Why do many small businesses use the manufacturer’s suggested retail price? What are the disadvantages of this technique?

Asked on by soman2006

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readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted on

This is a good question. Let me make a few points that might help you think though the issues.

First, before any product is sold, there is extensive market research in terms of pricing. This takes a lot of time and money. Hence, the manufacturer's retail price comes with all this research. It is offering the optimal price in terms of saleability and profit. In light of this, there is wisdom in using this information. If a store does not go with the manufacturer's price, then they will have to do their own research, which might be worse.

Second, often times stores are forced to use the manufacturer's suggested price and are not able to mark it down, even if they wanted to. In other words, the manufacturer does not allow for individual stores to manipulate their prices.  So, stores have no choice.

lee25's profile pic

lee25 | Student, Grade 11 | eNotes Newbie

Posted on

manufacturers use this to standardise prices.small businesses may use this as deceptive advertising. they will show the price that was suggested an make their prices lower and consumers will think that they are getting a bargain.there are also disadvantages as retailers cant have a very high mark up as the suggested price is sometimes on the product and if there is a high mark up consumers will see this and think that that they are paying too much and this will result in low turn overs

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