When shopping for goods, one of the most common terms that we encounter is “recommended retail price” or RRP. As a consumer, we may see this term on price tags, promotional materials, and advertisements. As a business owner, we may use the recommended retail price as a pricing strategy for our products. In this Business Kitz blog post, we will discuss what RRP is in Australia, how it works, and its implications for consumers and businesses.
What is a RRP?
The recommended retail price (RRP) refers to the price that a manufacturer or supplier suggests that retailers charge for their products. It is also called the suggested retail price or list price. The RRP is not a fixed price, but rather a recommended price that provides guidance to retailers about how much they should sell the product for.
It also serves as a benchmark for pricing and is typically set by manufacturers or suppliers. The RRP is usually higher than the actual price that retailers pay to purchase the products. Retailers can then choose to sell the product at the RRP or lower the price to attract customers. It is important to note that the RRP is not a legally binding price and retailers are not required to follow it.
How does RRP work?
The recommended retail price is an optional pricing strategy that manufacturers or suppliers can use to influence the price of their products in the market. It can also be communicated to retailers through various channels such as sales representatives, promotional materials, or invoices.
Retailers are free to set their own prices and can choose to sell products at the recommended retail price or lower to attract customers. Retailers who sell products at or above the recommended retail price may advertise that the product is being sold at the recommended price. However, it is important to note that if a retailer chooses to sell the product at a lower price, they cannot advertise that the product is being sold at a discount from the recommended retail price.
What are the implications for consumers?
For consumers, RRP provides a benchmark for pricing and can help them make informed purchasing decisions. Consumers can compare the RRP of products across different retailers to determine which offers the best value for money.
However, it is important to note that the recommended retail price does not necessarily reflect the actual price that retailers pay for the product. Retailers may sell products below the recommended retail price to attract customers or because they have negotiated a lower price with the manufacturer or supplier. Consumers should also be aware that retailers may use recommended retail price as a marketing tool to create the perception of value, even if the product is not actually worth the recommended price.
What are the implications for businesses?
For businesses, RRP can be used as a pricing strategy to influence the price of their products in the market. By setting a high RRP, businesses can create the perception of value and exclusivity for their products. However, businesses should also be aware that setting a high RRP may deter price-sensitive customers and lead to lower sales.
It is important to note that while RRP is not legally binding, businesses should be cautious about using certain pricing strategies. For example, setting a minimum resale price or fixing the price of a product can be considered anti-competitive conduct and may breach competition law. The Australian Competition and Consumer Commission (ACCC) has issued guidelines on minimum resale price maintenance, which businesses should consult before implementing any pricing strategy.
What are the rules for displaying RRP?
Businesses that choose to use RRP as a pricing strategy should also be aware of the legal requirements for displaying the recommended retail price. The ACCC requires businesses to display the recommended retail price clearly and prominently. The RRP should be in a font size that is easily readable and should not be obscured by other information such as discounts or promotional offers.
In summary, RRP is the recommended price that a manufacturer suggests retailers sell their products for. While it’s not a mandatory price, it provides a reference point for consumers and helps create a level playing field for businesses selling the same or similar products.
There are legal implications for businesses that use RRP, including the ban on Resale Price Maintenance (RPM). Retailers also need to be careful when advertising discounts to ensure that they’re not misleading consumers.
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