Pricing Methods And The Power Of Labeling Or Signage

The pricing strategy a business follows will generally dictate the product pricing

behavior that occurs as well as how customers react to those figures in marketing, advertisement and most importantly, spending. Along the lines of pricing methods and strategy, labeling and signage have significant play. Yes, technically speaking, pricing can be communicated by something as simple as small price stickers from retail price guns or hand held price guns. However, a lot more psychology can go into the process.

Cost-Based Pricing

Regardless of whether one prices products with basic stickers from a hand held price gun or does so with a general bin and price signage instead, with just a bar code for reference at the cashier, the cost-based approach only sets a dollar figure on what is needed for the business to recover its expense and profit. That said, a customer can easily take this basic information and compare it with a competitor brand, ultimately rejecting a product because it ends up being too much money. So while cost-based pricing conveys the price message to a customer, it tends to do so poorly.

Competition-Based Pricing

With competition proactively being responded to, both pricing labeling and signage come into play significantly. The psychology and messaging to a customer is intended to make it clear the product sold is the best value he will get anywhere for that product. Even in cases where the pricing may be higher than a competitors, the signage pushes the impression the product sold is of higher quality and worth more, so competitors should be disregarded. This pricing approach is more widely used as conscious strategy in product pricing. Both pricing stickers from retail price guns to shelf and bin signage are coordinated to convey the same competitive edge message.

Customer-Based Pricing

This type of pricing is based on customer trends and buying patterns. The focus is to anticipate what the customer wants to them make it easier for him to make purchases, increasing sales and return business revenue. Pricing can include all sorts of incentives from club member programs to bonus purchasing to bulk pricing discounting. Hand held price guns tend to have to adjust more often for unique labeling needs to match. Otherwise the sticker pricing on products has to be changed more often. Many modern stores skip the retail price gun entirely with this strategy, instead using bar codes where the pricing can be updated by computer, almost on an hourly basis.

A good example of customer-based price labeling approach can be in clothes stores that provide sales in the first half of the day which then switch to normal pricing after the noon hour. Early customers tend to spend more, so they are rewarded with early day sales. It would be wasted work to go and re-tag every product with new pricing via hand held pricing guns at the switch of the hour. Instead, the bar code labeling stays the same and their price reference tables get updated by computer so the cashier rings up a new price at 12:01pm.

Conclusion

Most stores and businesses today that have been in the retail business for a while understand the power and psychology of pricing methods. Its not just a hand held price gun sticker with a dollar number on it. Labeling and signage can be a sales campaign, a price war, or a conveyance of premium quality versus other goods. Its all in the presentation.

by: William Hauselberg

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