Getting the price proposition of your business correct involves careful consideration of what your customers want to buy. For local shops this means thinking about what is important to the shopper.
If you are on a busy high street or near a train station, will shoppers value speed of service? So that if you have what they want and they can get it quickly they will not notice that it is 10p more expensive. If it is available and your service is good, what else do you need to consider? Keeping the shop clean and the lighting bright may be important in that it will help the shopper trust you as a supplier.
If you have a shop on a local estate, where shoppers appear to be price conscious, then your pricing policy may be more challenging. Obviously, you can price compare with Tesco and tell people where you charge the same price. It may not be a pint of milk for 45p. It could be McVities Digestives at 50p.
Michael Jackson, writing in Business XL, argues that “assumptions about products and services and what customers are willing to pay need to be studied scrupulously”. When he launched Sage accounts software, his partner picked on a £99 price tag instead of the £200 that the existing market seemed to suggest. What they discovered was that at £99 many more people were tempted to try the product.
In your shop, there will be a similar equilibrium. To grow market share, you need to experiment with pricing and calculate the balance between the margin per sale and the rate of sale. With a mix of treat and top-up items, you have the opportunity to appeal to the different needs of the same shopper and this is a profit opportunity.
chander Hingorani
26/03/2010
Pricing is a perception in the minds of the public and this is exploited by big supermarkets who sell a small selection of goods at eye catching prices and this is then retained by the customer and he thinks everything is cheap. Perhaps this policy should be adopted by small retailers who can price basic goods like bread, milk etc at low prices which will then attract customers. You should also adverise this in the shop to alert the customer and if possible compare prices to say Tesco price XXX and your price XXX.
The RN does a price comaprison to illustrate how different retailers charge different prices and it is amazing how many retailers do not even charge the recommended price. Increase the price of a Chocolate bar by say 2p and see many customers notice the differnce. I have paid double the price for a Mars bar in Central London.
On a different subject both Times and Sunday Times are charging £1 a day for accessing their website. Interesting. Times must be hard for publishers with circulation declining and moving from print to Internet. More will follow.
nick shanagher
29/03/2010
At the Convenience Retailing Show in Birmingham last week I met a retailer who passionately believes in low prices. He sells a pint of milk at 45p. “I am cheaper than Tesco for two pints,” he added. What for? I asked. Because low prices is what my shoppers value me for, he said. And I am committed to giving them low prices.