Retail pricing glossary
The language of retail and ecommerce pricing, in plain English - 78 terms a category manager actually runs into, from dynamic pricing and price elasticity to MAP, KVI, and markdown math. Each one links to how the concept plays out in a real pricing workflow.
Brand perception is how shoppers subjectively judge a retailer or product brand's quality, value, and trustworthiness, which directly shapes what price they will accept.
Break-even pricing is the process of finding the exact selling price at which total revenue equals total costs, leaving zero profit and zero loss.
Bulk pricing is a strategy that lowers the per-unit price as customers buy larger quantities, rewarding volume purchases with better rates.
Bundle pricing combines two or more products into a single package sold at one price, usually lower than buying each item separately.
Campaign pricing is a temporary price plan built around a specific marketing event, such as a seasonal sale, holiday push, or new-product launch.
Competitive match pricing is a rule that automatically sets a retailer's price equal to a chosen competitor's price for the same or comparable product.
Competitive pricing is the practice of setting prices based primarily on what other retailers charge for the same or similar products, rather than on cost or demand alone.
Competitor price analysis is the ongoing process of collecting and comparing rival retailers' prices to understand where a business stands in the market.
The competitor price index (CPI) is a single score that summarizes how a retailer's prices compare to a chosen group of competitors, usually as a percentage.
Contribution margin is the amount left from a sale after subtracting variable costs, showing how much each unit contributes toward covering fixed costs and profit.
Cost of goods sold (COGS) is the total direct cost of the products a retailer sells, including purchase price, freight, and other landed costs.
Cost-plus pricing sets the selling price by adding a fixed markup percentage or dollar amount on top of a product's cost.
Cross-price elasticity measures how much demand for one product changes when the price of a different, related product changes.
Customer value is the overall benefit a shopper believes they get from a product relative to what they pay, combining price, quality, and experience.
Discount containment is the set of controls retailers use to keep promotional and markdown discounts from spreading further or lasting longer than planned.
Dynamic pricing is a strategy where retailers change prices frequently, sometimes in real time, based on demand, competitor moves, inventory levels, and other market signals.
Everyday low pricing is a strategy of setting consistently low prices year-round instead of running frequent promotions and temporary discounts.
Ex-works pricing is a cost basis where the quoted price covers only the goods at the seller's factory or warehouse, with the buyer covering all shipping, insurance, and duties after that.
Geographic pricing is the practice of setting different prices for the same product across different regions, stores, or markets based on local conditions.
Gross margin is the percentage of revenue left after subtracting the cost of goods sold, showing how much profit a retailer keeps before operating expenses.
Incremental customer value is the extra benefit a customer perceives from one additional unit, feature, or upgrade compared to what they already have.
Incremental revenue is the additional sales revenue generated by a specific action, such as a price change or promotion, compared to what would have happened without it.
Initial markup is the percentage added to an item's cost to set its original selling price, before any markdowns or promotions are applied.
A key basket is a defined set of frequently purchased, highly visible products that a retailer tracks closely to benchmark its overall price competitiveness.
Key value items are the specific high-visibility products, often within a key basket, on which shoppers most closely judge a retailer's overall price image.
Keystone pricing doubles the wholesale cost to set the retail price, producing a straightforward 50% gross margin on the item.
MSRP is the price a manufacturer recommends retailers charge; it is a guideline, not a binding floor, unless a separate policy says otherwise.
Margin and markup both measure profit over cost, but margin is profit as a percentage of price while markup is profit as a percentage of cost.
Markdown costs are the margin a retailer gives up when it cuts a product's price below its original selling price to move inventory.
Markdown pricing systematically reduces a product's price over time to clear seasonal, slow-moving, or excess inventory before it loses more value.
Market pricing sets a product's price based primarily on what competitors charge for the same or comparable items, rather than on internal cost alone.
Markup pricing sets a selling price by adding a fixed dollar amount or percentage on top of a product's cost, one of retail's simplest pricing methods.
Minimum advertised price is the lowest price a brand allows a retailer to show in advertising, regulating what is advertised, not the checkout price.
Odd-even pricing sets prices just below a round number, like $9.99 instead of $10.00, to make the price feel lower than it actually is.
Omnibus price is the EU rule requiring a discount ad to show the lowest price charged for that product in the prior 30 days, not an inflated one.
