Abstract
Retailers follow one of two pricing strategies – high-low (HL) and every-day low pricing (EDLP). The HL strategy is where the retailer will start with a higher price and give deep discounts in order to attract customers. On the other hand, retailers that follow the EDLP strategy keep prices very low and rarely giving price discounts. Not too long ago, JC Penney changed its strategy from HL to EDLP that had a very negative impact on its performance. The study hypothesizes that retailers who change their strategy (from HL to EDLP or EDLP to HL) will not be successful if they do not change their entire marketing mix, and if its customers do not accept the change in strategy. This study has two parts, each part testing five hypotheses. The first part tests five hypotheses investigating the effects of JC Penney’s change in strategy on its financial performance and finds support for all of the five hypotheses, i.e., JC Penney’s financial performance worsened because of its move from a HL strategy to an EDLP strategy. This study contends that a firm’s change in strategy is going to be successful only if its customers (consumers) accept the new strategy. The second part of the study tests five more hypotheses to find whether consumers accepted JC Penney’s change in strategy. The findings of the study support the hypotheses that consumers do not accept the change in strategy. This is because consumers perceive JC Penney to be a medium-price department store that sells homogeneous and heterogeneous shopping goods using a HL strategy, not EDLP strategy. It is very likely that JC Penney’s change in strategy was not very successful because consumers still perceive JC Penney as a department store with a HL strategy. For a change in strategy to be successful, customers of the firm have to accept the change in strategy.
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DOI
10.20429/jamt.2017.070102
Publication Date
4-2017
Recommended Citation
Shah, Abhay (2017). High-low pricing (HL) vs. every day low pricing (EDLP) strategy: The consequence of JC Penney’s move from HL to EDLP. Journal of Applied Marketing Theory, 7(1), 18-32. ISSN: 2151-3236. https://digitalcommons.georgiasouthern.edu/jamt/vol7/iss1/2
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