Everyday Low Pricing is a strategy where the products are provided to consumers at a lower cost or a discounted price over a longer time at a constant rate instead of releasing sale events. Only then can the same products be bought at a discounted price. These retailers and retail chains provide products at their stores at a continuously lower price for all of their products, thus focusing on their product quality instead of marketing them.
What is Everyday Low Pricing (EDLP)?
Everyday Low Price (EDLP) is a pricing strategy adopted by retailers and retail chains which promises the consumer or customer to provide them their goods at a discounted price or relatively lower cost compared to the market continuously instead of giving for a specific period which can also be said as a sales event.
The Rationale behind EDLP
Maximizing Sales with Consistently Low Prices
In the everyday low pricing strategy, the stores set their products at a reasonable price and maintain the same price for a longer period. It helps by simplifying the consumers’ decision-making as the consumer need not have to think about when the sale will be coming; instead, they can buy their products at a fair price anytime they want. In addition, this helps the store focus on their products instead of on their marketing of the products that require a substantial amount of funds and time to provide significant advantages in the market.
Definition of EDLP
Everyday low pricing is a pricing strategy in which brands and retailers promise consumers that their prices will be consistently low, as opposed to having sporadic discounts or promotions. Thus, as long as product costs stay the same, the low-priced goods will stay that way over a longer timeframe.. This pricing strategy is often associated with large retailers who have significant bargaining power in the market, allowing them to negotiate lower prices from suppliers and pass on the savings to consumers.
One of the key benefits of everyday low pricing is that it can help to build brand loyalty among consumers. When customers know they can consistently get a good deal on products they regularly purchase, they are more likely to continue buying from that brand or retailer. In addition, because there are no sudden price hikes or dips, customers are more likely to trust the brand and feel confident in their purchasing decisions.
However, implementing an everyday low pricing strategy can also be risky for brands and retailers. If costs increase unexpectedly, it can be difficult to maintain low prices without sacrificing profits. Additionally, some customers may perceive low prices as an indication of low quality, which could harm the brand’s reputation. This may lead to consumer skepticism, as customers may start to question the true value of the brand’s products being sold. Despite these challenges, many companies continue to use everyday low pricing as a way to differentiate themselves in competitive markets and build customer loyalty.
Examples of EDLP
Some well-known examples of retailers that follow the EDLP model include:
1. Walmart: As one of the largest retail giants globally, Walmart has built its reputation on offering everyday low prices to its customers. By maintaining low prices throughout the year, Walmart attracts a large customer base and generates significant profits through high sales volume, despite having lower profit margins.
2. Trader Joe’s: This popular grocery store chain is known for its unique products and consistently low prices. Trader Joe’s focuses on providing high-quality items at affordable prices, making it a go-to destination for budget-conscious shoppers.
3. Avenue Supermarts Limited (D-Mart): D-Mart is an Indian supermarket chain that follows the EDLP model, offering a wide range of products at competitive prices. The company’s focus on low prices has helped it gain a strong foothold in the Indian retail market.
4. Target: Another major retailer, Target offers a broad selection of everyday products at low prices. Although the company faces limited growth opportunities within the saturated U.S. market, its commitment to providing affordable products continues to attract customers.
These retailers have successfully differentiated themselves from competitors by adopting the EDLP strategy, ensuring that customers can consistently find low prices on their products. This approach not only simplifies decision-making for consumers but also helps retailers save on marketing costs, streamline staffing efforts, and improve demand forecasting.
Advantage of EDLP Strategy
Promoting Fixed Lowest Prices
If the phrase “everyday low pricing” (EDLP) rings a bell, you probably know that this is the pricing strategy that Walmart used to become a retail powerhouse. Amazon followed shortly thereafter and brought the EDLP strategy to eCommerce.
Example of Walmart’s EDLP Strategy
It’s easy for other retailers and even manufacturers to look at these success stories and want to understand how to make EDLP work for them. But it’s not as simple as just slashing prices to rock-bottom levels. It’s a complex decision that involves customer behavior, marketing, supply chain and inventory management, and other functional areas.
Suitability of EDLP for Retail Stores
There are several factors that a business must make before deciding if Everyday Low Pricing is the right pricing strategy for them. However, to understand precisely what EDLP is and how it works, it helps to compare it against some other similar pricing strategies.
Disadvantages of EDLP
Lack of Attractive Appeal during Special Shopping Events
Everyday Low Price (EDLP) is a pricing strategy in which retailers like Walmart promise their customers the lowest prices on their stock. Since pricing is always low, consumers don’t have to wait for sales events, use coupons, or take any other step to get a fair price on the products they purchase.
Need for Minimal Advertisements
While the Everyday Low Price strategy doesn’t use sales events, coupons, promotions, discounts, and the like to encourage buys, high-low pricing employs these tactics to temporarily lower prices, build excitement, and in the process, encourage consumers to purchase.. This strategy is commonly used by retailers who want to attract a broad range of customers, from bargain hunters to those willing to pay full price.
