February 23, 2006
5 Pricing Strategies
In this paper, I will cover five different pricing strategies used, by retailers and manufacturers, to sell their products. I will demonstrate how pricing products according to one of the five pricing strategies chosen works effectively for each company. Loss Leader
Look in any newspaper circular, it is chocked full of advertisements from untold numbers of retailers who are trying to push "loss leaders" onto consumers. The loss leader is an item that is sold below cost and is designed to lure people to the store to shop. The loss leader might be a popular item, yet an obscure brand that is sold at a low price. I do not believe that the retailer cares if the loss leader sells or not; once you are in the store, the salespeople have the opportunity to "up sell" you to the nicer model or brand. A perfect example of this is the circular for Stereo King; it is loaded with loss leaders with insanely low prices. Read the fine print and you will see that the advertised item is a no-name brand or a factory-refurbished item. In the Stereo King ad from February 19th, they are advertising a 7" Clarion monitor for only $99.00. This is a great price; it jumps off the page and says "you HAVE to buy this! It is such a good deal! Looking closer at the ad, it is a factory-refurbished item and there are limited quantities available. I fell into this trap once and was drawn to the store by an ad. When I got to the store, the salesman said that the item was located at a different store and was "missing pieces"; it was not really a good deal. I learned the loss leader marketing scheme first hand before I knew the name of it. The salesman was religious in showing me the model that he would recommend and that he stocked in his showroom; unfortunately, it was a "no sale." Suggested Retail Pricing
Most placed where you would expect to see suggested retail pricing is with items such as books, magazines,...