Everyday Low Pricing Strategy: Pros, Cons - Prisync

Everyday low pricing strategy is a price management method or tactic that enables companies, brands, and retailers to offer their customers ... SolutionsPriceCheckingDynamicPricingMAPMonitoringPriceMatchingPriceManagementPriceScrapingPriceWatcherRepricingEcommercePricingCompetitiveIntelligenceAssortmentAnalysisDigitalShelfManagementFeaturesIntegrationsShopifyMagento2Magento1OtherPlatformsviaAPIPartnersResourcesBlogCaseStudiesEbooks2021EcommerceEventsPricingAcademyHelpCenterTestimonialsUltimateE-CommerceGuidePricing STARTATRIAL Login Reading: EverydayLowPricingStrategy:Pros,Cons|+4BrandsThatNailedIt Sharethis: Twittericon Facebookicon LinkedInicon HomePrisync|BlogEverydayLowPricingStrategy:Pros,Cons|+4BrandsThatNailedIt EverydayLowPricingStrategy:Pros,Cons|+4BrandsThatNailedIt by BetulParlak July29,2021 Everydaylowpricingstrategyisapricemanagementmethodortacticthatenablescompanies,brands,andretailerstooffertheircustomersconsistentlylow-pricedproducts.Insteadofofferingdiscounts,coupons,andpromotions,companiesfocusonprovidingconsumerswithlow-priceproducts.  Bearinmindthatthiskindofpricingstrategyishighlybeneficialforabrandifthecostofproductsstaysthesame,allowingthemtoearnprofitsevenbysellinglow-pricedgoods.Iftheproducts’costsalignwiththelow-pricestrategy,theretailercanachievelong-termgoalsforaprolongedperiod.  Companiesandbrandsconsiderawiderangeoffactorswhendecidingtoimplementthistypeofpricingpolicy.Afterall,pricemanagement,pricetracking,orrepricingareessentialaspectsoftheirbusiness,andretailerswanttoimplementastrategythatalignswiththeirbusinessgoals.  Intoday’sarticle,wewilldiscussthedifferencebetweeneverydaylowpricingandhigh-lowpricing,theprosandconsoflowpricing,andfamousbrandsthatusethispricingstrategytostreamlinetheirbusinessoperationsandachievehigherreturnsoninvestments(ROIs).Readon!  TheDifferencebetweenLowPricingandHigh-LowPricing  Beforedecidingwhetherlowpricingisasuitablestrategyforyourcompany,itiscrucialtoidentifyandunderstandthecriticaldifferencesbetweenlowpricingandhigh-lowpricing.High-lowpricingisanessentialstrategyformanycompanies,allowingthemtostartsellingproductsatahighpriceandreducethepricelaterthroughdifferentmethods,includingpromotions,clearance,andmarkdowns.  Remember,startinghighenablesabusinessorcompanytocreatebargainingperceptionswhencustomersdemanddiscountsorthecompanyofferdiscountsorpromotions.Thepurposeofusingahigh-lowpricingstrategyistodrivefoottrafficandencouragecustomerstotakeadvantageofthediscountsandpromotions.  Thatway,thecompanycancross-sellotheritemsbecauseithasalreadycreatedexcitementforitscustomersthroughdiscountsoncertainproducts.Ontheotherhand,lowpricingallowsacompanytosetlowerpricesforproductswithoutfluctuatingthem.So,thisistheapparentdifferencebetweeneverydaylowpricingandhigh-lowpricing.  Werecommendfocusingonyourbrandrequirements,productcategories,andROIgoalsbeforechoosingandimplementingapricemanagementstrategy.Thepurposeistomakeaninformeddecisionaboutchoosingyourpricingstrategy.Somecompaniesfollowthistypeofpricingstrategy,whileothersimplementdynamicpricingfortheirproducts.Remember,italldependsonyourbrandrequirements.  ProsandConsofEverydayLowPricingStrategy  Supermarkets,companies,brands,andretailershavetwooptionswhenofferingdiscountsontheirproducts.Thefirststrategyiseverydaylowpricing,andthesecondoneishigh-lowpricing.Bearinmindthattheformerallowsacompanytoofferdiscountsacrosstheboard.Italsofocusesonapromotionalpricingstrategy,offeringtemporarymarkdownonselectedproducts.  ProsofaLowPricingStrategy  Chainretailers,suchasCostcoandWalmart,madesubstantialeffortsafewdecadesagotoexpandtheirlowpricingstrategies.Thesecompaniesaimedtoattractmorecustomerswhohadaninterestinlowpricing.  