Supplier pricing errors
Typically, the fast moving consumer goods in retail stores to be defined into three categories: price-sensitive commodity, impulse products, convenience-type goods. In most cases, suppliers tend to have both a price-sensitive goods and impulse-type products, such as dairy producer prices are sensitive to both the production of pure fresh milk, fruit production and consumption of impulse yogurt. The terms of any supplier in the pricing of the most common mistakes is the price and product positioning in retail stores do not meet, the most common example is the overpricing of basic commodities, or impulsive changes in commodity prices modest.
For example, several just enter the Shanghai market's dairy companies will set the prices of fresh milk higher than the existing brands. In fact, the pure fresh milk in Shanghai has become a necessity for most ordinary people, consumers of such commodity prices are very understanding and very sensitive, even if these new brands often engaged in gift promotions, but consumers more down conversion still feel there is nothing cheap, so I rarely impulsive buying. The new brand will be the common error is the "double high" pricing used in the price-sensitive goods.
Another example, in the present most areas do not like the plastic cup milk yogurt as a daily necessity, the consumption of such goods are still the characteristics of casual snacks, most consumers still are impulse buy, so prices plastic cup yogurt should reflect the characteristics of a large range of price changes. However, some enterprises in the pricing strategy so that price range is very small, they are usually priced in two forms, one is the wholesale price of the gross margin is not high enough, the daily price of medium; the other is high despite wholesale price margin, but the price range is not big enough. The two pricing promotions have resulted in price usually only about 10% margin of preference. In fact, if enough consumers want to stimulate impulse buying, such products must be price reductions more than 15%.
Suppliers easily make mistakes in pricing there is another main reason is subject to internal financial goals. To corporate finance to account for product pricing, usually a simple cost-plus method of calculation. This is a completely autonomous model of pricing, simply ignoring the situation of market competition, retailers will also turn a blind eye to what kind of product positioning, just think of every factory must comply with at the beginning or the previous year gross margin target set. Therefore, the financial officer will ask the sales price of the goods in accordance with the established level of gross sales, will be strongly opposed to marketing a variety of ways to price promotions.
Suppliers to make the right pricing strategy requires an understanding of how their products in retail stores at any location, to understand how retailers will fare rate. Different categories of general merchandise retailers have different increase rates, to achieve the target value of all goods. To do this, suppliers must increase retail gross margin rate to determine the wholesale price level. According to this pricing principle, the supplier of different types of products can make the right pricing decisions.
Price-sensitive commodity prices
Price-sensitive consumer goods on the basis of characteristics of goods to buy the "buy cheap." Therefore, the retailer increases for commodities is low, sometimes zero profits to sales, the purpose is to establish the reputation of the shop, and attracted a large number of low traffic. To rely on low prices to attract customers in addition to most people to buy cheaper goods, the shop will also purchase other high margin products. Retailers often require suppliers to ensure a very low wholesale price based on product gross margin level, expects its suppliers to rely on small profits to profits. In this case, the supplier to avoid the gross margin rate of price increase supply, and to support efforts to promote the practice of big. If so, consumers will doubt the authenticity of the pricing, especially those engaged in significant long-term brand sales or selling price will be more complimentary activities do not trust these brands.
It should be said, based on product margins should remain relatively low wholesale price level, to get the price competitive. Under this pricing principle, the supplier how to ensure a reasonable margin level? This rationality is based on brand awareness and influence to decide. But no matter what brand appeal, based on the profit limit of the product will not exceed the average profits of similar products in the industry level. Based products through the high turnover rate, the scale of sales to create profit. Therefore, the provision of such products suppliers must be very carefully assess whether their products sold in the store to get a substantial, if not do this, the supplier's loss will be inevitable. Product category in each category based on only one or two suppliers of products faster inventory turnover; able to do scale, most of the remaining suppliers products into low-margin, low-sales dilemma.
To control the prices of sensitive commodities price range, according to market experience, price reductions should be controlled at about 10%. This is because the wholesale price for basic products, the gross margin level of low, everyday prices on consumers does not pose any resistance; for profit products, it is only there for part of the purchasing power of customers, and its price on the big day part of the purchasing power of consumers is a drag, so the purchasing power of the consumer does not have the ability to be expansionary. If this product would increase the price reductions will only attract more lack of purchasing power, only occasional buyers during a sale, there is no long-term role in promoting increased sales.
From the promotional frequency analysis, product promotion based on the frequency is higher than the profit products. Promotion frequency is generally believed that the formation of reference prices and consumer prices of produce daily root causes of the gap, the higher the frequency of promotions, consumer prices more than the daily reference price. Therefore, in terms of profits products, promotional frequency can be kept low, normal selling price of success. Way from the promotion of basic products are usually used special methods, while profit products in three forms: gifts, gifts to buy similar products, price + small gifts.
