Factors Influencing Retail Pricing

Prices in retail depend upon many factors. Product pricing strategy changes from time to time according to market dynamics. It is important for any retailer to keep the cost of his item competitive to attract buyers. Let us check out the factors that influence retail pricing strategies.

Cost of product development

Perhaps the most vital factor in any business that influences the market value of any commodity is its overall development cost. Actual cost of a product depends largely on the total cost of production. Before finalizing the real price, retailers take into account cost incurred at every stage of production, including taxes.

Perceived value of the product

Retailers take perceived value of any product into account before setting a price. It is important to understand that normally customers feel that low price means poor quality. If a commodity is priced too low, buyers get the feeling that materials used in production are of inferior quality. Therefore, a retailer has to maintain a fine balance between perceived value of a product and its cost.

Demand in market

Market demand is a key aspect of retail pricing strategy. If the supply of a product is less than demand, then prices shoot up and vice versa. If a good commodity’s stock ends up quickly, there is a mad rush among consumers, which automatically escalates its price.

Competition level

The level of competition plays an important role in determining the cost of a good. When a company’s rival sells its product at a lower price, then it may affect the business of the former. It is natural for retailers to study the competition in the market before finalizing the cost of their own product. However, it becomes immaterial when a company enjoys a monopoly in the market.


Demographics of the audience strongly influence marketing plan and costing. Demographics factor include:

· Place of business

· Age of customers

· Living standard of buyers

Demographics are all about the taste and preferences of the target audience.

Economic factors

Economic factors such as labor cost, inflation rate, exchange rate of currency and the Government’s monetary policy influences the cost of a product. These factors can influence the pricing strategy either positively or negatively.

Keeping competitive price of their product is a challenge for retailers. Pricing can either make or break a business. Therefore, retailers do it with extreme caution getting help from professionals. Once a customer loses his faith in a company, it’s very difficult to lure him back, especially in today’s cut-throat market competition.