Price Markdown as Marketing Strategy

A price markdown is a way retailers use in making their merchandise more sellable by deliberately reducing their products’ prices. Retailers usually mark down the prices of their merchandise when these products become obsolete in the market, or when the merchandise of a new season has already arrived to replace the old like what fashion retailers do (Walker, 1999).

Retailers often resort to a price markdown at the end of a season. When their stock of merchandise during the current season is not sold at its regular selling price, retailers impose a big price reduction on the unsold items.

They do this through placing discounts or promotions (e.g. 50% discount off the regular price, or buy one take one on selected items).

Price markdown also acts as a strategy for retailers to lure consumers to come to their stores. First, there are times of the year when people are in the incessant mood to shop, the best example being the Christmas season (Tkacik, 2006).

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Because of this stores markdown their merchandise to appeal the shoppers, especially when the shops sell items which are identically the same. Posting discounts on selected items also opens doors for other items which are sold at their regular price tags to be purchased too. That hits two birds in one stone for the retailer, for not only was he able to eliminate his merchandise but was able to gain profits from the regular selling price as well.

Finally, price markdown is a tool to earn patronage from consumers that have specific tastes and preferences.

Stores put certain items on sale to which a shopper with this kind of preference would lay her eyes on. Applying a shopper’s psychology, this person would not buy this apple on retail. Thus she would be more or less purchasing at least purchase two or more items of this kind especially that they are marked “on sale” or “discounted.”

Sources

1. Tkacick, Maureen (2006). Markdown-onomics. New York Magazine, (13) 12.
2. Walker, John (1999). A model for determining price markdowns of seasonal merchandise. Journal of Product and Brand Management, (8) 4, 352-361.