Marketing91

  • Home
  • Categories
    • Marketing
      • Advertising
      • Branding
      • Sales
      • Retailing
      • Consumer Behavior
      • Distribution
      • Market Research
      • Pricing
      • Product Management
      • Strategy
      • Segmentation
      • Targeting
      • Positioning
      • Services Marketing
      • Articles
    • Digital Marketing
      • Blogging
      • SEO
      • E-commerce
      • PPC
      • Email marketing
      • Social Media Marketing
      • Facebook Marketing
    • Brands Analysis
      • Marketing Mix
      • SWOT
      • Strategies
      • Competitors
      • Lists
      • Expensive
    • Management
      • Customer Management
      • Communication
      • Leadership
      • Decision Making
      • Delegation
      • Organizational Management
      • Motivation
      • Personal Development
      • Project Management
      • Risk Management
      • Team Management
      • Time Management
    • Careers
      • Interviews
    • Business
      • Business Models
      • Logistics
      • Supply Chain
    • Human Resources
    • Skills
  • News
  • Academy
  • About Us
    • Contact Us

Markdown Pricing – Different Types of Markdown Pricing Explained

August 16, 2019 By Hitesh Bhasin Filed Under: Pricing

Making changes in your business strategies with the change of the market trend is important to stay relevant. Retailers must keep themselves up to date about the products that they sell.

Merely knowing the products will not ensure the success of your business. You should learn about the different market strategies to be ahead in the game. For example, when to cut down the price of the products to attract more and more customers.

In this article, you will learn about markdown pricing and different types of markdown pricing.

Table of Contents

  • What is Markdown Pricing?
  • How can Small Businesses Manage Inventory to Utilize Markdown Pricing strategy?
  • When to use Markdown Price?
  • Dating Of The Products

What is Markdown Pricing?

Markdown Pricing and the Types of Markdown Pricing Explained - 1

 

To cut down the actual price of the products to increase the sale is called markdown pricing. Promotional events and sales strategies are used by retailers to enhance the sales of products, but prices of the products are kept same, and in markdown pricing strategy the same amount of product is sold at a lower price for the same purpose.

Retailers use this strategy because it has commonly seen that people tend to buy more (even when they don’t need) when there is a drop in the price of the pr0duct if retailers are selling products at a markdown, that doesn’t mean that they are selling at a loss.

That means they are selling products at a lower profit. For example, you mark down the price of a jam jar by $10 from the market price $30. The jam jars were initially bought at $10 per unit.

You are still making $10 profit by selling the jam jar at $20. Markdown strategy will help you to sell your stock fast but at a lower profit.

Purchasing retail products is not about trend or fashion, but it is about the right calculation. You should know how and when you are going to sell products that you are going to make an investment to purchase.

Also Read  Maintaining the balance between price and quality

Having the lack of knowledge about how to sell products to make a profit and sold them out before they go out of trend otherwise you will end up making bad investments, and ultimately you will have to mark down the prices on the products to be able to sell them. In this way, you will incur a loss.

Marketing91 Academy Banner

However, markdowns can be avoided. But doing markdown correctly can be healthy than losing money on products getting old sitting on your store shelves. Markdowns bring customers in the store and keep it alive and fresh.

Most retailers believe that their products will be sold out at their original price if they keep them in store for a little long time. But they should think that if their customers did not buy their products early then, there is a very low chance that they will buy it later.

Therefore, in such predicament, it is a smart strategy to mark down the prices of products and sells them off as soon as possible. Never forget that something is always better than nothing.

How can Small Businesses Manage Inventory to Utilize Markdown Pricing strategy?

Markdown Pricing and the Types of Markdown Pricing Explained - 2

 

The amount of your profit highly depends on your decision to purchase inventory. If you are buying products without under the influence of the salesman and without making calculations on how much you will be able to sell in your store in one season, then you will end up piling up old products in your inventory and either you will be forced to sell them at lower prices, or you have to discard them because of their expiration date have crossed, or they are not in the condition to be sold in the store.

