ECON 101 CC Pricing Strategies Discussion
ANSWER
Discussion 15 in Module 8 is devoted to pricing strategies, particularly the consequences for retailers of wholesalers’ “suggested retail price” (SRP) idea. The topic of discussion centres on the economic justification for SRPs and the elements a retail business manager should consider when determining whether to charge the SRP, a higher price, or a lower price.
Suggested Retail Price (SRP) Economic Basis:
The price that the manufacturer or wholesaler suggests as the best-selling price for a product is the suggested retail price (SRP). Retailers and customers can use this price as a benchmark. Retailers are free to set their pricing, and the SRP is not mandatory, but there are economic reasons for doing so:
SRPs assist in preserving pricing uniformity across merchants, fostering a consistent brand image, and averting price wars that can reduce the value of a brand.
Perceived worth: Manufacturers frequently set SRPs to match the product’s perceived worth. A higher SRP could signify better quality, whilst a lower SRP might appeal to buyers on a tighter budget.
SRPs offer a transparent pricing foundation, which can assist in sustaining positive relationships between producers, wholesalers, and retailers. Significant departures from SRPs may put these connections under stress.
Pricing Decision-Influencing Factors:
When choosing whether to charge the suggested retail price, a higher price, or a lower price as the manager of a retail establishment, several considerations come into play:
Competition: It is essential to consider the pricing practices of rivals. Charging the SRP could put you at a disadvantage if your rivals are selling comparable goods for less.
Costs: It is critical to comprehend your costs, which include procurement, operational, and marketing expenses. If your costs are higher, setting a price over the SRP might be possible.
Value Proposition: Take into account the benefits your store offers to clients. You can justify asking a more excellent price if you provide exceptional service, distinctive features, or a premium shopping experience.
Customer Perception: Research the preferences and purchasing power of your target market. Customers might be more likely to spend more if they are brand loyal, convenient, or high-quality.
Market Demand: You can charge more than the SRP if there is a high demand for the goods and a constrained supply.
Determine the degree to which demand is elastic to price fluctuations. You should maintain a tight relationship with the SRP to retain clients if demand is elastic (sensitive to price changes).
Promotions and discounts can help you draw in clients concerned about prices while allowing you to sell products above the SRP at other times.
Consider your long-term corporate objectives. A lower price may result in more sales, yet a higher price may maximize earnings per sale.
Relationship with Wholesalers: Significantly deviating from the SRP may cause friction in your dealings with wholesalers and manufacturers, which may limit your access to goods.
The suggested retail price (SRP), supported by economic factors like consistency, perceived value, and channel partnerships, acts as a starting point for retailers. To choose the best pricing strategy—whether to charge the SRP, a higher price, or a lower price—that is in line with their business objectives and market dynamics, retail managers should carefully assess the competitive landscape, costs, value proposition, customer perception, and other relevant factors.
QUESTION
Description
Module 8: Discussion 15 – Pricing Strategies: Suggested Retail Price
Most wholesalers post a “suggested retail price” on packages, which in turn are sold by retailers. Is there an economic basis for the suggested retail price? As the manager of a retail outlet, what factors will determine whether you should charge the suggested retail price or some higher or lower price?