Retail Pricing, Promotion and Marketing
Pricing sets the offer, promotion accelerates it, and marketing makes shoppers aware of it. The exam tests pricing methods, the markup-versus-margin distinction and how promotions are evaluated rather than merely announced.
Pricing methods
- Cost-plus: cost + fixed markup, simple but ignores demand.
- Competitive/market pricing: match or beat nearby stores.
- Value-based: price to perceived benefit, common in premium and private label.
- Psychological: odd pricing (Rs 199), anchoring, bundle pricing.
- Skimming (high launch price, then reduce) and penetration (low launch price to build volume).
- EDLP (everyday low price) versus Hi-Lo (high base price with frequent discounts).
- MRP is the maximum retail price fixed under legal metrology; a retailer may sell below MRP but not above it.
Promotion and marketing
Promotion types: percentage discount, BOGO, coupon, cashback, loyalty points, combo and loss leader. Marketing uses the 4Ps (product, price, place, promotion) and, for services, 7Ps adding people, process and physical evidence. Push incentives go to channel and staff; pull incentives go to the consumer. Local store marketing means catchment activity: leaflet drops, resident offers, festival displays, WhatsApp and social posts.
Worked example
Cost is Rs 720, MRP is Rs 1,200, and the item sells at 25% off MRP, i.e. Rs 900. Margin = (900 - 720) / 900 = 20%; markup on cost = 180 / 720 = 25%. The same rupees give two different percentages, and confusing them is the classic error.
Traps
- Reporting markup on cost as if it were margin on selling price.
- Applying a discount after adding GST instead of discounting the MRP and then extracting tax.
- Running a loss leader without a plan to recover the traffic it creates.
- Selling above MRP, which is a legal violation, not a pricing choice.