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EDLP versus Hi-Lo Pricing Strategies in Retailing

Literature Review and Empirical Examinations in the German Retail Market

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Sabine El Husseini

Retail pricing strategy is seen as one of the priorities in retail management. There exist two main pricing strategies in retailing: the Every Day Low Price (EDLP) strategy and the High-Low (Hi-Lo) pricing strategy. Despite the importance of this topic, it has been given little attention in academic research. The author fills this gap in academic literature and examines the topic both from a theoretical and an empirical perspective. Based on a comprehensive conceptual examination of pricing strategies in retailing, the author conducted two large-scale empirical studies about the impact of the retailer’s pricing strategy and the price promotion activity on store performance and derives fruitful implications both for future research and for managerial action.
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Price is the most effective profit driver among the components of the profit-equation “profit = (price x volume) – costs”. Furthermore, among the classical 4Ps of the marketing mix, price is the only variable that directly generates revenues, while the other three elements involve expenditures or investments. Especially in retailing, the price is the most important marketing instrument and retail pricing strategy is seen as one of the five most important priorities in retail management. According to most definitions, there exist two main pricing strategies in retailing: The “Every Day Low Price” (EDLP) strategy whereby the retailers claim to offer the lowest every day prices to their customers and the “High-Low” (Hi-Lo) pricing strategy whereby the retailers set their prices on a higher every day level, but use price discounts and promotions to attract customers. In reality, retailers not only use either a Hi-Lo or an EDLP pricing strategy, but follow a “hybrid” pricing strategy containing elements of both Hi-Lo and EDLP.

The work of Dr. El Husseini contains three single parts, in which she answers three research topics. In the first part, she sheds light on the components, determinants and outcomes of pricing strategies in retailing and provides a state of the art literature review about pricing strategy in retailing. In the second part, she uses these conceptual findings and empirically examines the relation between pricing strategy and relevant retail specific outcomes, considering the moderating effects of market/consumer, retail, competitor and brand factors. Dr. El Husseini provides...

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