Nov 30, 2011

Posted by in Ask Europaman, Business | 0 Comments

Retail 101: Pricing Philosophies and Customer Categories

Dear Europaman,

I’m always at a loss on the best way to price my products. What are some different ways I can look at doing this?

Daniel S., Retail Store Owner



Setting prices is one of the biggest challenges for any retailer. First, you need to ask yourself what type of customer shops at your store (or potential store)? What are their characteristics? Can they be classified in the following categories?

Economic consumers

They view competing retailers as similar and want low prices. This segment has grown in recent years.

Status-oriented consumers

They see competing stores as dissimilar from each other. They are lured by prestige brands and customer service more than price.

Assortment-oriented consumers

They seek retailers with a wide variety of products and want fair prices.

Personalizing consumers

They go where they are known and are personally attached to employees and the store. They’ll pay slightly above-average prices.

Convenience-oriented consumers

They shop if they must. They like nearby stores, extended hours and pay above-average prices. You can have any kind of mix of those types in your area. Identify for yourself a rough percentage for each category based on your experiences. To classify your customers, come up with a classification system to track demographic information. This will help you have an idea as to what your customer base is composed of.

Once you’ve mapped out who your customers are, then you can look at how you view pricing to determine your pricing philosophy. Your pricing philosophy is related to how your store is positioned and your competitive niche. Which philosophy do you think will best reach the groups of customers that you have defined for your store?

High-End Pricing Philosophy

A retailer who believes prices can be set at abovemarket levels due to a posh atmosphere, distinctive products and outstanding customer service.

Medium Pricing Philosophy

A retailer who treats price as a non-factor in the competitive strategy; this means at-market prices and more attention to store hours, location, product assortment, etc.

Low-End Pricing Philosophy

A retailer stresses below-market prices due to operating costs, special buys, tight control, etc.

For example, if your demographic skews towards a more economic consumer then a low-pricing philosophy will work best for your market. Ask yourself, does your customer category match your pricing philosophy? If it does, then great! You are right on target. If not, maybe you need to do some analysis on the best way to position your store for the optimal amount of success.

Yours in Good Health,


P.S. Got a question regarding your buisness or the industry? Email

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