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PRICING STRATEGY OF WAL -MART 2

Pricing Strategies

Wal -Mart has built a super -mega brand with its pricing strategy. Businesses are about

making a profit and having pricing objective and having pricing strategy are key. As Perreault,

Cannon, and McCarthy (2015) define, “pricing objective should flow and fi t within, companies -

level and marketing objective” (p. 443). Also according to Perreault, Cannon, and McCarthy

(2015), “these p ricing objectives should be explicitly stated because they have a different effect

on pricing policies as well as the methods used to set prices” (p. 443). Wal -Mart’s success in its

pricing strategy world which is the stuff dreams are made of, such as - establishing a legend.

This creative strategy has the ability to provide customers with “everyday low prices .” Wal -

Mart prese nce as an economic and political force ; with its gigantic size and influence in the retail

industry , is the results of a system which was built on core values and principle s. Looking at

Wal -Mart history and present operations helps investors understand the mythology that enables

this chain to do what it does best and that is to sell products cheap . Wal -Mart standing in the

retail industry can be attributed to the way the fou nder Sam Walton started. He opened his first

five and dime store in 1950 with a business model that focused on keeping prices as low as

possible. The strategy of offering low prices hinged on another cornerstone on which much of

Wal -Mart’s advantages is built: scale s and volume s (Hyde, n . d .).

Pricing by scale and volume

By Mr. Walton using certain principle s to build Wal -Mart’s pricing brand using scales

and volumes, with a slimmer margin than their competitors, he would make up for the shortage

with vol ume of sales. Over time, volume would permit economics of scale, and a level of

bargaining power that would enable Wal -Mart to re shape the supply sector and the retail

landscape, to suit its own schemes. Building on each success, which resulted in and eve n wide - PRICING STRATEGY OF WAL -MART 3

spread of operations and increasing leverage for this retail entity. Wal -Mart used this new

founded power to gain and acquire even less cost to itself. Its large volume of sales have

allowed this company to profit substantial, even if individual m argins on single items may be

slimmer that those of its competitors (Hyde, n . d.).

Perreault, Cannon, and McCarthy (2015) explains , “Over the long term, and over the

short term, marketing managers should set objectives oriented toward making a profit” ( p. 443).

Wal -Mart new low price strategy today, they ask to check customer receipt on items purchased .

If the retail giant finds that a customer paid too much at their store, they will give money back in

store credit. This program is being tested in San Di ego and six other cities is called “Savings

Catcher.” Shoppers signs on Wal -Mart ’s website and register their receipt after each shopping

trip. They will find deals for the customers by comparing its competitors’ prices and will pay the

customer the diff erence. The catch is that Wal -Mart will only check prices at local stores and not

online sales (Bob, 2014).

Penetration Pricing

Wal -Mart innovative use of penetration pricing in a very competitive retail market has

proven to be successful. Perreault, Can non, and McCarthy (2015) defines, “a penetration policy

is even more attractive of selling larger quantities that results in lower costs because of

economics of scale” ( p. 450). Perreault, Cannon, and McCarthy (2015) also added, “Penetration

pricing may b e wise if the firm expects strong competition very soon after introduction” ( p. 450).

Wal -Mart a discount store began enter ing into new market s to increase market share, they use

penetration pricing strategy while entering into markets where the competition was high. During

this time, Wal -Mart invested nothing on sales promotion; but instead built lowest price retail

outlets by reducing operatio ns and tighten control on inner expenses. In areas where competition PRICING STRATEGY OF WAL -MART 4

was loser or non -existence, they charge premium prices according to ongoing market rate. Each

of their location had different pricing strategy (Bashir , 2013).

Discount Pricing

When someone think of Wal -Mart, they think of sale s and discount s. Perreault, Cannon,

and McCarthy (2015) states, “Quality discounts are discounts offered to encourage customers to

purchase produce in larger amount” ( p. 453). Discounts have been the heart of W al-Mart’s

strategy for years. The company’s motto is “Always Low Prices.” Wal -Mart send its employees

to visit its competitor’s store each day to ensure they are not being undersold. “They have

reinvigorated the rollback discount strategy. Wal -Mart beli eves the rollback strategy convey

value, and gets the message across,” said Gary Severson, the senior vice president for electronics

at Wal -Mart. During the holidays, Wal -Mart feels that this strategy represents a bold move that

can save Christmas by sing le-mindedly emphasizing low prices, a message that has become

clouded by efforts to carry higher -end merchandise , which now has produce profits (Barbaro,

2006).

