Retail Pricing, Sales And Markdowns

Price, in some industries, has a great deal of impact on sales volume. Once customers are familiar with a product and know what they want, they often tend to buy for price. When this is the case, it is necessary to run sales frequently and to ad­vertise them, so that customers know your store is a good place to frequent if they want to save money. In this environment, all prices have to be watched carefully with those of competi­tors. In other businesses, pricing is less sensitive and normal markup can be figured on most products.

It is often possible to attract more customers to your store and sell more merchandise if your prices on some items are somewhat lower than those of your competitors. For other merchandise, especially that which is less competitive and more unique to your store, you may have to set a higher selling price, since you may not get the volume of sales you need in order to make a good profit. In trying to decide on a price, it is useful to experiment first with different prices.

For example, if you are selling 75 units per week at $1.60 gross profit per unit, your total weekly profit is $120. This is the equivalent of selling 100 units at $1.20 each.

In this example then, a retailer may offer a product for sale at a $0.40 savings to the consumer but still earn the same weekly gross profit if he or she is able to sell only 25 more units at the lower price.

On The Job Activity

In your own business, select one or two products and post a "sale" price in the window or on the item. Reduce your profit by about 1/4 and keep that lower price for at least one month. Then check whether your total profit was higher than previously at the old price for the same time period.

If possible, discuss your thoughts with a person knowledgeable in the area of merchandise management; determine other experiments in pricing which may be worthwhile in your particular situation.

Sales and Markdowns

Basically, there are three occasions for holding sales:

Start of season sales may be run to introduce the consumer to new merchandise. Often, it is useful to run pre-season sales to get a jump on competitors. Such sales before the season tend to take sales away from competitors.

Holiday sales are always effective due to the large number of people available for shopping and in the market for gifts.

Sales to clean out merchandise are perhaps least frequently held but should be held more often. Marking down least de­sirable merchandise along with end of season merchandise will not only remove slow moving products from your inventory, but will also provide you with cash-on-hand necessary to replen­ish inventory with new and more profitable merchandise.

Additionally, frequent sales get you into the eye of the consumer more often. Sales attract greater numbers of people into stores and, more often than not, such people will also come in to buy regular merchandise too. Even selling merchandise at cost usually entails no loss, since you will be able to replace empty store space with better moving merchandise, thereby attracting more people into the store.

Retail Advertising And Promotion

Two approaches may be used to increase both customer traffic in your store and the sale of specific items or merchandise lines. These approaches, best used in conjunction with each other, are:

Advertising - which addresses those potential customers who are not within the store

In-store promotions - which can attract the attention of customers within the store or via window displays

Advertising

Although the primary purpose of this section is to discuss merchan­dise management, advertising is so important to the concept that its inclusion, though brief, is necessary.

There are two major types of advertising:

Advertising to acquaint potential buyers with the special features of a product. With many industries, advertising of this type is done by the manufacturer of the product. Quite often, however, the retailer must do some of this advertising. When this occurs, it is often necessary to work with an advertising agency so they may help you write the copy (wording) such that the advertising will bring the best results. Such advertising concentrates almost solely on the single featured product.

Advertising the availability and price of nationally known merchandise. Much retail advertising is merely directed at letting potential customers know that the product is avail­able and informing the customer of special prices or promo­tions which may encourage her/him to buy, at your store. This is perhaps best done through 'Omnibus' ads which fea­ture many products, their prices, and brief slogans about their benefits. Consumers very often "shop" such ads and will come into your store to buy one or two of the items listed. While there, they buy other things on impulse.

Whatever your message may be, there are many ways to advertise­ - depending on how much information you wish to impart to prospec­tive consumers, what kind of information (audio and/or visual), and how many consumers you wish to reach.

Retailers who cater to local clientele may use advertising methods such as:

In-house flyers indicating products and bargains

Signs both internal and external to the store

Informative in-house displays of merchandise

Direct mail advertising

Local newspapers

Distribution of flyers by hand or using the local newspaper deliveries (some papers have such arrangements)

Those retailers who wish to launch a large scale campaign may, of course, resort to advertising via radio, television, or widely circulated newspapers.

It is very important to remember that for any kind of advertising, single ads bring very sparse results. In order to make an ad­vertising campaign successful, it is usually necessary to adver­tise repeatedly (five or six times during a one to two week period) to acquaint consumers with your service or product and, most im­portant, with your store. It is also necessary to maintain a regu­lar program of advertising throughout the year in order to con­tinue bringing customers into the store.

