Price generates revenue, whereas the other tools of Marketing Mix incur expenditure. Price differential of private labels is in the hands of retailers to generate demand, get more margin, and ultimately more profitability to the stores. Retail revenue management optimizes price to maximize the value sales. Retailers follow various pricing methods to attract various segments of the market and compete with national brands to optimize the profitability of private labels.

When customers enter a retail store, the first question they ask is "what is the price of the product?" Price is an important factor for both the seller and the customer, where they think they are making more value through a transaction. Customers think they are getting more for less and the seller thinks he is giving less for more, but what is the true inherent value of the product? Why are there two different perceived values for the same product?

Let us consider a small example. A private label product, say "X", is priced at Rs. 50. The retailer thinks that by selling the product he can make 10% profit i.e., the inherent worth of the product in terms of cost is, Rs. 45 only. The seller is fully aware of the inherent worth of the product and, hence, will never sell the product excluding profit (for less than Rs. 45).

The customer thinks differently, by paying Rs. 50, anticipating that the product is more valuable than Rs. 50; otherwise, he can't buy the product i.e., his policy is getting more for less. He presumes the hidden value of the product may be Rs. 55, making 10% extra value out of purchasing the product, "X" at Rs. 50.

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