However,thesetwocompaniescreatedproblemsforotherretailersbecausetheydidn’tknowwhichpricingstrategybestalignwiththeirbusinessgoals.Atthesametime,smallretailershadnoideaofhowtoappealtocustomersthroughapricingstrategy.Letusfirstdiscusstheprosofalowpricingstrategy.Continuereading!  StreamlinedDecision-Making Agrowingbodyofresearchevidenceshowsthatconsumerspreferlowpricingforproducts.That’swhycompaniesfocusonalowpricingstrategyfortheirproductsinsteadofhigh-lowpricingstrategiestoincreasetheirsalesandgeneratehigherreturnsoninvestments(ROIs).  Thequestionis:howisthispossible?Becauseyourcustomersdonotworryaboutthepricesofproductsforaprolongedperiod,youcanmakesimplifieddecisionsandsetpricessuitableforyourcompanyandyourcustomers.Whencustomersdon’tworryaboutpricefluctuations,theytrustyourcompanyandbecomerepeated/loyalconsumers.  SavesConsumers’Time Alowpricingstrategyishighlybeneficialforcompaniesthatprovidevaluetotheircustomers.Forexample,whenyouimplementhigh-lowpricing,yourcustomerswillconsistentlycomparepricesandsearchforthebestdeal.Bearinmindthatthisisdauntingandtime-consumingforyourcustomers,leadingtoreducedsatisfactionlevels.Asaresult,consumerslookforalternativestoreswheretheycanshopeasilyandsavetime.  Ontheotherhand,whenyouhaveaneverydaylowpricingstrategyinplace,youcanbenefityourcustomersbyallowingthemtoshopseamlesslywithoutcomparingprices.Notonlydoesthisenableyourcustomerstosavetime,butitalsogivesthemgreaterpricevalues.Remember,improvedcustomersatisfactionlevelsaredirectlyproportionaltohigherROIs.  EasyDemandForecasting Demandforecastingisanessentialstrategythatallowsacompanytoestimatedemandforitsproductsorservicesinthefuture.Companiesanalyzethepastdemandsforproductsandcomparethemwiththecurrentmarketconditionstostreamlinetheirpricingstrategies.Webelievethathigh-lowpricingisnotasuitablestrategyforoptimizingyourdemandforecastingoperations.  Becauseaneverydaylowpricingstrategyallowsyoutodecreasedemandfluctuationsandavoidsalespromotions,youcanstreamlineyourdemandforecastingoperations.Alowpricingstrategyenablesyoutosetlowpricesforyourproductstoattractmorecustomersandincreasesales.Youcancomparethepastdatawithcurrentdataforbetterdemandforecasting.  LowMarketingCosts AccordingtoVendux,acompanymustspend7%to8%ofitsrevenueonmarketingcampaigns.However,whenyouhaveahigh-lowpricingstrategy,youwillchangepricingrepeatedlytoattractcustomersbyofferingdiscountsandpromotions.Remember,offeringdiscountsrequiresyoutospreadthewordtoconsumersthroughmarketingcampaigns,whichcancostalotofmoney.  Ontheotherhand,whenyouhavealowpricingstrategy,youwon’tspendalotofmoneyonyourmarketingcampaignsbecauseyourcustomersalreadyknowthatyouhaveconsistentpricesforyourproducts.  Forinstance,Walmartsavedalotofmoneyonmarketingcampaignsin1994byimplementingalowpricingstrategy.Walmartwouldadvertiseitsproductsinnewspaperseverymonthcomparedtootherretailersorcompaniesthatwoulddothesameeveryweek.So,whenyouhavealowpricingstrategy,youcansavemoneybyminimizingyourmarketefforts.  ConsofaLowPricingStrategy Productpricingisacrucialfactorforyourmarketingandadvertisingstrategy.Alowpricingstrategyrequiresyoutoconsistentlyprovideyourcustomerswiththelowestpricesforyourproductsinthemarketplace.Companiescarryoutthoroughresearchandconductsurveystoidentifypricingpatternsandimplementasolidstrategy.  Althoughtherearemanybenefitsofalowpricingstrategy,italsocomeswithafewdownsides.Letusnowdiscussthedisadvantagesofalowpricingstrategyforyourcompany.Keepreading!  ReducedCreditability  Mostcompaniesoffertodayselltheirproductsonline,andeveniftheyimplementalowpricingstrategy,consumerscaneasilycompareyourproducts’pricewithcompetitors’forthesameproducts.Ifconsumersfindoutthatyourcompetitors’pricesarebetterthanyours,theywon’ttrustyourbrand.Instead,theywillinclinetowardyourcompetitors,causingyoutoloseyourcredibilityinthemarket.  