Everyday low pricing is a pricing strategy widely used by retail chains. It enables them to set prices lower than their competitors charge and keep them for a long time period.
This strategy is commonly used together with high-low pricing. While the latter allows brands to set high prices initially and then sell items at low prices during promotional campaigns, an everyday low pricing strategy helps a company position itself as the lowest price seller on the market. This provides them with both pros and cons. Let’s take a closer look at them.
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 managed to build brand awareness, clients know which company to choose.
- Predictable demand. A high-low pricing strategy makes marketers run regular promotional campaigns that result in unstable demand because it’s difficult to forecast the sales volume on holidays. While everyday low-pricing strategy provides retailers with easily predictable demand so they can 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 obvious since the lowest price implies a low markup. Still, big corporations have big retail of products which ensures a huge sales volume that 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 which can result in a bad brand reputation.
- Small investment budget. Since companies manage to keep prices low, they don’t have much money to hire the most experienced specialists, offer A-class customer support or invest them in the promotion. Only large corporations with huge turnover can afford it.
So, now you know both pros and cons of everyday low pricing strategy and can assess its benefits for your business.
- This article provides examples of companies that use everyday low pricing successfully.
- This article will help you understand whether this pricing strategy is right for your business.
Last Updated: 12.03.2021