Jeweller - August 2022

FEATURE | Retail Pricing Guide
“It’s hard to bet on new entrants when you’ve
been using the same products from longstanding
brands. Penetration pricing provides
a solution to both problems.”
Penetration pricing has some immediate and
obvious shortfalls for jewellery retailers.
Unsuccessful attempts at gaining more
market share can lead to insufficient funds for
business operations long-term, as well as lost
opportunities with customers who associate
higher prices with higher quality products.
Penetration pricing is commonly used by
supermarkets, streaming services, hotels,
and banks.
Weighing it up
While the pricing strategies listed above are all
important, there are many more to choose from.
When it comes to selecting the right pricing
strategy, it’s important to start by setting targets
that are both measurable and attainable.
With those in place, you can then perform
market research, determining what methods
your competitors are using and what degree of
success they’re having.
That kind of information won’t be readily
available, but can be gleaned by speaking
with customers and analysing how they view
competitor pricing.
With targets in mind, knowledge of how your
competitors are approaching pricing, and an
understanding of how customers perceive the
market, a retailer is then ready to weigh up the
pros and cons of different pricing strategies and
determine which one best suits the market.
It’s hard to bet on new entrants when you’ve
been using the same products from
long-standing brands.
Edge Retail Academy provides highly specialised
consulting services to US, Australian and New
Zealand retail jewellers. David Brown, president
and Jeweller contributor, says involving an outside
perspective can improve the pricing process.
“In my experience, the biggest barrier to
business owners setting the correct price is
their own mindset,” Brown says.
“In many cases, items are set lower than
they could be because of assumptions and
expectations the owner held.
“The business owner put up barriers that aren’t
necessary. Often the most successful pricing
strategies are the ones set by other people who
don’t have an emotional ‘buy-in’ to the decision.
One of the most effective ways of pricing is to ask
someone who has no knowledge of the cost of
the item to tell you what they think it is worth.
Brown continues: “Again, this has often led
to higher pricing policies than a ‘cost-plus’
mentality, especially where the staff are involved
and don’t know the inputs. At the end of the day,
they are the ones who will be selling it!”
Just as there are different horses for different
courses, there are different pricing strategies
for different businesses.
In the same way that sending a champion
thoroughbred to an unsuitable racetrack could
end in disaster for all involved, so will adopting
the wrong pricing strategy for a retailer.
Every retailer has it’s own unique factors and
quirks and failing to take them into consideration
when pursuing the correct pricing strategy is
opening the door to a nasty dismount!
AJG.com.au
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