LessProfitMargin Implementingalowpricingstrategyrequiresyoutoavoidofferingdiscountsandpromotionstoyourcustomers.Becauseyoumakeeffortstoprovideyourcustomerswiththelowestpricesatalltimes,youmaynotachieveyourdesiredprofitmargins.  Remember,discountsandpromotionsinfluenceyourcustomerspsychologically,encouragingthemtobuyafewproductsataspecialdiscountedprice,leadingtomoresatisfaction.Atthesametime,yousethigherpricesforotherproductsandbalanceyourpricingstrategy,ensuringthatyougethigherprofitmargins.  Somecompaniesimplementaneverydaylowpricingstrategy,butwhentheydon’thavethedesiredprofitmargins,theyofferdiscountsonspecificproductsandraisepricesforotherproducts.Bearinmindthatthiscanconfuseyourcustomersbecauseyouhavealreadymarketedthatyouhavethelowestprices.Notonlydoesthisleadtodisloyaltyandreducedtrust,butyoualsoloseyourcustomers,leadingtoreducedprofitmargins.  ChallengesinStayingCompetitive Alowpricingstrategyoftendiscouragessomecustomersbecausewhenyouofferthelowestpricesconsistently,consumersbegintodoubtthatyouhavelow-qualityproducts.  That’swhyitiscrucialtofocusoncompetition-basedpricingtostaycompetitiveinthemarket.  Thelowest-pricestrategymayalsonegativelyaffectconsumersbecausetheythinkthatyourproducts’qualityislowerthanyourcompetition.Someconsumersmaybelievethatyousellreconditionedproducts,whichiswhyyouofferlowerpricesconsistently.Ifthisisyourstrategy,youwon’tstaycompetitiveinthemarket.  FactorstoConsiderWhenChoosinganEverydayLowPricingStrategy  Therearenumerousfactorstoconsiderwhenchoosingorimplementingalowpricingstrategy.Itiscrucialtomakeaninformeddecisionbyknowingthatalowpricingstrategymakessenseandbestfitsyourneeds.Hereareafewfactorsyouneedtoconsiderwhenselectingalowpricingstrategyforyourcompany.  RoomforGrowth AccordingtoNielsen,companiesthatachievesuccesswithalowpricingstrategyhaveahighlevelofbrandpenetration.However,theyhaveasmallroomforgrowth.So,itiscrucialtoanalyzetheroomforgrowthbeforeimplementingalowpricingstrategy.  Besides,werecommendfocusingonthematurityfactorofyourproducts.Ifyourproductsrequirenoorlittlemarketing,itmeanstheyhaveasmallroomforgrowthormaturity.Ontheotherhand,ifyouhavelessmatureproducts,youwillhavetospendmoremoneyonmarketing.Inthatcase,youshouldnotimplementalowpricingstrategy.  ExpandablePurchasingPatterns Beforeimplementingalowpricingstrategy,werecommendyouunderstandthedifferencebetweenexpandablepurchasingandexpandingconsumption.Forexample,ifyousellproductsliketoiletpaper,soaps,andshampoos,theyhavealimitedexpandableconsumption.  Ontheotherhand,ifyousellbreadoranyotherfooditems,theyhavehighexpandableconsumption.Customersbuymorebreadbecauseithasalowerpriceandconsumemorebecauseofreducedorindefiniteshelflife.  However,breadhasalowexpandablepurchasingvalueorpatternbecauseconsumersbuybreadonlywhentheyneedit.Incontrast,soapsandshampooshaveahighexpandablepurchasingpatternbecauseconsumerscanstoreandusethemforaprolongedperiod.  Remember,alowpricingstrategyalignswellwithproductsthathavealowexpandableconsumptionpatternandhighexpandablepurchasingpattern.So,ifthisisthecase,werecommendimplementinganeverydaylowpricingstrategy.  BrandsthatNailedEverydayLowPricing  Althoughmanybrandsandcompaniesusealowpricingstrategyfortheirproductsorservices,notallofthemgetthemostoutofit.Thereasonisthatimplementingandusingalowpricingstrategyrequirescarefulplanningandpreparation.  Onearticlehighlightsthatabout26%ofretailcompaniesintheUnitedStatesfollowalowpricingstrategyfortheirproducts,and74%followhigh-lowstrategies.Amazon,Walmart,Procter&Gamble,WinnDixie,andTradeJoe’sallfollowalowpricingstrategy.Herearethefourmostpopularbrandsthathavenailedeverydaylowpricing.Keepreading!  