Retail Strategy Secret #11: MSRP

Flexible

Welcome to the eleventh post in our series of “Retail Strategy Secrets”!  Here you will learn the angles, approaches, and tactics retailers are using every day to try and separate you from your hard-earned cash.  Understanding these unlocks the door to spotting great deals, and you never want to pass up a Dealicacy…

MSRP

Manufacturer Suggested Retail Price (MSRP) is the act of setting product resale prices using manufacturer recommendation as guidance. Perhaps most prominent in the car industry, you will also see it on price tags at many department stores (where it is also referred to as “list price”).

MSRP helps to standardize prices across retailers and their separate locations, but it is one of the more flexible forms of Vendor Pricing. It is not necessarily the price the consumer pays…  Good news for deal hunters, as this allows us the opportunity to understand price extremes and know when we have found a Dealicacy.

For the most part (and we’ll get to some exceptions in our upcoming post on “Prestige Pricing”), MSRP marks the upper level “starting point” of price for a product. More or less, the point of ridiculous markup.  The bad news here for the lazy is that a “sale price” lower than MSRP isn’t necessarily a sale – it could simply be the current market value. 

Likewise, if you opt to pay MSRP you more than likely just got ripped off. Remember, the MSRP is the vendor’s opinion of the product’s value – not the consumer’s.  They’ll gladly take your money if you want to give them 100%+ markup.

This is why we also want to reference lower price extremes before deciding if we have found a deal or not, such as sale and clearance prices.  Let’s look at Docker’s Original Khaki pants as an example.  At last check, these show an MSRP of $48. 

A quick Google or Bing search will show that these sell for anywhere from $24-$48 on any given day (maybe less), depending on what store you are looking at.  Given this range of extremes, we can establish a benchmark price somewhere between the high and low points.  And this shouldn’t just be an arbitrary point in the middle.  Rather, it should be based on personal preference or even a point that represents a good balance between price and how bad you need (or want) the item.

For me, it’s tough to even get interested unless this style of pants are under $30. From there, I know that if I see these for less I might want to take a second look.  A lot less and I have two options: stock up even if I don’t absolutely need another pair of pants this instant (a few extra clothes help when you have kids), or walk away due to inferior quality. 

Recall I suggested taking a “second look” above when I find my price range… sometimes extremely marked down merchandise is a factory second or damaged return. Value for your dollar counts bigger than sheer price alone.  That’s what makes for a true Dealicacy. 

On the other side of the benchmark price, convenience enters into the equation.  Maybe the situation becomes more urgent due to me getting caught on another doorknob (*rip*).  Having a personal benchmark allows you to walk away if the price is too far above your idea of what the convenience is worth.  In the case of these Dockers given the situation, I’d maybe go up to $35 before driving to the next store.  Unless I got caught on the doorknob while shopping at that particular store… 🙂

So a quick summary:

  • Know your MSRP / List Price, but don’t benchmark off of it
  • Establish your idea of a great price below the MSRP as a benchmark instead
  • Get the best *value* given the sale, convenience, and quality

As you can see, deal hunting is not for the faint of heart – which is why I’m glad you are here.  We’re better as a team!  What we just walked through together is a template and *key* piece of the formula we use at Dealicacy to notify you of exceptional deals. 

All you have to do is join the newsletter and you’ll get alerts for each Dealicacy we discover. By the way, it’s FREE and I won’t abuse your inbox. In fact, I can’t – a truly great Dealicacy doesn’t come along every day!  🙂

Yours for Great Deals,

– Nathan

PS – Next up: Minimum Advertised Price (MAP).

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4 Responses to “Retail Strategy Secret #11: MSRP”

  1. kredyty bezbik says:

    Great, I never knew this, thanks.

  2. redy k says:

    Been looking for this article for long time and finally found here. thanks for sharing this post. appreciate it!

  3. Esid F says:

    Great post! I started following your blog about a month ago and I like your honesty. Good example to emulate.

  4. Thaddeus Swatman says:

    I know this is really boring and you are skipping to the next comment, but I just wanted to throw you a big thanks – you cleared up some things for me!