A repository of acronyms, jargon, and useful definitions perfect for eCommerce founders & marketers like yourself.
Recommended retail price(RRP) is the price at which the manufacturer suggests the retailers to sell its product. The RRP generally tells all the manufacturing and selling costs associated with a product. It is also known as the list price or the sticker price, or the manufacturer’s suggested retail price (MSRP), or the suggested retail price (SRP). Its main purpose is to keep the prices the same everywhere.
The recommended retail price usually applies to branded products or higher-priced goods, such as electronics and appliances. The RRP is mainly to provide a reference point, manipulating the consumers’ willingness to pay for goods.
Purpose of Recommended Retail Price
The aim of the recommended retail price is to establish similarity among the selling prices at different retail locations. The RRP is intended to control deceptive pricing practices and standardize prices of goods within a trade area of the company’s retail outlets.
The similarity of prices also seeks to ensure that basic and main goods are always available at reasonable prices without denying sellers a fair return on investment. It makes sure that all parties involved in a deal (manufacturer, wholesaler, retailer) will be able to earn profits at the end of the final sale. Although the price is called “recommended,” retailers can sell the products purchased from the manufacturers at the RRP, as well as below it.
It is good to sell the products below the recommended retail price when there is excess inventory that needs to be sold out as early as possible. There can be multiple reasons for clearing out the inventory like the products becoming obsolete or getting perish. We can also sell below RRP when we sell huge quantities but we can do that only when the manufacturers of brands allow us because selling at low prices may destroy brand image and identity. On the other hand, we can also sell above the recommended retail price when the availability of certain items in an area is less. For example, there are very few stores that operate 24/7. They are providing services all day long, so they might charge a little higher but it is the sole decision of the owner. When the demand is high and the supply is less, then also we can go above the recommended retail price. To sum up, there are multiple factors that affect the recommended retail price (RRP) like market share stabilization, retail value chain, customers’ bargaining power, product’s demand status, marketing objectives, production expenses, and competition, etc.