Marketing91 Academy Banner

Follow the rule of “one-third.” Which means selling first one-third of products at full price and one third at 25% discount and so on.

Also Read  Predatory Pricing: Effects, Advantages, Disadvantages and Examples

When to use Markdown Price?

Buying products and marking down the price of the products is not a good strategy. You should know when to mark down the prices of products before you end up having expired or out of trend products.

To do this, you should make the use of your calendar to mark down the price of products with time. Markdown the price only if the product has remained in the store for a long period of time.

For example, some retailers mark down the price of a product if it has been on the shelves for more than two months. The markdown of the price should not be a random decision. You should mark down the price of the product at regular intervals.

Dating Of The Products

Do calculation and prepare an order based on the last year sales and place an order of the only amount that you know you can sell within that period. You can also make a deal with your supplier for the products that are about to expire and ask them to replace the products with the extended expiry date.

It is difficult to make such arrangements with your suppliers, but if you are giving them business then they will surely get ready to such business conditions, and if you have already bought products that you can sell in your store then you can easily avoid such conditions and if you have calculated number of products than you will have to sell less number of products at markdown pricing.

Marketing91 Academy Banner

Follow techniques mentioned above to avoid markdown pricing or to make a profit from markdown strategy too. A calculated markdown of price can prove to be profitable as well as attracting customers to store.

Liked this post? Check out these detailed articles on Topic of Pricing

Alternatively, check out the Marketing91 Academy, which provides you access to 10+ marketing courses and 100s of Case studies.

Marketing91 Academy

About Hitesh Bhasin

Hi, I am an MBA and the CEO of Marketing91. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. Business is my passion and i have established myself in multiple industries with a focus on sustainable growth. You will generally find me online at the Marketing91 Academy.

Related posts:

  1. What is Cost-Plus Pricing and why it is a good Pricing Strategy?
  2. What is Keystone Pricing? Keystone Pricing Strategy in retail
  3. Pricing Methods – Cost Oriented and Market Oriented Pricing
  4. Pricing Discounts or Discount Pricing Strategy
  5. Penetration pricing explained with examples and case study
  6. Captive product pricing explained with examples
  7. 6 types of Product Mix pricing to push products in the market
  8. Cost-Based Pricing – Definition, Types, Examples, Advantages and Disadvantages
  9. 5 Types of Pricing Structure Used by Companies
  10. Demand Backward Pricing – Definition, Importance and Types

Join the Marketing91 Academy

Marketing Masterclass

Management Masterclass

Management Masterclass

Communication Course

Communication Masterclass

View All Courses
Economics Masterclass

Economics Masterclass

Sales Masterclass

Sales
Masterclass

Advertising Masterclass

Advertising Masterclass

View All Courses
Leadership Masterclass

Leadership Masterclass

Branding Masterclass

Branding
Masterclass

Strategy Masterclass

Strategy
Masterclass

View All Courses
Not found what you are looking for? Search this website.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Advertisement
Recent Posts
  • Informational Power: Definition, Sources and Importance
  • Reward Power in Leadership: Definition and Examples
  • Expert Power: Definition, Examples and Development
  • Legitimate Power: Definition, Examples, Advantages and Disadvantages
  • Nike, Adidas, Shein, and Temu Sent Letter From House China Committee About Forced Labor
Advertisement

Marketing91

MORE INFO

  • About Marketing91
  • Marketing91 Team
  • Privacy Policy
  • Cookie Policy
  • Disclaimer
  • Terms of Use
  • Editorial Policy
  • Advertise
  • Contact us
  • Sitemap

WE WRITE ON

  • Marketing
  • Business
  • Management
  • Brands
  • Digital Marketing
Search
[email protected]

Copyright © 2023 Marketing91 All Rights Reserved