Continual experimentation is necessary to determine which approaches are best. Although proper advertising may involve an initially high expense, if it succeeds both in drawing more clientele into your store and in increasing sales in both advertised and unadver­tised products, the initial investment may more than pay for itself.

Once advertising has brought the consumer into your store, promotion and sales efforts must transfer the customer's attention and interest into desire and action to buy.

Everyone needs To be familiar with the Decision Making Process. We all rely on advice, and tools or techniques, to help us in our
daily lives.

When we head out To consume, the restaurant is the tool which provides us with the information needed to decide what to purchase
and how much to invest.

Running a Business also requires making decisions using information and techniques - how much stock to maintain, what price to
sell it in, what credit agreements to provide, just how many people to hire.

Decision Making Procedure in business is the systematic procedure for identifying and solving issues, of asking questions and
finding answers. Decisions are made under conditions of uncertainty. The future is not known and sometimes even the last is
suspect. This guide opens the door for company owners and managers to find out about the selection of techniques which may be used
to boost your decision making process in a world of doubt, change, and uncontrollable conditions.

A General Approach to Decision Making Procedure. Whether a scientist, an executive of a significant corporation, or a small
business owner you can gain from boosting your decision making skills. The general solution to systematically solving problems is
the same. The following 7 step method to enhance management decision making may be used to examine virtually all problems faced by
a business enterprise.

State that the problem. A problem first has to exist and be recognized. What's the issue and why is it a issue. What is ideal and
how do current operations vary from this ideal. Identify why the symptoms (what's going wrong) and the causes (why is it likely
wrong). Attempt to specify all terms, concepts, factors, and relationships. Quantify the issue to the extent possible. If the
problem, not accurately and quickly filling customer orders, then attempt to determine how many orders were incorrectly filled and
the length of time it took to fulfill them.

Establish the Objectives. What are the objectives of the analysis. Which objectives are the most crucial. Objectives are said by
an action verb like to reduce, to grow, or to improve. Returning to the client order problem, the significant goals is: 1) to
increase the percentage of orders filled properly, and 2) to reduce the time necessary to order and process. A sub-objective could
comprise to simplify and streamline the order filling process.

Grow a Diagnostic Framework. Next set a diagnostic frame, that is, determine what methods will be utilized, what kinds of
information are needed, and also how and where the information is to be found. Is there likely to be a consumer survey, a review
of business records, time and motion tests, or something else. What are the assumptions (facts assumed to be right ) of this
analysis. Which would be the criteria used to judge the study. What time, budget, or other constraints are there. What type of
quantitative or other specific techniques will be used to analyze the data. (Some of that will be covered shortly). To put it
differently, the diagnostic framework determines the scope and methods of the whole study.

Collect and Analyze the Data. The next step is to gather the information (by following the procedures established in Step 3. Raw
information is then tabulated and organized to ease analysis. Tables, charts, graphs, indexes and matrices are a number of the
conventional ways to organize raw data. Analysis is your critical requirement of audio business decision making. What does the
data show. What facts, patterns, and trends could be seen from the data. Many of the qualitative methods covered under can be used
during the step to ascertain details, patterns, and trends in data. Obviously, computers have been used widely during this step.

Generate Alternative Solutions. After the analysis has been completed, some specific decisions about the character of the problem
and its resolution must have been reached. The next step is to develop alternative solutions to the problem and rank them in order
of their net benefits. But how are choices best generated. Again, there are some well established techniques such as the Nominal
Group Method, the Delphi Method and Brainstorming, amongst others. In all these methods a group is involved, all people who have
reviewed the information and analysis. The approach is to have an informed group indicating many different feasible solutions.

Develop an Action Plan and Implement. Pick the best solution to the issue but be sure to understand clearly why it is best, that
is, how it achieves the objectives created in Step 2 greater than its options. Then develop an effective method (Action Plan) to
implement the solution. At this point a significant organizational thought arises - that will be responsible for seeing the
implementation through and what power does he have. The chosen manager ought to be accountable for seeing that all of tasks,
deadlines, and reports have been performed, fulfilled, and composed. Details are important in this step: reports, programs,
activities, and communication are the key elements of any activity plan. There are several techniques available to decision makers
implementing an action plan. The PERT method is a way of laying out an entire interval such as an action program. PERT is going to
be covered shortly.

Evaluate, Obtain Feedback and Monitor. Following the Action Plan has been implemented to Solve a issue, management must evaluate
its own effectiveness. Evaluation Criteria have to be ascertained, feedback channels developed, and observation performed. This
Measure ought to be performed after 3 to 5 weeks and at 6 months. The goal is to answer the main point question. Has the problem
been solved?

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