Hi-Value: The Everyday Low Pricing Strategy

The everyday low pricing strategy works best in a broader store positioning strategy and supported with advertising. Hi-Value doesn’t need to be the lowest priced supermarket in the area for the everyday low pricing strategy to work. Lowering pricing needs to be used by all in the area or else Hi-Value will confuse our store image and positioning. Hi-Value must look at recent consumer research to see how we are positioned and how this pricing will change our image. There is potential to reduce operating costs. Everyday low pricing can lower our operating costs in two different ways. It can reduce inventory and handling costs due to more steady and predictable demand. It can also reduce labor costs related to less frequent temporary price reductions.

This chart shows that Hu-Value’s market share was increasingly and then had a decline in 2000. After this plummet, Hi-Value had to recover and slowly build their market share back up. In Attachment 5, the chart shows Hi-Value Supermarket Sales in Centralia from 2000-2002. All stores gradually went a little amount up in sales each year. The Hi-Value supermarket on West Main Street does the best in sales out of the 3 Hi-Value stores. In Attachment 6, this chart shows how $100 is spent in a typical Centralia Supermarket. This chart breaks down the budget and will show why grocery and produce are specific categories to pay more attention to than others. In Attachment 7, the chart shows the association of store characteristics with major food stores in Centralia. These are the results from the first study that was conducted. The participants scores show how Hi-Value is perceived and compared against their competition. In Attachment 8, this chart shows the Hi-Value Supermarket shopper interview results the studies that were conducted. This breaks down all 3 stores and provides more in-depth knowledge of their superior characteristics. In Attachment 9, it shows the financial situation which breaks down the 5%, 7%, and 10% possible price reductions. It is easier to compare the numbers in the different categories. Gross profit margin and breakeven sales numbers were conducted so

We don’t want to risk it and make it too low by reducing the price by 10%. There is a potential increase in market share by reducing the price by 7% in only the grocery and produce markets. The gross profit margin with efficiencies means updated prices, people don’t need to tag shelves, lower inventory costs, lower supplies, and labor expense which makes Option 3 so attractive. The price will be best if reduce only 7% in those two categories.The categories we choose addresses the issue of consumer perceptions of higher prices by increasing the perception of value for customers of the most popular grocery items. This option allows the grocery chain to focus on important determinants of store choice: Grocery and Produce. This option will increase Hi-Value’s competitiveness in the market, especially against chains that are less convenient and more expensive. Customer price perception is category specific so it will be a high impact. Management believes a price war with competitors is unwise and that it is not a viable option to engage in deep discounting across the board like Harrison’s, Grand American, and Missouri Mart. I think it is crucial to reassess pricing strategy on a quarterly basis per store to determine effectiveness. James Ellis and Randall