Additional Mark-On

Refers to the practice of further increasing the retail price of merchandise, often executed during holiday periods or times of peak demand to maximize profits.

Definition

Additional Mark-On refers to a strategic increase in the retail price of merchandise beyond its regular markup. This pricing tactic is typically employed during holiday periods or peak demand times to take advantage of increased consumer spending and limited competition. Retailers use additional mark-on to optimize profit margins by leveraging periods when consumers are more willing or able to pay higher prices.

Examples

  1. Black Friday Sales:

    • Retailers might initially advertise significant discounts on Black Friday but then apply an additional mark-on to some high-demand items to offset the discounts on more prominent deals.
  2. Holiday Season Toys:

    • Popular toys or electronics often see an additional mark-on during the holiday season when parents are more likely to purchase these items regardless of higher prices to fulfill their children’s wishes.
  3. Tourist Destinations:

    • Souvenir shops at tourist hotspots might increase prices during peak tourist seasons to maximize profits when visitor numbers are high.

Frequently Asked Questions (FAQs)

Why do retailers use additional mark-on?

Retailers use additional mark-on to maximize profits during times of high consumer demand, where customers are less sensitive to price increases.

Yes, additional mark-on is legal as long as it does not involve deceptive pricing practices or violates any specific local, state, or federal regulations related to price gouging.

How does additional mark-on impact consumer perception?

If executed transparently, additional mark-on can be accepted by consumers due to the higher demand. However, if used excessively or opaquely, it may negatively affect consumer trust and loyalty.

Are there instances where additional mark-on is frowned upon?

Yes, during emergencies or natural disasters, excessive price increases (price gouging) can be considered unethical and may be illegal in many jurisdictions.

Can additional mark-on be beneficial for both retailers and consumers?

Yes, carefully executed additional mark-on can help retailers manage inventory and meet the sudden surge in demand, while consumers get timely access to coveted items.

  • Markup: The amount added to the cost price of goods to cover overhead and profit.
  • Dynamic Pricing: Strategy where prices change in response to real-time supply and demand conditions.
  • Price Gouging: The practice of increasing prices to an unfair level, especially during emergencies or disasters.
  • Surge Pricing: Adjusting prices based on demand; commonly used in transportation services like ridesharing.
  • Premium Pricing: Setting higher prices for items to reflect higher perceived value or exclusivity.

Online References

  1. Investopedia: Markup Definition
  2. Wikipedia: Pricing Strategies
  3. Retail Dive: Pricing Strategies & Trends

Suggested Books for Further Studies

  1. “Pricing Strategies: A Marketing Approach” by Robert M. Schindler
  2. “The Strategy and Tactics of Pricing: A Guide to Growing More Profitably” by Thomas T. Nagle, John Hogan, and Joseph Zale
  3. “Retailing Management” by Michael Levy and Barton Weitz

Fundamentals of Additional Mark-On: Marketing Basics Quiz

### What is 'additional mark-on' most commonly used for? - [ ] Reducing the price of merchandise during off-peak times. - [ ] Standardizing prices across various stores. - [x] Increasing retail prices during periods of high demand. - [ ] Improving product quality. > **Explanation:** 'Additional mark-on' refers to further increasing retail prices during high-demand periods, like holidays. ### During which period is additional mark-on often used by retailers? - [x] Holiday periods - [ ] Summer months - [ ] Monsoon season - [ ] Post-holiday sales > **Explanation:** Retailers often use additional mark-on during holiday periods to leverage increased consumer spending. ### Which of the following would likely see an additional mark-on? - [ ] Grocery items in offseason - [x] Popular toys during Christmas - [ ] Off-season travel packages - [ ] Basic utilities > **Explanation:** Popular toys during Christmas are prime candidates for additional mark-on due to elevated demand. ### Why is additional mark-on considered advantageous for retailers? - [ ] It minimizes inventory management. - [ ] It fixes regular low-demand periods. - [x] It maximizes profits during peak demand periods. - [ ] It reduces production costs. > **Explanation:** Additional mark-on helps maximize profits during periods of peak demand when consumers are less price-sensitive. ### Which pricing strategy is most similar to additional mark-on? - [x] Dynamic pricing - [ ] Penetration pricing - [ ] Below-cost pricing - [ ] Everyday low pricing > **Explanation:** Dynamic pricing, which adjusts prices in response to real-time supply and demand, is most similar to additional mark-on. ### What is a common consumer reaction to excessive additional mark-on? - [x] Decreased trust and loyalty - [ ] Increased purchase volume - [ ] Ignoring price changes - [ ] Seeking alternatives much later > **Explanation:** Excessive additional mark-on can decrease consumer trust and loyalty, especially if perceived as exploitative. ### How can retailers ethically apply additional mark-on? - [ ] By hiding price increases. - [x] By being transparent about the reasons for price adjustments. - [ ] By setting arbitrary higher prices. - [ ] By offering confusing promotions. > **Explanation:** Retailers can ethically apply additional mark-on by being transparent about the price changes. ### Which industry heavily uses additional mark-on during peak seasons? - [ ] Insurance - [x] Retail - [ ] Real estate - [ ] Communications > **Explanation:** The retail industry heavily uses additional mark-on during peak seasons like holidays to boost profit margins. ### What legislation can additional mark-on potentially infringe upon during emergencies? - [x] Price gouging laws - [ ] Sales tax laws - [ ] Consumer protection laws in normal times - [ ] Advertising regulation laws > **Explanation:** Additional mark-on can risk infringing upon price gouging laws during emergencies. ### Additional mark-on is also known as what in the market? - [ ] Discount strategy - [ ] Market penetration - [x] Increased markup - [ ] High-low pricing > **Explanation:** In the market, additional mark-on is also referred to as increased markup, especially during high-demand times.

Thank you for learning about additional mark-on in retail pricing and participating in our engaging quiz. Keep improving your business acumen!


Wednesday, August 7, 2024

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