Everyday low pricing is a pricing strategy widely used by retail chains. It enables them to set prices that are lower than their competitors’ and keep them like this for a long time.
This strategy is commonly used together with high-low pricing. While the latter allows brands to initially set high prices and then sell items at low prices during promotional campaigns, an everyday low pricing strategy helps companies establish their reputation as the lowest price sellers on the market. This technique can either bring benefit or damage to your company.
Advantages and Disadvantages of Everyday Low Pricing
This strategy is a win-win for both consumers and retailers if implemented correctly. It can bring the following benefits.
- Short sales cycle. Since a company using this strategy provides the lowest prices on the market, customers don’t need to compare prices to find the best seller. If a firm manages to build brand awareness, clients will know which company to choose.
- Predictable demand. High-low pricing makes marketers run regular promotional campaigns that result in unstable demand because it’s difficult to forecast the sales volume on holidays. By contrast, an everyday low-pricing strategy provides retailers with easily predictable demand to produce and distribute the necessary amount of products.
- Low advertising costs. If we compare this approach to high-low pricing again, we can assume that the latter requires regular investments in advertising to inform the audience about the upcoming sales. Everyday low pricing strategy doesn’t need to pay for advertising since consumers already know who the lowest price seller is.
Although the pros are very attractive, this strategy has several disadvantages. Check them out below.
- Lower net profit. This drawback is evident since the lowest price implies a low markup. Still, big corporations have big product retail that ensures a huge sales volume and helps them get high revenue.
- No discount opportunities. Retailers using this pricing strategy can’t offer discounts because their prices are initially the lowest. Besides, offering a discount will make clients doubt their everyday low prices, resulting in a bad brand reputation.
- Small investment budget. Since companies manage to keep their prices low, they don’t have much money to hire the most experienced specialists, offer A-class customer support or invest them in a promotion. Only large corporations with huge turnover can afford it.
And now you know both pros and cons of everyday low pricing strategy and can assess its benefits for your business.
Resources
- This article will help you understand whether this pricing strategy is right for your business.
Last Updated: 06.09.2024
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