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Pricing is one of the most important decisions in buying and merchandising because it directly influences sales, profitability, customer perception, stock movement, and the overall positioning of a retail store. A merchandiser must select a pricing method according to the nature of the merchandise, target customers, competition, cost structure, demand conditions, and objectives of the retailer. Four important methods of pricing are cost-plus pricing, competitive pricing, psychological pricing, and demand-based pricing. Cost-plus pricing is one of the simplest and most widely used methods. Under this method, the retailer first determines the total cost of acquiring or producing the merchandise and then adds a predetermined percentage of profit, known as the markup. For example, if a retailer purchases a shirt for ₹800 and decides to add a 25% markup on cost, the selling price will be ₹1,000. The major utility of this method is that it ensures that the retailer recovers the cost and earns a planned margin. It is particularly useful when costs are relatively stable and the retailer wants a simple and systematic method of determining prices. It is commonly used for merchandise such as basic garments, household products, stationery, and other products where the cost and desired margin can be easily calculated. It is also useful for small retailers who may not have sophisticated systems for analysing customer demand or competitors' prices. However, if the market is highly competitive, simply adding a markup may result in a price that is either too high or too low compared with competitors. Competitive pricing involves fixing the selling price by considering the prices charged by competing retailers. A retailer may price a product at the same level as competitors, slightly below competitors, or slightly above competitors depending on its positioning and objectives. For example, if several retail stores are selling a particular brand of shampoo for ₹250, a retailer may sell it for ₹245 to attract price-conscious customers. Alternatively, a premium store may charge ₹260 if it provides superior service or shopping experience. The utility of competitive pricing is particularly high in markets where customers can easily compare prices and where several retailers sell similar products. Supermarkets, department stores, electronic retailers, and online retailers frequently consider competitors' prices while making pricing _________ ______ ______ ________ _____.
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