Top 4 Retail Pricing Strategies

January 15, 2021

This article covers 4 commonly used pricing techniques in the consumer electronics business, through the eyes of a data-driven decision-maker or a brand manager. The term 'pricing' implies defining an end-user price for retail sales.

Retail Pricing Strategies

Pricing strategy is a well-researched topic, thoroughly analysed in scientific papers but often and easily neglected in the everyday decision-making process. Brand management is based on combining 4Ps of the marketing mix (product, price, placement, promotion). Therefore, the decision-makers should be aware of different techniques and tools implemented in the pricing process. Then, they should and combine them with their own understanding of the market and company’s risk-taking ability.

Whether they are directly responsible for the pricing process or not, brand managers, sales managers, or eCommerce managers can have a significant influence on it.

Management usually considers a lot of factors prior to product pricing, such as:

  • product segment,
  • willingness of a consumer to pay for the product,
  • market conditions,
  • actions of the competitors,
  • cost of manufacturing for products or development and deployment for services,
  • profit margins.

But, it is common in practice to simply follow the competition and act reactively when a lower price for some product is noticed. This can have several consequences:

  • UNCERTAINTY – This approach can have a negative impact on a company’s profit since it becomes difficult to forecast revenue and profit.
  • INCONSISTENCY – Brands or retailers implementing this technique do not communicate a clear message to their customers – what can they expect.

There are multiple pricing strategies, with one common objective: to maximize the company’s profit. In this article, we would like to point out 4 pricing techniques often used in the consumer electronics business, in order to address the specifics of each and provide guidance on how KLIKER market can be of use in pricing.

We will analyse: 

  1. Economy Pricing (or budget pricing)
  2. Promotional Pricing
  3. Mark-up Pricing
  4. Dynamic Pricing (surge pricing, demand pricing, or time-based pricing.)

Full list of pricing techniques available in our Market Data Usage in Brand Management.

1. Economy Pricing

Economy pricing is a pricing technique in which promotion and marketing costs are always kept minimal, to keep the end-user prices low. Also known as budget pricing, it is suitable for brands and merchants whose target buyers are budget-driven, with price being a primary factor for the purchase decision. Some usage examples:

  • Brands that have decided to use economy pricing and skip advertising can place their products on more markets. That way they use the economy of scale leverage to achieve margins needed, without having to increase the end-user price.
  • When an A-brand launches an economy brand on the market, it certainly gives a good push to the new budget pricing brand, since the consumers connect the quality of the new brand with the older brother, but at a price much lower than the latter.
  • Private label products are becoming a real competition to traditional branded consumer electronic products. Budget-driven customers are keen on buying devices in retail stores because they mostly have a high level of trust in their retailer. Also, the retailers usually have customer-friendly return policies, which is a very important factor for the customers – it brings the feeling of safety and easy problem resolving.

KLIKER market use case

How to use KLIKER market to analyse an economy-priced portfolio? 
  • Choose the selected category in My market interface
  • Select All retail and All brands for total data pool
  • Select a technical specification mix for the product you are currently analysing.

Now you can conduct Search and analyse the price distribution among retailers having these products listed.

Beware – sometimes it is not necessary to have the lowest price, even in the budget pricing model. It can be enough to have a price lower than a top-selling competitor’s model.

How to find the top sellers?

  • Check the display position count for every product you got from this search and eliminate the ones with only a few listings. Models that are available to buy in 5 or more retailers can be top sellers.
  • For the products you identify as direct competition, open Price history graph and analyse the trends among retailers for the past 3 months. If price dynamics are visible (price changes, weekend promotions etc.) this model is probably a hero product (top seller by volume or margin). 

For easier analysis and archiving, we recommend exporting the Search results into an .xls file.

2. Promotional Pricing

Promotional pricing is the most used pricing technique in modern retail and eCommerce. With exception of EDLP (Everyday Low Price) retailers, most of the merchants are using some form of promotional pricing: a discount, free gifts, coupons, vouchers, bundle offers… When we talk about promotional pricing, we consider products in a mature phase of their lifecycle, not exclusively EOL phase.

KLIKER market use case

KLIKER market is showing regular price and promotional price for every product. KLIKER market also collects publicly available and non-restricted coupons and discount codes and applies them to regular prices to get the final, lowest price.

When deciding on your next promotion, KLIKER market can help you with:

  • Analysing the competitiveness of your promotional prices on the market
  • Analysing promotion cycles of your main competitors (be it a competitor brand or a competitor retailer) – you can notice time patterns and decide if you want to run a promotion at the same time or avoid a clash
  • Crashed promotion feature – KLIKER market collects your promotional data as well as competitor’s data. Every day after data import, Crashed promo feature automatically* reports when a lower price appears on the market – find it in the Alerts section. 

*Automatically means that for Retailers using KLIKER all of their crashed promo products will appear on Crashed Promo Alert tab. For Brand and Wholesales users, Crashed Promo can be used once hero products have been pinned to the Pinned dashboard. 

3. Mark-Up Pricing

Mark-up pricing is based on increasing the manufacturing or purchasing price for a certain mark-up (%). Mark-up can be constant on all products or specified for each product line or category.

KLIKER market use case

  • Purchasing managers might use KLIKER market as a control tool for purchase prices. After applying the mark-up on your purchase price, analyse the competitiveness of your offer on the market (check competitor’s pricing for selected SKU). If the result is substantially higher than the market average, you might choose to go back to your supplier and negotiate better terms.

4. Dynamic Pricing

Dynamic pricing is also known as surge pricing, demand pricing, or time-based pricing. It is a flexible pricing strategy where prices fluctuate based on market and demand, purchase frequency, stock level, and sell-out dynamics. It is often used on advanced eCommerce sites, with the aim of keeping a constantly high competitiveness level. 

Dynamic Pricing can be: 

  • direct or public - applied on the public website, available to all visitors and potential customers
  • indirect or individual - through individualized coupons and discounts for each customer, based on its previous behaviour 

KLIKER market use case

  • By connecting your CMS or ERP and KLIKER market via API, your pricing software can be fed with accurate market data from all the relevant competitors on the market. Insert this data in your dynamic pricing formula and keep your prices optimal.

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A good pricing strategy can be your competitive advantage on the market. By actively using and analysing market data in the pricing process, you can achieve higher profits and maximize the return on your company’s capital. We created KLIKER market as a tool to help you in this process.

 

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