Developing a Price Strategy within Retail Trade

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ABSTRACT
The present work has in view:
- Describing the part played by prices in retail strategy and the importance of price decisions, decisions that must be adjustable and complete. 
- Inquiring the impact of consumers, government, producers, wholesalers, and other suppliers, effective and potential competitors, on price establishing decisions. Retailers must know all factors that influence price decisions, as well as the elasticity of demand, and possible market shares. The government affects prices at three levels: federally, stately and locally. Price control may generate conflicts. Producers, wholesalers and other suppliers may be asked for guarantees (if their position is not very fortunate). Competitive environment may determine prices to increase, and may even generate a price war.
- Describing the environment of developing a price strategy within retail trade. This environment has five stages: goals; price policies; price strategies; price strategy implementation and price adjustment. 
The goals that are to be achieved by the means of prices are: sales increase, profit increase, return on investment and quick depreciation. A good price strategy incorporates demand, costs and competitive concepts. Retailers must know when to use customary or variable prices, when to use low price policies and variable price policies, leader prices, multiple - unit prices, and when to range prices. Price adjustment is required for adaptation to internal and external conditions. It includes price reductions or higher additions. It is very important for the adjustment to be controlled by a budget in order to avoid excessive discounts, to measure the adjustments in time, and to write down reduction causes. 
1. Introduction
The work approaches the price establishing issue within retail trade, especially in American economy. 
As shown in the following figure, a price strategy in retail trade includes five stages: retail trade goals, price policies, price strategies, price strategy implementation and price adjustment. 
2. Retail Trade Goals
The process may be a complex one due to the occasional excessive demand, to the number of products and due to the external factors mentioned above. 
A price strategy must emphasize its own targets and must be closely connected to the sales and the profit. Nevertheless, certain price goals must be mentioned in order to avoid problems that may appear because of the confusion created by the displaying of more prices, problems caused by the long lasting negotiations with clients, or by offering frequent discounts to stimulate client flow, or even problems caused by the major importance given to prices. 
The goals that are to be achieved can take the shape of incomes and/or volume units. An aggressive strategy, also known as market penetration price is used when the retailer wishes to obtain incomes by selling large quantities of goods at a low price. The profit per unit is lower, but the total profit is high if the goal is achieved. This strategy is advantageous in the case of price sensitive clients and if costs do not increase. 
Implementing a high price strategy the company attracts clients who are interested in services and prestige and not in prices. Usually it does not maximize sales, but it draws high unitary profit (e.g. Bvlgari - third jewellery company in the world; if you ask how much does it cost? means you cannot afford it). 
Return on investment and quick depreciation are other goals that retailer aim to. The retailer aims a certain percentage of the investment (such as 20%). Quick depreciation is used by retailers who do not possess high resources, wish to expand or have an uncertain future. 
Other goals are listed bellow. Each retailer establishes a list of priorities based on its current position, and creates a plan that tries to fulfil. Some of the goals may be incompatible. 
- To maintain a suitable image;
- To encourage clients not to be price sensitive;
- To be equitable to all parts (including suppliers, employees and clients);
- To have a consequent price policy;
- To increase client flows in off-peak seasons;
- To sell season stocks;
- To align prices to competition without starting a price war;
- To promote a "we-won't-have-the-lowest-prices" philosophy;
- To be acknowledged as price leader by competitors;
- To supply a high range of services;
- To minimize the government chance to response to price established and made public;
- To discourage potential competitors to enter the market;
- To maintain the clients interested;
- To encourage business repetitiveness.
3. Price Policies
Through a large price policy a retailer generates and integrates a price plan on both short and long term (goals that can be achieved in a short period of time and goals that can be achieved in a long period of time), that aim creating a consequent image (essential to franchises an shop chains). The retailer connects the price policy to the target, to the image and to other specific elements. 
Here are some price policies a company may chose from:
o No competitor will have lower prices; no competitor will have higher prices (in case of prestige) or prices are aligned to competition;
o All goods will have independent prices, based on demand; or all prices are connected to one another to ensure a certain image and to create a suitable addition;
o There is a price leadership; competitors are price leaders and will set the first prices; or prices are independent from competitors;
o Prices are fixed during a year or a season; or prices will modify if costs change. 
4. Price Strategies
In the case of prices directed towards demand retailers set the prices based on consumer wishes and determine the price limits accepted by the market. The upper limit is called demand ceiling. 
In the case of prices directed towards costs retailers set the inferior limit of demand, and the lowest accepted price, so that the company gains a certain profit.
In the case of prices directed towards competition the retailer sets the prices accordingly to the competition;
As a rule, these concepts ought to be combined in order to establish a price policy.


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