Demand oriented Pricing strategy in Retailing

Dr.K.ThirugnanaSambanthan, Professor, SIMS

      A retailer fixing the price on the basis of customer demand is called Demand oriented pricing.  Most of the retailers try to work backwards starting from the product perceiving value to the buyer, rather than starting from the costs.  This type of pricing is used to maximize the profit.  The retailers who adopt demand oriented pricing consider a range of prices that are acceptable to target customers. The retailers who use demand oriented pricing approach should understand the psychological implications of the retail price on customers. The stated sales goals can be achieved by estimating the quantity of goods that the customers demand for various products at different level of price. This demand oriented pricing used by the retailer’s struggles to gain sales volumes and market share.  The retailers should consider the following types of pricing

• Price Quality Association

Most of the customers perceive a high priced product as a high quality product and a low priced product as low quality product.

• Prestige Pricing

   Retailers using this pricing approach do not keep low value goods and services in their store as they think customer may perceive the store as low quality store.

This type of prestige pricing may sometimes boomerang since some customers who are economizers may enter the shop for buying as they tend to look for discounts.

Thus a retailer should study about the target customers before fixing the price for their product.