Pricing is perhaps the most complex marketing decision. There is no one best formula to use to establish prices. A price strategy is only effective if the customer is willing to pay the price and a profit is received. Some computer and technology advancements have simplified pricing decisions. To be successful, a marketing strategy must set prices that are both satisfying to customers and profitable to the business.
Retailers have some of their prices suggested by manufacturers and wholesalers.
Suggested prices are sometimes marked on the product by the manufacturer. Even though some prices are recommended, retailers still need to determine their own prices for many or most of the items they sell. The goal for the retailer is to balance high and low markup items to achieve an average markup that produces a desirable profit for the overall operation. This gross profit margin, usually expressed as a percentage of cost or selling price, must pay for all expenses and provide for a profit. For example, the average gross margin needed by a business may be 35 percent.