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The suggested retail price, or SRP, is the selling price that the manufacturer recommends that the seller or retailer receive for the goods or services. Sometimes referred to as a recommended retail price or RRP, this type of retail price can help to normalize the prices charged by different retailers in a community for the same product. Different retailers utilize this price recommendation in different ways, often as a strategy that helps move the business closer to its financial goals.
It is important to note that the suggested retail price leaves a great deal of room for competition among different businesses. Retailers may price their goods for some amount that is not only less than the suggested price, but also slightly less than the prices posted by other stores in the immediate area. This lower price may be an everyday retail price, or be a discounted special price that is only available for a short period of time.
One common approach used by retailers is to publish the manufacturer’s suggested retail price for all consumers to see. Along with this price, the retailer will also publish a purchase price that is lower than the cost recommended by the manufacturer. This approach creates the illusion that the consumer is getting a good deal on the purchase, although the purchase price is usually set high enough to still allow the retailer to earn a significant profit off each unit sold.
Automobile dealers often employ this same approach to the suggested retail price. In many countries, regulations demand that dealers display the manufacturer price with each vehicle offered for sale. Dealers use this to their advantage by contrasting this suggested price with a lower price, which in turn conveys the impression that the vehicle is a bargain. When running a sale to clear out inventory that is not moving, some dealers will display three prices on selected vehicles: the suggested retail price, the usual discounted sticker price, and sales price that is available for a short time only. This strategy serves to further identify the vehicle as true bargain, and is likely to attract consumers who would not consider purchasing the automobile otherwise.
There are different terms used to describe the suggested retail price in various settings. This price is sometimes referred to as a rack rate when referring to pricing for telecommunication services, or when booking a trip through a travel agency. The term implies that the average going rate charged for the product is what most other providers would charge, but that it is possible to receive a discounted rate with a particular provider. With telecommunication services, smaller competitors often use the published price structures of major players in the industry as the rack rates, then offer potential customers pricing that is significantly less than those purported industry averages.