|
Demand Based Pricing
What is the best price a retailer can charge for his product?
One of the most difficult, yet an important aspect, a retailer must decide how much to charge exactly for a product. A price too high will not drive enough volume and a price too low will not give any margins. While there is no one single right way to determine the optimal pricing strategy, fortunately there are some guidelines that will help to take this crucial decision.
Retail Price Elasticity
Retailers can benefit hugely by knowing precisely the effect on marketing activities such as advertisements, pricing and promotions on the overall sales. Since the advent of optical scanner data, retailers have utilized estimates of the effects of marketing mix variations to better manage inventory, shelf-space allocation, and promotional activities (Food Marketing Institute 1985; Petrison 1987). The effects of marketing activities on retail sales are frequently assessed by estimating sales-response functions (e.g., Moriarity 1985).
|
