EDLP stands for Every Day Low Pricing and involves offering consistently low prices without the need for promotions. BNPL stands for Buy Now Pay Later and it allows customers to purchase products and pay for them in installations, without interest. BOGOF stands for Buy One, Get One Free, this offers customers a free product with the purchase of another product.
While we are aware that one cannot survive in today's world without Price Discounts / Offers. But one needs to both understand how far price discounts REALLY can take you and what alternative strategies you must keep in your kitty. So read on if you wish to discover what really happens when you offer promos.
In most cases, price discounts attract category heavy buyers for whom the need is the category and NOT your brand. It also creates an environment where shoppers become addicted to promo-hunting. And critically, contrary to popular beliefs, Non-Buyers DO NOT start purchasing a brand (or a category) simple because it is on promotion. The reason is a basic Human Behaviour Understanding — they do not buy because they do not have an established RTB (Reason to Buy — there you go, another jargon!). If you do not believe me, ask yourself this question. Suppose you don’t typically buy Peanut Butter (as an example). Would you buy a 500 gm * 2 offer just because the promotion catches your eye? Or would you rather buy a smaller 100 gm pack to first try it out? It costs less and if you like it, you repurchase / if don’t like it then the wastage is less.
One needs to think beyond lower prices being a solution to EVERYTHING. But at the same time remain practical that there needs to be some level of activity here. We recommend that you keep an eye on what is the overall level of promotions in your category and stay below that level. This is CRITICAL if your brand is the category leader! The other option you can opt for is to reduce the depth of promotions. Thirdly, avoid using %s. Say “Buy one get one free” rather than “50% price off” and most shoppers have difficulty calculating %s while on the shop floor. Finally, keep an eye on stocks that aren’t being picked up DESPITE being heavily promoted. These need to be seen with a critical eye at the time of listing and delisting discussions.
Get Full Report Analysis Here: https://www.glasgowinsights.com/blog/how-to-think-beyond-edlp-bnpl-bogof-etc-for-pricing-strategies/
But these are ALL short-term tactics. For long-term gains, think of strategies such as De-gramming, Category Adjacency, Seasonal SKUs, Disruptive Planogramming, Being Distinctive Not Different, etc.
We end by quoting Bob McDonald, former P&G CEO, who said, “We know from our history that while promotions may win quarters, innovation wins decades.”!
If you found this interesting, please do reach out to us to see how we can help you drive data driven business growth.
In the ever-evolving landscape of retail and e-commerce, pricing strategies play a pivotal role in shaping consumer behavior, influencing purchasing decisions, and ultimately driving business growth. From everyday low prices (EDLP) to buy now, pay later (BNPL) schemes and buy one, get one free (BOGOF) offers, understanding the nuances of various pricing strategies is essential for businesses aiming to stay competitive and maximize profitability. In this blog post, we’ll delve into some popular pricing strategies, dissect their mechanics, and explore their implications for businesses and consumers alike.
- Everyday Low Prices (EDLP): EDLP is a pricing strategy characterized by offering consistently low prices on products or services over an extended period. This approach aims to build customer loyalty, simplify pricing structures, and create a perception of value and reliability. Retail giants like Walmart have successfully implemented EDLP strategies, attracting cost-conscious consumers while streamlining operations and reducing promotional expenses.
- Key Benefits:
- Builds customer trust and loyalty.
- Simplifies pricing for consumers and retailers.
- Reduces the need for frequent promotions and discounts.
- Considerations:
- Requires careful cost management to maintain profitability.
- Limited flexibility for short-term promotions or pricing adjustments.
- Buy Now, Pay Later (BNPL): BNPL has gained significant traction in recent years, especially among younger consumers seeking flexible payment options. This strategy allows shoppers to make purchases and spread the cost over installments, often with no interest or fees. Platforms like Afterpay and Klarna facilitate BNPL transactions, offering convenience and affordability to consumers while driving sales for merchants.
- Key Benefits:
- Attracts budget-conscious consumers seeking flexibility.
- Increases purchasing power and average order value.
- Reduces cart abandonment rates and boosts conversion rates.
- Considerations:
- Potential risk of increased debt for consumers.
- Requires integration with payment platforms and potential transaction fees.
- Buy One, Get One Free (BOGOF): BOGOF, also known as “buy one, get one free” or “BOGO,” is a promotional pricing strategy wherein customers receive an additional item at no cost when purchasing one item at full price. This tactic is effective in stimulating sales, clearing excess inventory, and attracting price-sensitive consumers. BOGOF offers can be applied to various product categories, from groceries to apparel and electronics.
- Key Benefits:
- Drives impulse purchases and increases transaction size.
- Creates a sense of value and urgency among consumers.
- Enables inventory clearance and minimizes waste.
- Considerations:
- Requires careful planning to maintain profitability.
- May devalue products if overused or misaligned with brand image.
- High-Low Pricing: High-low pricing involves alternating between higher regular prices and lower promotional prices to create perceived value and stimulate demand. Retailers leverage this strategy to capitalize on consumer price sensitivity while maintaining profit margins. By strategically timing promotions and markdowns, businesses can drive foot traffic, increase sales volume, and optimize revenue.
- Key Benefits:
- Balances profit margins with consumer price sensitivity.
- Encourages repeat purchases and customer engagement.
- Allows for strategic inventory management and revenue optimization.
- Considerations:
- Requires effective pricing and promotion planning.
- Potential risk of diluting brand value if discounts are too frequent.
In conclusion, pricing strategies are powerful tools that can influence consumer behavior, shape market dynamics, and drive business outcomes. Whether adopting an EDLP approach to build customer loyalty, embracing BNPL to enhance purchasing flexibility, leveraging BOGOF promotions to stimulate sales, or employing high-low pricing to balance profitability and consumer demand, businesses must carefully evaluate the suitability and implications of each strategy within their specific context. By understanding the mechanics and trade-offs of various pricing strategies, organizations can craft effective pricing models that resonate with consumers and promote sustainable growth in an increasingly competitive marketplace.
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