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Concept Version 5
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High/Low Pricing

High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.

Learning Objective

  • Recognize the mechanism of High/Low pricing strategies


Key Points

    • The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
    • The basic type of customers for the firms adopting high-low price do not have a clear idea about what a product's price would typically be or have a strong belief that "discount sales = low price".
    • The way competition prevails in the shoe and fashion industry is through high-low price strategies.

Terms

  • everyday low price

    Everyday low price ("EDLP") is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shop.

  • belief

    mental acceptance of a claim as truth regardless of supporting or contrary empirical evidence


Full Text

High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors. However, through promotions, advertisements, and or coupons, lower prices are offered on other key items consumers would want to purchase. The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.

High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms. The basic type of customers for the firms adopting high-low price will not have a clear idea about what a product's price would typically be or have a strong belief that "discount sales = low price. " Customers for firms adopting this type of strategy also have strong preference in purchasing the products sold in this type or by this certain firm. They are loyal to a specific brand.

There are many big firms using this type of pricing strategy (ex: Reebok, Nike, Adidas). The way competition prevails in the shoe industry is through high-low price. Also high-low pricing is extensively used in the fashion industry by companies (ex: Macy's and Nordstrom) This pricing strategy is not only in the shoe and fashion industry but also in many other industries. However, in these industries one or two firms will not provide discounts and works on fixed rate of earnings. Those firms will follow everyday low price strategy in order to compete in the market.

High-Low Pricing Strategies

There are many big firms using this type of pricing strategy, especially in the shoe industry (ex: Reebok, Nike, Adidas).

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