Pricing Strategy for Store Brands
Industry Vertical and the Company:
Retailers sell, in addition to those from well-known manufacturers, products under their own brands,. These are called Store Brands or Private Labels. Retailers have completed control over their pricing and promotion. However, store brands, with a few exceptions, have a poorer image as compared to large national brands, and have a lower acceptability among customers. This is a major issue for any retailer they stand to earn more store brands.
We worked on finding ways to increase the market share of store brands without dropping the prices. Therefore, keeping the average price unchanged, we compared two pricing strategies – Hi-Lo and Everyday Low Price (EDLP).These are the most common pricing strategies followed by retailers worldwide.In the first pricing strategy the prices were changed on a weekly basis while for latter strategy the price was kept constant throughout.
Our analysis of customer sentiments showed that if the retailer followed Hi-Lo strategy, constant changing of prices eroded customers’ trust in the retailer as well as in products most closely associated with the company, i.e. the store brands.
With constant prices under EDLP pricing strategy, retailer was able to increase the acceptance of store brands among customers. This was accomplished while maintain retailer’s profit margin for store brands.