What Is High–Low Pricing?

High-low pricing, often referred to as hi-lo pricing, is a dynamic and widely adopted pricing strategy in the retail industry. This approach involves setting a high price for a product and lowering it through promotions, markdowns, or clearance sales when the product becomes less desirable. This method is particularly popular among small and medium-sized retail firms but is employed by several large retailers.

How Does High-Low Pricing Work?

The essence of high-low pricing lies in its cyclical nature. Retailers start by offering products at higher price points, known as reference prices. Over time, these prices are reduced during sales events, creating a sense of urgency and excitement among consumers. This strategy leverages the psychological appeal of getting a good deal, which can drive significant traffic to stores and websites.

For instance, companies like Macy’s and Kohl’s are notable examples of retailers that use high-low pricing strategies. They frequently offer substantial…