What is SRP?

Suggested Retail Price is the price that a customer

product is expected to be sold at over the counter
and its stores.
The government’s Department of Trade and Industry (DTI) controls the
prices of essential commodities by managing a list of wet market and
supermarket prices for a critical basket of goods that includes sardines,
rice, coffee, and cooking oil among others. Retailers that do not follow
these SRP’s can be penalized.
SRP’s are intended to be pricing tools for suppliers so that they can
somehow control the list price of their products at the store level. Without
an SRP, retailers may arbitrarily set prices for these products that, at worst
would see them priced out of market’s reach.
But once upon a time, there was no such thing as a suggested retail price.
Prices were always the subject of negotiation.
In fact, you would still see this pricing mindset whenever you go to tiangge
(market stalls) or palengke (wet markets). In these places, consumers
are actually expected to haggle with the vendors. At an extreme case,
vendors may even harbor a modicum of contempt for shoppers who do
not bother to haggle.
It is a socio-cultural phenomenon that both parties are expected to respect
and abide by. Because the seller knows that the buyer is going to ask for
a discount (tawad), a generous level of price padding is factored into
the initial offer price.
 There are two lessons that can be extracted from the above scenario
and these are significance for understanding the nature of pricing:
1. Consumers do not really know what the real price of a product should
be: and
2. Sellers can have a pretty wide leeway to price their products.
How can you tell if something is cheap or expensive?
Answer: By Comparing
There are two elements in particular seriously altered
merchandiser’s approach to pricing:
1. Mass Production
2. Transportation

This lead to an evolution in merchandising, with shopkeepers

evolving from product specialists who only sold a few
specialty items at generally high margins, to mass
merchandisers who stocked a wide variety of goods and
who hoped to make money by moving their inventory as
quickly as possible.
 Depending on the type of product or service that is being
offered, the difference between the product’s actual cost
and eventual SRP can be very lean or very large.

 Before setting the final retail price for a product, proper due
diligence should be done in order to ensure that all possible
costs are accounted for.

 What you do not wan to happen is that you would already

set your SRP in stone and only then will you realize that your
costs will actually turn out to be higher than you originally
anticipated.
  What is the difference between elasticity and
inelasticity?
In classical economics, elasticity refers to the degree of
sensitivity of a market to changes in a product’s price. On the
other hand, inelasticity refers to a market’s reluctance to let
go of a product even if its price goes up or, contrariwise,
inertia against buying more of a product just because its
price goes down.
 Price Elasticity of Demand-is typically explained as the
market’s sensitivity to changes in price.
There are a couple of exceptions to this general rule of demand
that are inversely reacting to price. These are:
1. Veblen goods
2. Giffen goods
 The market is said to be price elastic if the rate of
change in quantity is greater than the rate of
change in price.

 The market is said to be price inelastic if the rate of

change in quantity tends to be less than the rate of
change in price.
 Price High or Price Low?
 Price is a very sensitive element because, unique among the
components of the marketing mix, it actually can make or
break your product’s profitability.
 If the price is too low, you could use money and at worst be
driven out of business.
 If the price is too high, you could price your product out of
the market and you could lose buyers (and your business)
too.
As it turns out, communication plays a vital role in this balancing
act. A higher price helps to communicate higher quality,
while a lower price (if done right) can communicate good
value.
In the end, pricing is not just about recovering your investment. It
is also all about communication.
 A useful little secret to remember in marketing is this: everything is relative.
 If there is only one brand that offers products in particular industry, the
market really cannot say whether or not its price is cheap or expensive. The
price is simply taken at face value.
The fact is, you really cannot tell if a price is high or low until you get to
compare it with a point of reference.
 For most cases, the point of reference will be the market leader because by
definition, it is the most popular product in the category.
 The market leader get to dictate the going rate for the product.

What Is Your Pricing Objective?

 Prices can be set low enough so as to discourage potential competitors
from entering the market.
 Prices can be discounted for a limited time in order to encourage
immediate purchase.
 Prices can be set high in order to communicate a premium feel for the
product.
If the object is market share leadership, then the price is set in such a way as to
appeal to the mass market. However, if the objective is product quality
leadership, then a premium price may be set in order to best
communicate this attribute to the market.
 Markup pricing-a typical approach in determining price. Here,
the cost of producing the product is first estimated, with cost
being primarily defined as the variable costs of a product or the
costs of its direct components.
 Target return pricing-is similar to markup pricing, except that it is
based on the Return on Investment requirements of the firm.
 Perceived value pricing-is a proactive and marketing-based
(rather than accounting-based) pricing method whereby the
value of the product to the market becomes basis for the price.
 Going-rate pricing-is another relatively simple pricing technique,
this time basing price on industry rates rather than on either costs
or market perceptions.
Adapting the Price
-after the process of determining the suggested retail price as
presented in the previous section, firms ma still have to make
adjustments based on a number of circumstances that their product will
have to navigate through.
-price is still adjusted depending on the objectives.
• Pricing a New Product
-If it is a new product that is being sold, then the business can either
skim the market or penetrate the market.
 Market Skimming
 Market Penetration
 Psychological Pricing
-much of pricing’s communication, particularly with regard to
referencing other product’s prices, is inherently psychological in nature.
Here are a few more psychological tactics that are often utilized when
setting end prices for products:
  Free Pricing
 Discriminatory Pricing
-discrimination is defined as the treating of different groups of
people in different manners, which is technically unjust because all
humans should be treated alike as a matter of principle.
-In marketing, however, market segmentation is a way of life.
Market segmentation often translates to opportunities for
discriminatory pricing—offering different prices to different market
segments.
 Customer-Segment Pricing
 Product-Form Pricing
 Image Pricing
 Location Pricing
 Time Pricing
-it has been discussed in an earlier section. Now, let’s take up
price considerations in managing a portfolio of products.
 Product Line Pricing
 Optional Feature Pricing
 Captive Product Pricing
 By-product Pricing
 Product Bundle Pricing

What are Trade discounts, VAT, and Taxes?

 Trade discounts are the incentives that you offer the resellers
or participants in your selling process. This can include
commissions for sales personnel.
 VAT or value-added tax is a form of input tax where the tax is
earmarked onto the added value that your firm produces.