Recommended retail price and consumer
For clarity, Consumers’ Assembly will in this edition, provide a simple explanation of a behavioural explanation exhibited by some operators of distributive trade antithetic to established rule guiding product pricing at the various stages of product distribution, till the point of retailing.
In all, trade price influence is given to manipulation so much so that same product would sell at different prices at different places, from time to time. In this case, we pay special attention to Recommended Retail Price (RRP).
RRP is that particular price at which product manufacturers decide their products should sell at the final retail point of purchase. It is a rule as well as advisory; it is instructive and acts as a guide for consumer-trade exchange at the marketplace.
RRPs are derived from the totality of the costs invested in the production of any particular product, plus profit margin.
It is recommended because at the point such prices are determined; all costs are taken care of, interestingly inclusive of the margin due to the entire trade till the point of retail purchase.
RRPs are an expression of trade support mechanism operative as a competitive tool; it could be to drive up sales in form of consumer attraction (affordability) or to curtail fraudulent trade practice, to protect consumers against trade’s price manipulation. It could also be implemented to curb artificial scarcity.
In all, RRPs are instructive to consumers and a guide to trade.
RRP can also serve as market stabilisation instrument in a situation where the strength of a brand and its market acceptance tempt trade to aggressively amplify the tendencies to optimise profit, in disruption of the product’s personality.
In this case, such products stand the risk of losing consumers’ confidence and shelf off-take, endangering its market performance. When this threat is imminent, brand managers are wont to activate RRP to protect such brand against consumers’ odium and strengthen its competitiveness.
Unfortunately, the RRP with all its promises and influence has come under total disregard, with the direct consequence on consumers. In the years preceding year 200, RRPs are held sacrosanct.
Brands invest huge sums of money to communicate RRP for it is worth; when such are determined are communicated, it sends signals to all stakeholders, driving warning signal to all, because it is a classical response to identified inconsistency along the chain of distribution.
It is a common knowledge that distributive trade chain is open to price manipulations in order to optimise profit (especially in the FAST-MOVING-CONSUMER-GOODS segment. Commonly referred to as ‘penny-market’, brands in the FMCG category sell at small prices, whereas investment outlay at the entry point for big bulk breaking is very huge.
Down the line, trade investors earn ‘pennies’ for their huge investment. Interestingly, however, the attraction is in the big volume and speed of shelf off-take that makes for the small value of earning build-up.
But there lies the temptation, among some operators; the tendency is to manipulate the recommended price at any point of the distributive process, for profit optimisation.
For many reasons, some of which are mentioned above, manufacturers are charged with the responsibility of price monitoring and regulation, by keenly regulating activity of trade.
Sadly, growing commerce is gradually being tainted with so much manufacturer-trade indiscipline that price manipulation is threatening consumer rights protection.
From mobile phones airtime purchase through carbonated drink market to food seasoning, price manipulation is evident; there are many cases of same product and size selling at different prices from one place of purchase to another.
Recently a mobile telephone service provider became notorious for trade-induced marginal retail cost, borne by its subscribers. It was so bad that the brand attempted an awareness campaign which achieved next to nothing, because of its evidently limited scope and its ineffective strategic support.
As we have also mentioned, it is even not enough to communicate RRP if such consumer information is not backed by trade monitoring and sanction.
Without the corporate monitoring/policing for sanction, concerned brands tend to paint the impression of either complacency or collaboration.
Consumers must be protected against price manipulation by the trade. We are calling on trade to live up to their responsibilities to manufacturers and consumers in their business dealings. We are all equally challenged by economic downtime, and so it is only fair that rules of trade-consumer engagements be adhered to.
Brands/ manufacturers must step up to their responsibilities; consumers must be protected against abuses in form of price manipulations.
Trade Descriptions Act prohibits “misleading indications on the price of goods”, terming them collectively as “illegal trade practices”.
We advise consumers to take advantage of this Act to drive self-protection; anywhere we notice price manipulation, especially when such retail prices are higher than recommended, they should report to authorities, better still the Consumers Protection Council (CPC) or come to us at Consumers Assembly, using any of our media platforms.
Retail price manipulation is unacceptable and all stakeholders, especially brand owners must make the deliberate effort to inform consumers, monitor trade and enforce compliance among trade…for consumers’ interest.
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