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Lecture

Pricing/Promoting


Department
Retail Management
Course Code
RMG 400
Professor
Bharat Sud

Page:
of 3
Chapter 15
Establishing Retail Prices
Retail price includes cost of merchandise, and additional amount known as markup
The amount of markup must include enough to cover expenses (fixed and variable)
and planned profit
Retail Price = Cost + Markup
Planning Initial Markup Percentage
Determining the first markup place on products when they enter retail store
Elements of calculation are sales, expenses, profit, and reductions (markdowns,
discounts)
Initial Markup Percent = (Expenses + Profit + Reductions + Discounts) / (Sales +
Reductions)
Factors affecting Retail Price
Target Market
Store Policies
Competition
Economic Conditions
Pricing Policies
Skimming
Penetration Start with a low price
Loss Leaders Low Margins, Low cost producers
Odd-cent Pricing ($2.99, $3.87)
Even Pricing Pricing at a round or even number
Price Lining
Markdown Formulas
Markdown Percentage = Markdown Dollars / Retail Sales
Off Retail Percentage = Markdown Dollars / Original Retail
Adjustments to Retail Price
What are Markdowns?
Why do Markdowns occur?
When is the best time for retailers to take markdowns?
Pricing Strategies
Maximize profits
Improve / Maintain market share
Meet / Beat the Competition
Achieve a Target Return
Stabilize Prices
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Chapter 16
Sales Promotion involves communicating information about services, products, images,
and ideas to influence a consumers purchase behaviour
Objectives of Promotional Activities
To produce sales and maximizing profits
To generate customer loyalty and continued patronage
To project or enhance the stores image
Elements of a Promotional Mix
Personal Selling
Visual Merchandising
Publicity
Advertising
Special Events
Developing a Promotional Plan
Establish objectives
Prepare the budget
Select merchandise for promotion
Establish a schedule for promotional activities
Prepare the promotional message Sales discount, Display, Advertisement
Evaluate promotional activities How effective is promotion, compare
Select Merchandise for Promotion
Fast-selling styles
Items that will attract immediate attention
Items that vendors will be heavily promoting
New items
Merchandise with distinct price appeal
Private Brands
Components of the Promotional Calendar
When promotional activities will occur
What merchandise will be promoted
Which promotion mix elements will be used
Who will be responsible for the activity
How much is to be budgeted
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Coordination of Promotional Activities
Advertising, special events, and other sales promotions should create sufficient
interest and desire to bring customers into the store
Visual merchandising should remind customers why they came to the store
Informed sales associates should be able to persuade customers to buy
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