Everyday Low Pricing vs High-Low Pricing
High-Low Pricing Strategy
Starting with High Prices and Decreasing Later
In simpler terms, retailers using the high-low pricing strategy initially price products at a high price then, later on, organize a sale in which they sell the items at lower prices. This strategy is commonly used to attract price-sensitive customers who are always on the lookout for deals and discounts. By offering products at a higher price initially, retailers can create a perception of high quality and exclusivity in the minds of such customers.
Later on, when the sale is announced, these customers are more likely to make a purchase as they believe they are getting a good deal. However, this strategy can also backfire if customers perceive the initial high prices as unreasonable or if they do not trust the retailer’s pricing tactics. As such, it is important for retailers to carefully consider their target audience and pricing strategy before implementing the high-low pricing approach.
Driving Foot Traffic and Cross-selling Other Items
The high-low pricing strategy focuses on the promotional and sale event to temporarily boost their sale by reducing the prices of their products. In contrast, the everyday low pricing strategy focuses on providing theirproducts at a fair price for a longer period. This strategy aims to create customer loyalty by building trust, as customers know that the prices will remain consistent and they do not need to wait for a sale event to purchase the products they need. M
oreover, the everyday low pricing strategy can attract new customers who are looking for a reliable brand that offers good value for their money. While high-low pricing can create excitement and urgency among customers during promotional events, it may also lead to confusion and distrust when prices fluctuate too frequently. Therefore, retailers should carefully consider the pros and cons of each strategy before making a decision.
How to Decide if an EDLP Strategy is Right for You
Factors to Consider
So how can you decide if everyday low pricing makes sense? Here are a few signs.
A 2018 study from Nielsen revealed that the brands that have the most success with everyday low pricing have a high level of brand penetration with little room for growth. Additionally, the maturity of your product category is also a factor. These products tend to need much less marketing support as there is little room for growth and the brand is already well-established in the market.
However, if you’re trying to grow your brand or penetrate a new market, a different pricing strategy may be necessary. Less mature products usually require more marketing investment to fuel growth and market penetration, which makes them a poor candidate for EDLP. For example, a value-based pricing strategy, where you charge a higher price for a premium product, can help establish a sense of quality and exclusivity.
Alternatively, a dynamic pricing strategy can be used to adjust prices based on demand, allowing you to capture more revenue during peak periods. Ultimately, the right pricing strategy will depend on your specific business goals and target audience. It’s important to continually evaluate and adjust your pricing strategy to ensure that it aligns with your overall business objectives.
Less mature products usually require more marketing investment to fuel growth and market penetration, which makes them a poor candidate for EDLP.
If you are a retailer who values customer loyalty, building trust, and providing consistent pricing, then the everyday low pricing strategy may be the right choice for you. Offering products at a fair price all year round, you can establish yourself as a reliable brand that customers can depend on. This can lead to repeat business, positive word of mouth, and a strong reputation in the market. Additionally, if your target audience is comprised of customers who value convenience, simplicity, and minimal advertisements, then the everyday low pricing strategy may be more appealing to them.
On the other hand, if you are a retailer who wants to attract a broad range of customers, including bargain hunters and price-sensitive shoppers, then the high-low pricing strategy may be more suitable for you. By organizing promotional events, sales, and discounts, you can create excitement, urgency, and a sense of exclusivity among your customers. This can lead to increased foot traffic, cross-selling opportunities, and higher sales during these events.
Hybrid Approach: Combination of EDLP and Dynamic Pricing
It’s worth pointing out that it’s not an all-or-nothing decision. Some brands and retailers choose to take a hybrid approach, where some products have EDLP and others have dynamic pricing.. This approach can be especially effective for retailers who want to maintain a balance between offering highly competitive prices on certain products while also ensuring that they are able to maximize their profits on others. For example, a clothing retailer might choose to offer everyday low prices on basic items like t-shirts and socks, but use dynamic pricing strategies on high-end items like designer jackets and dresses.
Retailers using this tactic can attract price-sensitive customers while also capitalizing on the higher profit margins that come with luxury goods. The key to success with this approach is striking the right balance between EDLP and dynamic pricing, and carefully analyzing customer behavior to determine which strategy makes the most sense for each product category.
Importance of EDLP for Retailers
Everyday Low Pricing (EDLP) is a strategy that has proven successful for some of the biggest retail giants like Walmart and Amazon. However, it is essential to understand that implementing this strategy requires a thorough understanding of your brand, products, and product category. Additionally, it is crucial to consider factors such as customer behavior, supply chain and inventory management, and other functional areas before deciding if EDLP is right for your business.
While EDLP can be an effective strategy for some businesses, it is not suitable for all. Therefore, it is essential to carefully analyze your business and determine if this pricing strategy aligns with your goals, products, and target market. If it does, then EDLP could very well be the key to driving consistent sales and long-term success in the retail industry.Writ