High-Low Pricing Strategy

High-low pricing is a retail pricing strategy in which products are initially offered at a higher price and later discounted through promotions or sales events to stimulate purchases. This approach allows retailers to target different customer segments: those willing to pay full price for immediate access and those who prefer to wait for discounts. High-low pricing is particularly common in the fashion and electronics industries, where trends and technology evolve quickly, creating a need to clear inventory efficiently.

This strategy benefits retailers by creating a sense of urgency, encouraging customers to act during promotional periods. Seasonal sales, holiday discounts, and flash sales are examples of high-low pricing tactics that effectively drive store traffic and online conversions. However, a challenge with high-low pricing is the potential to foster a "discount-seeking" behavior among customers, leading them to delay purchases while waiting for sales, which can decrease full-price sales over time.

To implement high-low pricing successfully, retailers must carefully manage the timing, frequency, and depth of discounts to maintain profitability while attracting both full-price and discount-driven customers.

High-low pricing is commonly used by retailers and brands in industries like fashion, electronics, and home goods. Department stores such as Macy’s and brands like Nike often implement this strategy by offering products at full price initially and later using seasonal sales, flash sales, or clearance events to attract discount-seeking customers.

High-low pricing is a strategy where products are initially sold at a high price and later discounted during sales events to drive purchases. This approach appeals to both full-price buyers and bargain hunters.

Skimming pricing, on the other hand, involves setting a high price for a new product during its introduction and gradually lowering the price over time as demand decreases or competition increases. It is commonly used for innovative or technology-driven products, such as smartphones.

Retailers like Kohl’s, Macy’s, and Gap are well-known for using high-low pricing. They frequently introduce new items at full price and later hold sales or offer coupons to entice customers to purchase discounted products. This strategy helps them attract both full-price shoppers and bargain hunters.

EDLP (Everyday Low Pricing) involves maintaining consistently low prices without frequent discounts or promotions. Retailers like Walmart use this strategy to provide reliable value to customers and avoid the need for constant sales.

High-low pricing, in contrast, relies on setting high initial prices and then offering periodic discounts or promotions to attract customers. While EDLP focuses on consistent pricing, high-low pricing leverages the excitement of sales events to drive traffic and purchases.