Penetration pricing sets an intentionally low launch price to win market share quickly, with plans to raise the price once customers are established.
Perceived value is what a customer believes a product is worth to them, which can differ significantly from its cost or its actual market price.
Pocket price is the actual net amount a retailer keeps after every discount, rebate, and allowance is deducted from the invoice price.
Predatory pricing means selling below cost to force competitors out of a market before raising prices once the competition is gone, a practice restricted by competition law.
Premium pricing sets a product's price noticeably higher than competitors to signal superior quality, exclusivity, or status rather than to reflect cost alone.
Price anchoring is a psychological pricing tactic where an initial reference price shapes how customers judge whether a later or nearby price feels like a good deal.
Price band analysis groups products into price ranges to see how assortment, sales, and margin are distributed across low, mid, and high price tiers.
A price ceiling is the highest price a retailer will charge for a product, set to stay competitive, comply with regulations, or protect brand trust.
Price differentiation is charging different prices for the same or similar product to different customer segments, channels, or locations based on willingness to pay.
Price elasticity of demand measures how much unit sales change in response to a price change, showing whether demand for a product is price-sensitive or stable.
A price floor is the lowest price a retailer will allow a product to be sold at, set to protect minimum margin or comply with brand agreements.
A price follower is a retailer that sets its prices in response to a dominant competitor's pricing rather than setting the market price itself.
A price leader is the dominant retailer or brand in a market whose price moves other competitors routinely watch and follow.
Price lining sets a small number of fixed price points across a product line, such as 20, 30, and 40 dollars, instead of pricing every item individually.
Price matching is a retailer policy or automated practice of adjusting a price to equal a competitor's lower price on the same or comparable product.
Price optimization is the process of using data on cost, demand, and competition to set prices that best achieve a retailer's revenue, margin, or volume goals.
Price parity means keeping the price of the same product identical across all sales channels, marketplaces, or regions rather than letting it vary by outlet.
A price point is the specific price at which a product is offered for sale, often chosen deliberately to match customer expectations or psychological thresholds.
Price sensitivity describes how strongly customer demand for a product responds to a change in its price, whether that change is an increase or a decrease.
Price skimming is a launch strategy where a retailer sets a high initial price on a new product, then lowers it in stages as early demand is captured.
Price transparency means showing customers clear, accurate, and current prices, including any discounts, without hidden fees or misleading comparisons.
A price war is a cycle of repeated, escalating price cuts between competing retailers, where each cut triggers another and margins erode across the market.
Pricing guardrails are boundaries, such as a margin floor or a maximum discount, that constrain automated or manual pricing decisions to prevent costly errors.
Pricing rules are predefined if-then conditions that automatically set or adjust prices based on factors like cost, competitor price, margin target, or stock level.
Pricing technology is software that helps retailers set, monitor, and update prices at scale using data, rules, and automation instead of manual spreadsheets.
Product life cycle pricing means adjusting a product's pricing strategy as it moves through introduction, growth, maturity, and decline in the market.
Product volume is the number of units of a specific product sold over a given period, a core input for pricing, forecasting, and inventory decisions.
Profit optimization is the ongoing process of adjusting prices, promotions, and assortment to maximize total profit rather than just revenue or unit volume.
Promotional pricing is a temporary reduction in a product's price, run for a limited time, to drive traffic, clear inventory, or boost short-term sales.
Psychological pricing uses how shoppers perceive numbers, such as ending a price in .99, to make an offer feel cheaper or more attractive than it plainly is.
Real-time price monitoring is the automated, continuous tracking of competitor and marketplace prices so a retailer always works from current, not stale, data.
A reference price is the price a customer compares a current offer against, whether a past price, a competitor's price, or a suggested retail price.
Retro payments are vendor payments or credits applied retroactively to past purchases once a retailer hits a volume or sales threshold, adjusting true product cost.
Sales volume is the total number of units a product or store sells over a given period, used to gauge demand and inform pricing decisions.
Stock level is the quantity of a product currently held in inventory, tracked to balance availability against holding costs and markdown risk.
Wholesale price is the price a manufacturer or distributor charges a retailer to buy products in bulk before they are resold to consumers.
Willingness to pay (WTP) is the maximum price a customer is prepared to pay for a product before they choose not to buy it.