Impact Of Pricing On Overall Sales Of A Product

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Impact of pricing on the overall sales of a product in the supermarket business
Today we can see multiple channels of retailers who are engaged in pricing products very competitively so as to capture maximum market share. Online stores and mobile apps are going one length ahead in providing discounts to customers. The traditional supermarkets have not stayed back in the race and have started offering discounts online which can be collected in their nearby stores as well as in store to keep with the fast paced competition. Many retailers have engaged into providing variant products of the same product type in their stores with reduced rates. It therefore becomes apparent to look into the impact of such pricing on the overall sales in the
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Supermarkets use their one-stop shopping, convenience and low prices to attract the consumer at all points and negotiate the best buying prices from suppliers. . Retailers use various pricing strategies to influence consumers’ price perceptions, assuming that they will impact choice. Three prominent retail pricing strategies are frequency discounting, where retailers offer frequent but small discounts; depth discounting, where retailers offer infrequent large discounts; and everyday low pricing (EDLP), where retailers offer products at a constant low regular price. A more fine-grained analysis suggests that consumers’ purchase decisions are driven by price perceptions rather than by actual prices. These perceptions are highly subjective and susceptible to contextual influences. (Danziger, Hadar and Morwitz 2014)
Paul Ellickson and Sanjog Misra point out in their paper Supermarket Pricing Strategies that “While firms compete along many dimensions, pricing strategy is clearly one of the most important. They found that consumer demographics played a significant role in the choice of local pricing strategies: firms choose the policy that their consumers demand. Furthermore, the impact of these demographic factors is consistent with both the existing marketing literature and conventional wisdom. For example, EDLP is favoured in low income, racially diverse markets, while promotional pricing clearly targets the rich. However, a key implication of their
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