drive sales of other products (basket drivers)
  • Which products drive traffic to stores.