Various methods of price policy are followed by retailers in Bangladesh. Of them the following four methods are practised widely:
(1) Markup on the purchase price.
(2) Following the price suggested by the manufacturers.
(3) Fixing the price according to convenience.
(4) Following the price of competitors.
(1) Markup: A `markup’ means adding a fixed margin on the cost price by the retailer. When a retailer adds certain amount for profit with the purchase price of the products, it is called a mark-up. For example, suppose a retailer buys a tooth-paste for Tk. 50.00, adds Tk. 20.00 for his profit and sells it to the consumers at Tk. 70.00. In this case Tk. 20.00 is the markup on the purchase price of Tk. 5.00. This method of markup is widely followed by the retailers of our country. About 90 percent of the retailers follow the practice upon some variety of goods sold by them, Crockeries, garments, shoes etc. are sold according to a fixed mark up. This method of price policy is mostly used in the case of local manufactured goods. The retailers do not generally follow this policy of mark-up in the selling of imported goods.
(2) Price suggested by manufacturers: This method is usually followed where the manufacturers of consumer goods promote the market by direct advertisement. When the producers themselves take the responsibility of promoting sales of their products and the retailers are not required to do anything for enhancing the sales of the products, it is desirable for the retailers to charge a price dictated by the manufacturers. For instance, the drug retailers generally follow the price suggested by the manufacturers of medicine. This is, in other words, resale price maintenance. This method is also followed where the manufacturers distribute the goods through sole agents. Bangladesh Tobacco Company, for example, distribute the various brands of cigarettes through its distributors or agents and the retailers sell according to the price suggested by the company. It has been found that a suggested price is followed only by some of the popular brand manufacturers including toilets, provisions and garments. The retailers of the different typo of products of Kohinoor Chemical Company usually follow the price suggested by the company from time to time.
(3) Fixing the price according to convenience: Under this method the retailers charge the price according to the principle of ‘charging what the traffic will beer‘. After independence this practice has become very much popular among the retailers. This system requires certain conditions to be fulfilled in order to be a success:
(a) Firstly, there is inadequacy of goods in the market
(b) Secondly, supply position is frequently disturbed by the lack of supply of goods.
(c) Thirdly, competition is not so much strong in the market.
(d) Fourthly, frequent variation in price of the items.
(e) Fifthly, there are restrictions on imports of certain products.
(f) Finally, there is absence of price control by the government.
All these conditions are present in Bangladesh and consequently the retailers have the tendency to charge the price of certain items like batteries. cosmetics, watches etc. according to their convenience. This method is more popular in smaller towns than the big towns where the supply position of various manufactured consumer goods is hindered due to lack of supply. The frequent variation of price of some items like soaps of all kinds and cosmetics of different types, whenever supply is irregular, is of course the common experience. Moreover, due to restrictions imposed by the government on the import of certain items, they have irregular supply in the market. But demand for these goods is high at times. The retailers for such goods are free to charge the price according to their own estimation of the demand.
(4) Following the price of competitors: Many retailers charge the price of various manufactured goods keeping an eye on the price charged by their competitor. If a competitor, for example, charges the price of a particular brand of tooth-paste at Tk. 10.00, the retailer may charge the price of the same item around Tk. 10.00 (usually less) so that his market is not disturbed.
