Superior Supermarkets

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Superior Supermarkets Memo Memorandum To: James Ellis, President of Superior Supermarkets CC: Randall Johnson, District III Manager of Superior Supermarkets From: Matthew Clemente RE: Potential Everyday Low Pricing Strategy Date: April 9, 2010 The challenge presented to the President of Superior Supermarkets James Ellis and his district manager Randall Johnson is whether or not to implement an everyday low pricing strategy to the Superior Supermarkets stores in Centralia, MO. Superior Supermarkets’ current pricing strategy is a high-end branding strategy, giving them the highest prices in Centralia. With their declining market share the past seven years (they currently have 23% market share in 2002, down from 31%…show more content…
The second alternative of implementing a limited everyday low pricing strategy is really dependent on whether or not the option is complemented with an increase in advertising. Without advertising, market share would be contingent on the customer’s awareness of the increase in ‘loss leaders’ at Superior Supermarkets; with advertising, on the other hand, the likelihood of increasing market share with this option would certainly rise. However, with an increase in advertising would come a decrease in Superior Supermarkets’ contribution margin; one must also consider that the high-volume, traditionally popular products that are newly marked with an everyday low pricing strategy would carry more implication towards a decrease in contribution margin then would low-volume ‘loss leaders.’ The final alternative—and my ultimate recommendation—of implementing an everyday low pricing strategy across-the-board with an increase in Superior Supermarkets’ advertising budget is the most logical and cost-effective option with immense potential for Superior Supermarkets. The Superior Supermarket Controller estimates that an everyday low pricing strategy would save the company 50 basis points (0.5% of sales) by lowering inventory and handling costs, in addition to a savings of 60 basis point (0.6% of sales) by eliminating the need to remark merchandise and their shelf tags. These significant savings could be added to

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