Hi-Lo Strategy Analysis

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According to Hoch, et al. (1994), everyday low price (EDLP) strategy has experienced rapid growth in media popularity, with description whereby retailer charges a constant, lower everyday price with no temporary price discounts in contrast with Hi-Lo strategy, whereby higher prices are charged on an everyday basis by the retailer but then runs frequent promotions in which prices are temporarily lowered below the EDLP level. The authors examined the viability of an "everyday low price" (EDLP) strategy in the supermarket industry, the evidence showed that an EDLP policy reduced profits by 18%, and Hi-Lo pricing increased profits by 15% because consumer demand did not respond much changes in everyday price. Meanwhile, large difference was found in profitability and also 10% EDLP category decrease led to a 3% sales volume increase, whereas a 10% Hi-Lo price increase led to a 3% sales decrease. In Support of findings by Hoch, et al., Ellickson & Misra (2008), stated that pricing strategy is…show more content…
The authors in their research investigate effect of leader pricing and rain check policy on store profits and market outcomes and the result of the study helps to resolved issues that attracts attention then. Meanwhile, Lal & Matutes (1994), explained that during promotional activities loss – leader pricing strategy is used especially by retail grocery chains . It is a strategy used to stimulate other sales of more profitable products, where a product is sold at price below its market cost in other to attract consumer into store. However, In & Wrighty (2013), in their empherical research analysis contrast most existing loss- leader theories. The authors explained that a new theory of loss –leader is applied to the pricing of ugrades. Meaning that consumers who bought the basic version of a product are loss, while the firms make profits from those who purchase the upgrade

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