What characterizes keystone pricing?

Keystone pricing is characterized by doubling the wholesale cost of an item to establish its retail price. This method provides a straightforward approach for retailers to determine pricing by ensuring a consistent markup. For instance, if a retailer purchases a product for $10, they would set the retail price at $20, effectively creating a 50% margin. This approach simplifies pricing decisions and is particularly prevalent in retail environments where inventory turnover is steady and predictable.

This strategy is commonly used in various segments of retail, especially where there’s a clear understanding of costs and market value. Keystone pricing can help retailers maintain adequate profit margins while also ensuring that prices remain competitive within the market.

The other options do not describe keystone pricing. Competitor pricing focuses on market pricing dynamics rather than a fixed markup. Marking down products relates to discounting strategies rather than establishing a price from cost. An aggressive discount strategy involves reducing prices significantly to attract customers, which is contrary to the principles of keystone pricing that rely on maintaining higher price points for profitability.