How Do Stores Decide What Price To Sell Their Products For?

­Retailers have to decide what price they will sell their products for.




The retailer simply looks at the cost of producing or buying the product and adds a percentage profit margin on top of that cost. For example, if it costs $10 to produce an item and you want to make 20 percent profit on it, then you would set your selling price at $12 (cost + 20% = selling price).


This is called markup pricing because you are marking up your prices from your costs.­


Another way retailers can determine their prices is by looking at other stores' prices for similar items. If one store has priced its item too high or too low compared with other stores in its area, customers may go elsewhere -- unless they really need that particular product right away!


So if another store's pricing strategy isn't working out well for them, there's no reason why yours should suffer as well.





­A third way retailers can set their prices involves looking at how much money people have available in relation to how much money they're willing to spend on certain goods or services -- also known as disposable income.


For example, during tough economic times when people don't have extra cash lying around but still need food and clothing items like everyone else does (and maybe even more so), those products become necessities rather than luxuries; therefore consumers are willing pay higher amounts for them than normal times when these same products were considered luxuries instead of necessities.





In addition some companies use psychological pricing strategies such as ending all numbers with 99 cents ($3.99 instead of $4) which makes us think we're getting a better deal than we actually are since our brains tend not notice that last digit after seeing 99 cents first!

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