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A retail pricing strategy represents a large-scale plan of how a company prices its goods or services in order to induce buyers to purchase these products. Market economies typically allow for a freer type strategy as companies are partly responsible for setting retail prices. The other side of the equation, however, is the potential buyers in the market. If a company’s pricing strategy is not well received, then the company may suffer detrimental ramifications. Choosing the best pricing strategy may include looking at factors such as the current stage of the business cycle, a review of competitors' pricing strategies, and keeping the consumer in mind when setting prices.
The business cycle in free market economics can play a large role in the retail pricing strategy. For example, the growth stage of the business cycle may allow a company to price goods higher than normal as few competitors exist and the company may dominate the market. Additionally, growth stages can be quite aggressive, with consumers purchasing pricier goods simply because a new product drives interest or desire. Peak stages in the business cycle tend to have many competitors and few opportunities for pricing advantages. The peak stage, along with the contraction phase of the business cycle, creates a different type of retail pricing strategy as companies fight to retain consumers.
Competitors play large roles in how one company sets or creates its retail pricing strategy. Each company typically uses their own internal guidelines for setting retail prices, though external market forces are also useful. The retail pricing strategy, for example, may be to undercut a competitor's pricing strategy in a given market. This can drive more consumers to the lower-priced goods, creating a successful business venture. Companies must be careful to not set their pricing strategy entirely on a competitor’s actions as this may become detrimental at some point.
Consumers are the lifeblood of any business as these individuals pay for the the goods or services. A retail pricing strategy should always keep consumers in mind when setting the individual prices of goods and services. For example, tough economic times may alter how a company markets and sells its wares. Consumers may actually want to do more business with a company who changes its retail pricing strategy in order to reflect the tough times consumers go through. Companies must be able to make consumers aware of changes back to the standard pricing strategy, however.
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