Jeweller - August 2022

FEATURE
Retail Pricing Guide
Pricing doesn't matter
OH WAIT, YES IT DOES!
Fundamentally sound product pricing is crucial to the success of a retail jewellery business.
SAMUEL ORD explores the application of common strategies, and weighs the pros and cons of each.
As a small business, how do you set the
appropriate price for a product?
That’s a question that every retailer should be able to
answer. Product pricing is an element of trade that will
make or break any business.
Surprisingly, this is an area in which many retailers report
a lack of confidence.
According to a recent study published by Retail Systems
Research, a US market intelligence company, there is a
notable difference in the way successful and unsuccessful
retailers view pricing strategy.
The study defined ‘winners’ as retailers with a sales growth
exceeding 4.5 per cent, and ‘losers’ as retailers who fail to
meet that average number.
The study concluded that just 64 per cent of the winners
consider themselves satisfied with their capabilities when
it comes to accurately pricing products.
According to the study, 67 per cent of the winners said
pricing optimisation was “absolutely vital”. Only 42 per cent
of the losers agreed. None of the winners surveyed agreed
with the suggestion that no price optimising tools were
required for a business.
Bizarrely, two per cent of the losers agreed with that
sentiment! Perhaps that’s not so bizarre, considering their
categorisation.
Brian Kilcourse, managing director Retail Systems
Research, says the study confirmed the importance of
correct pricing for retailers.
“In the end, retailers should know that closing the pricing
readiness gap is now a critical component of overall retail
strategy,” he says.
“It is clear that in order to win, precision pricing is a musthave,
not a nice-to-have.”
Another recent survey by web data platform Bright Data
suggested that consumers are increasingly fixated on price.
When asked which factors typically influence their
purchase decisions when shopping online, 82 per cent
of respondents said price. In addition, 74 per cent of
THE NUMBERS
Consumer
Behaviour
#1
driver of customer
satisfacton for
Gen Z consumers
is pricing.
75%
of Gen Z and
Millenial
consumers consult
at least one other
digital resource
before making
a significant
purchase.
#2
driver of customer
satisfaction for Gen Z
consumer was digital
experience.
47%
of all consumers prefer
to engage with retailers
by visiting a brick-andmortar
store.
Source: Verint
respondents said they would switch from their usual
retailer if they found a better price elsewhere.
Find the balance
What is not commonly known is that there are more than
20 different methods or strategies of price setting. (See
below) Some can, or should be, used for specific activites
and/or events.
In many ways, product pricing is like walking a tightrope:
Success in the pursuit of the appropriate pricing strategy
comes down to a balancing act, avoiding the extreme
pitfalls of failure on either side.
If the calculations are incorrect and the product is priced
too low, the long-term impact is dire. Low pricing may not
generate sufficient profit to cover costs, especially in the
event that sales volume is down.
In the end, retailers should know that closing the
pricing readiness gap is now a critical component
of overall retail strategy.
Customers are likely to fear that your product is inferior
to those offered by competitors if your product is notably
cheaper. Many customers are looking for value above cost,
after all.
Additionally, a retailer who sets a price too low is sending
a simple message to the rest of the market “our product
isn’t as good as similar products on the market, and thus,
is worth less.”
The perils of over-pricing are obvious. Sales volume will
drop as customers favour competitors with less expensive
products.
While the endgame in business is to produce profit, when
it comes to product pricing, this messaging or signalling is
just as important. Price setting is communication.
A luxury vehicle manufacturer such as Ferrari won’t drop
the price of a car simply to match the prices offered by a
major manufacturer such as Toyota.
The way a product is priced is a message regarding the
August 2022 | 41