Suppliers in order to ensure price-sensitive products, price competitiveness, they can use various methods to achieve this goal. Can be used in the food industry to change the packaging, packaging specification methods to increase the price competitiveness of products. There are two ways to change the packaging forms, one is to change the packaging materials, such as milk powder made by the tin drums into bags made by the paper, which makes packaging costs decreased significantly, lower prices. Another approach is to abandon the sales package to sell in bulk, such as bulk dumplings, dumplings, steamed buns; bulk cooking food; bulk jelly, candy, cakes. Types of bulk commodities from the current view of a growing trend, their prices are very competitive. Packing to change the strategy used mainly in packaging large, including a single packing and intermediate packaging large scale. Products or profits, whether based on product packaging big trend there. Packing large scale to bring fundamental benefits of reduced packaging costs and logistics costs to product prices down. Packing large scale through lower commodity prices expressed in three ways:
● single large packaged goods cheaper price than a single small package, the usual decline in about 10%.
● the middle of packing large scale packaging of goods cheaper than the single.
● maintaining the original price increase without changing the packaging capacity, reflecting "not increase dosage" price-cutting strategy.
Some suppliers to create cheaper to the consumer the impression that the smaller package size, product price has fallen, though in fact no decline in unit prices and capacity. Application of this pricing strategy is generally believed that the price-sensitive commodities in the probability of success will be low, because consumers of such goods is very sensitive to the unit volume price. This pricing strategy is more suitable for the impulse in the more expensive goods, consumers may not care unit capacity of these commodities prices, and more care about the price of each purchase.
Impulse-type product pricing
Consumer goods such impulse buying is characterized by the "buy to take advantage of," and on the price movements of such goods are not concerned about small, so retailers to increase the rate of such goods is greater than the price-sensitive commodities, At the same time often ask their suppliers to hold their own or substantially none other promotional activities. Because only such a high price, high discount the "double high" pricing will make consumers feel an advantage. Therefore, if the supplier of such goods, then they need to increase the gross margin level of the supply price, at least in reducing the rate to 15% still can guarantee profits. For example, dairy producers to supermarkets to provide 125 grams of plastic cups yogurt, production cost is 0.65 yuan / cup, wholesalers wholesale price of 1.0 yuan / cups, each cup margin was 0.35 yuan, retailers increase rate of 20% retail price 1.2 yuan / cup. 1 per cup as special, the price increase is 16.6%. The special wholesale price of the supermarkets into 0.8 yuan / cup, then suppliers are still 0.15 yuan per cup margins.
Supplier pricing on these products to avoid two types of errors:
● wholesale price margins medium, the daily price of medium, resulting in prices flattening out of the situation. This will cause two problems, one is the daily price can not guarantee customer loyalty obtain sufficient from the profits; the other is the lack of adequate space can not cut prices to attract more price-sensitive customers, sales expansion is not obvious.
● Although the supplier has sufficient margin level, but on price promotions show very stingy with luxury attitude towards their own products, not only to fewer price promotions, but a small price reductions. This mode of operation complete departure from the characteristics of impulse sales of goods, and consumer purchasing habits of such goods do not conform.
How much price increases will cause impulse buying it? We can see from retail sales price of such goods in the understanding of some of the information. A more obvious feature is the impulse for most retailers, commodity price reductions averaging 15% to 25% of individual products can reach 50% decline. For example, the average price range of snacks, 22.7%, the average price range of snacks and 19.4%, instant coffee, the average price increase of 19.2%. Another prominent phenomenon is that the more expansionary consumer goods greater price reductions, such as cookies, the average fell more than European cakes, shrimp and chocolate pudding than price reductions, plain yogurt prices drop than fruit yogurt.
Therefore, the impulse to commodity price changes, the size range of consumer goods based on the expansion of the size. Consumer ability to expand a two-level variables, one is the expansion of consumption, the other is the expansion of purchasing power. If consumption does not have to expand, and increase the price range, consumers will buy in a large number for a long period of time to stop buying, because the consumption of these commodities is relatively stable, will not increase with purchases and growth. If the purchasing power of the non-expandable, and increase the price range, it will only attract more occasionally in a sale the buyer, there is no long-term sales growth promoting effect. Reflected in the dairy market, this law example is yogurt flavor is often price reductions up to 20%, while the fruit yogurt price range is usually maintained at 15%, because the plain yogurt is more than the fruit yoghurt expansion of a consumer.