The Death of the “Price Point”?

   
                                                                                      Brian Maggio                                                        


For about two years now, we’ve heard grumblings of pricing pressure at retail.  Manufacturers are seeing higher costs of materials and labor, and retailers for their part are faced with ever higher margin requirements to justify the real estate.

At the same time, there has been an almost palpable desire to hit “key price points” at retail.  Sometime, somewhere, a group of marketing brains got together years ago and decided that all products had to fit neatly into distinct price tiers.  And retailers were trained accordingly. 

Regardless of the cost / value relationship or the build that had gone into a product, all sales presentations had to align with predetermined price points.  “Is that a $14.99 or a $19.99 product?” was a common question that a buyer would pose to the salesperson.  (To which I was occasionally tempted to

reply “Well, this one is actually a $17.64 product because of the extra little doo-dad here…”)  Manufacturers then had to dumb down the product to hit a key wholesale, or build it up somehow to justify the next higher price point.

Then, about a year ago, I heard several manufacturers take the bold stance: We are going to set the wholesale at a level that actually allows for a profit, and let the retailer figure out how to price it.  Ground breaking.  I assumed there would be significant pushback, and I’m sure in many cases there was. 

But, lo and behold, on a recent visit to Fred Meyer (a regional mass store here in the Northwest) I found a wide range of price points that were neither $24.99, nor $29.99, nor even $19.99.  Instead, there were price points like $32.99, $27.99, $28.99, and even a lonely $21.99.  Crazy times.  Wondering if all major retailers are headed in this direction.  If so, it’s good news for manufacturers.  And bad news for the marketing types…

Comments

[Gina Manola]

If pricing will truly be reflective of the associated costs required to deliver a quality product with quality play value—in the long run,
I think this is good news for everyone.

[Steve Markey]

I think a lot of the new price points came about because, after holding off for years, manufacturers finally had to implement a price increase. So, if the wholesale of a product is increased by 10%, a $10.00 cost becomes $11.00, and if the retailer still wants to keystone, $11.00 becomes $21.99 retail. The old $15.00 cost is now $16.50, taking a $29.99 retail to $32.99 etc etc.

[Steve Rogai]

There have been instances of a product's price dropping due to it's increased popularity. It would make sense to make them more accessible at an affordable price.