EDLP, Hi-Lo, and Margin Arithmetic

@article{Hoch1994EDLPHA,
  title={EDLP, Hi-Lo, and Margin Arithmetic},
  author={Stephen J. Hoch and Xavier Dr{\`e}ze and Mary E. Purk},
  journal={Journal of Marketing},
  year={1994},
  volume={58},
  pages={16 - 27}
}
The authors examine the viability of an “everyday low price” (EDLP) strategy in the supermarket grocery industry. In two series of field experiments in 26 product categories conducted in an 86-store grocery chain, they find that a 10% EDLP category price decrease led to a 3% sales volume increase, whereas a 10% Hi-Lo price increase led to a 3% sales decrease. Because consumer demand did not respond much to changes in everyday price, they found large differences in profitability. An EDLP policy… 

Figures and Tables from this paper

EDLP versus Hi–Lo pricing strategies in retailing—a state of the art article
The pricing strategy is seen as one of the five most important priorities in retail management. Over the past years, price wars have emerged and price has become an even more focal point of
Price Discrimination using in-Store Merchandising
The authors compare the effectiveness of in-store coupons and straight off-the-shelf price discounts (bonus buys), in generating incremental sales and profits for the retailer. In five field tests,
Variable Pricing : A Customer Learning Perspective
Recent works question the benefit of Promotional Pricing (Hi-Lo) formats. In this essay, we characterize a setting in which cost-disadvantaged firms would rationally and profitably opt for the Hi-Lo
Repositioning Dynamics and Pricing Strategy
We measure the revenue and cost implications to supermarkets of changing their price positioning strategy in oligopolistic downstream retail markets. Our estimates have implications for long-run
Supermarket Competition: The Case of Every Day Low Pricing
Every Day Low Pricing EDLP strategy has proved to be a successful innovation resulting in higher profits to supermarkets adopting it in competition with Promotional Pricing PROMO. Conventional wisdom
Supermarket Pricing Strategies
TLDR
Strong evidence is found that firms cluster by strategy by choosing actions that agree with those of its rivals within a competitive environment, and a significant impact of various demographic and store/chain characteristics is found.
When Little Things Mean a Lot: On the Inefficiency of Item‐Pricing Laws
Item‐pricing laws (IPLs) require a price tag on every item sold by a retailer. We study IPLs and assess their efficiency by quantifying their costs and comparing them to previously documented
Balancing Profitability and Customer Welfare in a Supermarket Chain
We investigate the impact of price discrimination by a large Chicago supermarket chain. First we measure the impact of the chain's current zone-pricing policy on shelf prices, variable profits and
...
...

References

SHOWING 1-10 OF 42 REFERENCES
Determinants of Store-Level Price Elasticity
Using weekly scanner data representing 18 product categories, the authors estimated store-specific price elasticities for a chain of 83 supermarkets. They related these price sensitivities to a
A Theoretical and Empirical Evaluation of Price Deals for Consumer Nondurables
Food retailers regularly offer products for less than normal market price in special sales or deals. This paper briefly examines several common explanations for this phenomenon and finds the analyses
Dealing-Temporary Price Cuts-By Seller as a Buyer Discrimination Mechanism
This paper is concerned with temporary price cuts ("deals," "sales," and "specials") as a mechanism for the seller to price-discriminate between buyers with different intensities of demand. We
Competitive Promotional Strategies
This article analyzes the equilibrium-pricing strategies of brands engaged in a pricing game. Each brand has a monopoly market (loyal consumers) and competes with others in a common market called
The Price Knowledge and Search of Supermarket Shoppers
A model of grocery shopper response to price and other point-of-purchase information was developed and hypotheses were tested by using observations and interviews. The findings suggest that shoppers
An Alternative Explanation for Lower Repeat Rates after Promotion Purchases
Several authors have observed that average repeat rates are lower after a promotion purchase. One interpretation of this result is that a media-coupon or cents-off promotion undermines the consumer's
Promotion Has a Negative Effect on Brand Evaluations—Or Does It? Additional Disconfirming Evidence
Early research on the effect of promotion suggested that a brand using that element of the marketing mix would be evaluated lower and therefore have a reduced repurchase probability. Though that
Determinant Attributes in Retail Patronage: Seasonal, Temporal, Regional, and International Comparisons
Determinants of retail patronage were identified and compared in a series of analyses of covariance of multinomial logit parameters. These parameters, estimated from random samples drawn from six
Economics of welfare
VOLUME 1 Introduction D. Collard Principles and Methods of Industrial Peace, 1905, 260pp Economic Science in Relation to Practice, 1908, 32pp VOLUME 2 Wealth and Welfare, 1912, 524pp VOLUME 3
Managing What Consumers Learn from Experience
The authors argue that what consumers learn from the experience of using products is not a simple matter of discovering objective truth. They frame the problem of learning from experience as a
...
...