The Importance of Retail Price
“The moment you make a mistake in pricing, you’re eating into your reputation or your profits.” – Katherine Paine
Your Retail Price is the dollar price you direct distributors (Bike Shops) to sell your products to customers. The distributor receives a percentage of the Retail Price (known as Retail Margin) and you receive the remaining amount (known as Wholesale Price).
Retail Price is usually a key determinant of Consumer Demand and is critical to maximizing your Sales Revenue and Profit. Therefore, carefully thinking about your pricing strategy is important to your company’s overall success!
The most common Pricing Methods are:
- Mark-up: Fixed margin on costs
- Target Return: Return/margin required by the company
- Perceived Value: What the consumer is willing to pay
- Going Rate: What is being charged in the market
Your Retail Price should not be set without regard for the price sensitivity of consumers (see Market Information Report) and the prices of your competitor’s products (see Market Summary Report).
Your Retail Price must also align with the overall marketing and company strategy. For example a Low Retail Price would require a High Volume of Unit Sales, as such, you would need to consider how this would impact marketing expenditure and operations decisions (i.e. Factory Capacity and Efficiency).
Pricing Example in our MikesBikes Introduction to Business Simulation:
Pricing Example in our MikesBikes Advanced Strategic Management Simulation:
Pricing Example in our Music2Go Marketing Simulation:
Questions?
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