Bunnings Bunningsisoneofthemostpopularbrandsthatusealowpricingstrategyforitsproducts. Source Thecompanymakessubstantialeffortstoanalyzeitscustomersegments.Becausetheyknowthecustomersbase,theyhavenailedtheirROIsusinglowpricingstrategies.Researchhighlightsthatabout40%ofBunnings’customerspay1.5%moreforproductsbecausetheydon’thavetowaitforsalesonspecificproductcategories.  Thebrandusesalowpricingstrategybecauseitattractsmorecustomers.So,whenthecompany’scustomersgetthelowestpricesonproductswithoutwaitingfordiscountsandpromotions,theytrustBunningsandspendmoremoneypurchasingitsproducts.Forinstance,Bunningsensuretoimplementstrategiesthatenablethemtoidentifytheirprice-sensitivecustomers.Asaresult,itoffersthelowestpricestothesecustomers.  NotonlydoesthisstrategyimplementedbyBunningsenablethemtoencourageitscustomerstobuymore,butitalsopreventsthemfromcomparingpricesorfindalternatives.Moreover,Bunningshasnaileditslowpricingstrategy,makingthemstaycompetitiveinthemarketandgeneratehigherprofits.  ArecentresearchreportshowsthatBunningsincreaseditsrevenuesby13.9%,translatingtoover$15billion.Likewise,thecompany’sstrategyallowedforearninghigherprofitsof$1.9billionin2020. Walmart Walmartisanotherfamousbrandandsuccessfulcompanythatusesalowpricingstrategyforitsproducts. Source Thecompanyoffersthelowestpricestocustomersthroughouttheyear,allowingthemtopurchasemore,trusttheretailer,andachievehighersatisfactionlevels.  Remember,highercustomersatisfactionisdirectlyproportionaltoincreasedsalesandprofits.  Walmarthasempowereditssalesstrategywithalowpricingpolicy,enablingthecompanytobeatcompetitorsacrosstheindustry.Evenifthecompanydoesnothaveabetterproductselection,thelowpricingstrategystillattractscustomers,leadingtohigherrevenues.Atthesametime,itcreatesproblemsforWalmart’scompetitors,allowingthecompanytostayonthetop.  Walmarthascoreprinciplesandproceduresforlowpricing,allowingthemtoconsistentlyfollowapolicythatcreatesawin-winsituationforthecompanyanditscustomers.Walmartadoptedalowpricingstrategysinceitstartedbusinessoperations,leadingtoaconsistentlymaintainedbrandreputation. TraderJoe’s TraderJoe’sisoneofthemostsuccessfulbrandsintheUnitedStatesthatusealowpricingstrategyforitsproducts.Thecompanycontinuestomakesubstantialeffortstoprovideitscustomerswiththelowestprices.Thepurposeistomaintainitsbrandreputation,increasecredibility,boostsales,andelevateROIlevels.  TraderJoe’soffersnaturalororganicfooditems,whicharechallengingtofindinotherstores,allowingthecompanytostayontopofthemarket.Thecompanyaimstofocusontwoessentialelements:high-qualityproductsandthelowestprices.That’swhyithasmaintainedthebrandimageforyears. Tesco TescoisamultinationalretailcompanywithheadquartersintheUK.Itisthethird-largestretailcompanyworldwidewithmillionsofloyalcustomers.Tescohadbeenchangingpricingpoliciesformanyyears,butin2016,theyimplementedalowpricingstrategyandannouncedthatthecompanywouldmakeallproductsavailableatlowprices.  Sincethen,thelow-pricingstrategyhasenabledthecompanytofocusmoreontheproducts’qualityandmaintainingstrongrelationshipswithcustomers.Atthesametime,thecompanydoesnotspendalotofmoneyonmarketingcampaignsbecauseitoffersalowpricingstrategywithoutusingpromotionalordiscountmethods.  FinalWords  Everydaylowpricingisanimportantstrategyforretailcompanies,allowingthemtoattractmorecustomersandmaintaintheirROIs.However,thistypeofpricingapproachalsohassomedisadvantages,suchasreducedcredibility,negativeperceptionsamongconsumers,andrisksoflowerprofitmargins.Followthetipsandtricksabovetodeterminewhetheralowpricingapproachissuitableforyourcompany.UntilNextTime!  pricingstrategies Sharethis: Twittericon Facebookicon LinkedInicon 0Comments LeaveaReplyCancelreply Savemyname,email,andwebsiteinthisbrowserforthenexttimeIcomment. 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