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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