Best 7 Product Pricing Strategies in Grocery and Supermarkets

With the intense and increasing competition in the grocery and supermarket sector, product pricing strategies play a fundamental and decisive role in attracting customers and maintaining their loyalty in new and innovative ways. So, what are the most effective pricing strategies to increase sales and profit margin in grocery and supermarkets?

1. Cost-based pricing and profit margin

Cost-based pricing and profit margin is one of the most popular traditional product pricing strategies in supermarkets. In this strategy, you determine the cost of the product and then add a fixed percentage to it as a profit margin. Thus, the final selling price to the customer is the product of the total cost of the product and the profit margin.

It can be expressed by the following mathematical equation: Selling price = Total product cost * (1 + profit margin). That is, if we assume that the total cost of a product was 10 riyals, and the profit margin was 25%. Then the final selling price to the consumer = 10 * (1 + 25/100) = 12.5 riyals.

Considering that the total cost includes other costs in addition to the cost of purchasing the product itself from the supplier, such as: labor costs, rent, electricity bills, marketing, and other expenses within the supermarket.

2. Bundle Pricing

Bundle pricing or multiple pricing is a product pricing strategy that stimulates sales in the supermarket. It means grouping two or more related products in one bundle, and selling them at a price lower than the selling price of each product individually. That is, if we assume that there are three products; a carton of milk (12 riyals), a carton of cheese (9 riyals), a carton of yogurt (1 riyal).

Note that all three products are related to each other, and therefore the bundle strategy can be applied to them. This is done by making an offer to buy the three products together for only 20 riyals instead of 22 riyals; which is the price that the consumer would have paid if he had bought these products individually. This strategy entices the consumer to buy more products to benefit from discounts within the supermarket.

3. Psychological Pricing

The psychological pricing strategy is one of the product pricing strategies that rely on the psychological impact on customers. For example, in the image below, Hyper Panda used fractions next to whole numbers to advertise the price of washing powder (39.95 riyals), and did not mention the price in whole numbers directly (40 riyals).

The secret behind this is the psychological pricing strategy, because the customer will assume in the previous example that the original price of washing powder is 40 riyals, and that Panda is offering it to him for only 39 riyals, which prompts him to buy the product thinking that it is a profitable deal. This strategy often succeeds with basic commodities, because a large segment of its customers may prefer to buy a product from one company over another due to a slight difference in price.

In addition, we find that Panda also used the psychological effect through reference pricing, by offering two prices, one high (79.95 riyals), and the other low (39.95 riyals), which is the price at which he wants the customer to buy the product.

4. Value-based pricing

The value-based pricing strategy is one of the product pricing strategies that does not rely solely on the cost of the product. But it also takes into account the value of the product to the consumer, which may be related to the quality of the product, its benefits, or its association with a particular brand. Examples of products based on value-based pricing include:

• Organic products: Organic fruits and vegetables are priced higher in the supermarket than regular fruits and vegetables. This is because consumers perceive the high value that organic products provide them, represented by their great health benefits, which makes them willing to pay a higher price to obtain them.

• Private brand products: These are products similar to famous brands in the supermarket. They are often cheaper, but provide the same quality to the consumer, such as: different types of local chocolate that are similar to the same taste and quality of expensive imported chocolate.

5. Competitive Pricing

The competitive pricing strategy depends on monitoring product prices in competing grocery stores and supermarkets, and offering discounted prices to attract customers. This strategy can be applied to some basic commodities such as eggs, rice, milk and other products. This is done by using very low profit margins, so that the final product price becomes lower than competitors.

This strategy attracts a large segment of customers interested in getting a lower price, especially in basic commodities. At the same time, most of these customers will not only buy discounted products, but they will buy other products from you and turn into loyal customers. This strategy can be relied upon from time to time to attract new customers to your supermarket.

In order to implement this strategy effectively, you need a program to monitor the changing prices of goods and products in the market regularly. Contact us now and get a free trial of the Grocsale program for managing grocery stores and supermarkets and experience its amazing features and integrated solutions.

6. Dynamic Pricing

Dynamic pricing is one of the product pricing strategies in which the price of the product changes based on various factors. Here are some examples:

• Seasonal pricing: For example, the prices of fruits and vegetables in supermarkets change according to the seasons.

• Pricing based on geography: The price of the same product is affected by where it is located. For example, if you buy a bottle of water from the grocery store in your area, its price will be lower than when you buy it from a café in a mall.

7. Promotional pricing

Promotional offers and discounts can also be used in supermarkets and grocery stores to increase sales, attract customers and raise their loyalty, in addition to increasing customer satisfaction and interest. Here are some examples of these offers:

• Loyalty programs: This is a reward system dedicated to customers who frequent the supermarket, through which the customer can obtain points according to the total amount of each bill he pays. After collecting a certain number of points, the customer can exchange them for a discount coupon or a coupon with a certain financial value to use within the same supermarket to buy new products.

• Discounts and free gifts: This strategy helps spread the name of your supermarket and reach a new segment of customers interested in your products. Discounts and free gifts for a limited time entice customers to try your supermarket, and some of them will surely like your products and prices and will eventually become your customers forever.

Finally, choose product pricing strategies that balance profitability and competitiveness. You should constantly check the effectiveness of your pricing strategy and change it as needed to keep up with market changes and your customers’ reactions.