Pricing Competitive Advantage

Wal -Mart’s holds a pricing advantage in its strategic plan ning in sell s at a low price and

differentiate its service by being open 24 hours. This company has developed a culture and

leadership way of a business by connecting with consumers, which is clearly related to building

Wal -Mart’s competitive advantage. T he founder of Wal -Mart Mr. Sam Walton, was pivotal in

creating the low -cost culture concept . Leaders of Wal -Mart are always reinforcing its low -cost

culture in advertisement to the public . It is this culture and leadership style that enable Wal -

Mart ’s personnel seek cost saving and increase efficiency. The ability to establish a particular PRICING STRATEGY OF WAL -MART 5

culture and leadership, are crucial and necessary tools in creating and maintaining competitive

advantage in any market ( Romero, 2005).

Wal -Mart has continue to ma rket it saying of “ committed to providing low prices every

day , on everything. ” They say “if you find a lower advertised price on an identical product, tell

them and they will match that price at the register. ” Additionally, they will match any price of

any competitor such as, buy one get one free ads with a specified price. The competitor’s ads

that feature a specific item for a specific price and also internet pricing . This is the Wal -Mart’s

way (WMT, para. 1). According to Perreault, Cannon, and McC arthy (2015), “ Making price

decisions and using value pricing, it is important to clearly define the relevant target market and

competitors when making price comparisons ” (P. 460). Wal -Mart is selling everything from

bath tissue, electronics to high -end televisions. They find the most affordable lowest pricing

attracting customers. Even though such as, high -end television, the area of expertise is not

available in educating the customer on this item. But, the people trust has kept them continue

shoppi ng at Wal -Mart because of the belief of getting more for their dollars. This company has

well define its competitive stand in the retail industry. It is much more geographically

diversified than its competitors Costco, Target, Kroger and others in the re tail business. Wal -

Mart uses approaches where they gain a competitive advantage. They have announced the

expansion of its Canadian operations. They also have taken over several stores from Target. By

this defeat, Target announced it was exiting Canada ea rly this year. Wal -Mart has also joined

with big -box counters Home Depot and Lowe’s, which are planning to build new stores in

Canada this fiscal year. Lowe’s has announced it will be leasing some of Target’s remaining real

estate , cost saving (Leinwand, & Mainardi, 2010). PRICING STRATEGY OF WAL -MART 6

Conclusion

Wal -Mart has proven to this retail industry it has the best metho d in price cutting. This

company has establish stores worldwide, especially in rural areas with it lo w pricing strategy are

helping low income Americans. These stores are offering fresh produce from surrounding

farmers as sale items in their stores. A strategy customer can relate too. Additionally, lines of

groceries from leading name brands and organic selections are part of this low pricing strategy .

Wal -Mart has created its own culture environment which includes in banking on lower income

people of a rural community as loyal customers . Their mantra of helping people all over the

world save money by l owering prices , is now a house hold slogan . Wal -Mart is using this

pricing strategy as a daily ritual, save money and live a better life , every day, and anywhere. The

leadership and culture identity of Wal -Mart is daily building upon continuing ways in p rice

reduction and customer favor. An area , which many of Wal -Mart ’s competitors have faltered.

PRICING STRATEGY OF WAL -MART 7

References

Barbaro, M . (2006). Rollback is Back as Wal -Mart Strategy. Retrieved from

http://www.utsandiego.com/uniontrib/20061104/news_ 1b4walmart.html

Bashier, A. (2013). Wal -Mart (Penetration Pricing). Retrieved from

http://bashirasher.blogspot.com/2013/06/wal -mart -penetration -pricing.html

Bob, C. (2014). Wal -Mart Tests New Low Pricing Strategy. Retrieved from

http://www.nbcsandiego.com/news/local/Wal -Mart -Tests -New -Low -Pricing -Strategy -

254983501.html

Hyde, R. (n .d.). How Walmart Model Wins With “Everyday Low Prices.” Retrieved from

http://www.investopedia.com/articles/personal -finance/011815/how -walmart -model -

wins -everyday -low -prices.asp

Leinwand, P., & Mainardi, C., (2010). Why Can’t Kmart be Successful While Target and

Walmart Thrive? Retrieved from, https://hbr.org/2010/12/why -can t-kmart -be -successful/

Perreault, W., Jr., Cannnon, J., & McCarthy, J., (2015). Essentials of marketing: A marketing

strategy planning approach (14 th ed). New York, NY: McGraw -Hill.

Romero, E. (2005). Leadership, culture and competitive Advantage . Retr ieved from

http://competeoutsidethebox.com/wpontent/uploads/articles/Leadership,%20Culture%20 a

nd%20Competitive%20Advantage.pdf

WMT, (n . d.). Our Ad Match Guarantee . Retrieved from

http://corporate.walmart.com/ad -match -guarantee