An Empirical Analysis of Determinants of Retailer Pricing Strategy

Venkatesh Shankar, Ruth N. Bolton

Research output: Contribution to journalArticle

128 Scopus citations

Abstract

This paper empirically investigates the determinants of retailers' pricing decisions. It finds that competitor factors explain the most variance in retailer pricing strategy. Only in the cases of price-promotion coordination and relative brand price do category and chain factors explain much variance in retailer pricing. These findings are derived from a simultaneous equation model of how underlying dimensions of retailers' pricing strategies are influenced by variables representing the market, chain, store, category, brand, customer, and competition. The optical scanner data base describes 1,364 brand-store combinations from six categories of consumer packaged goods in five U.S. markets over a two-year time period. Our study classifies retailers' pricing strategies based on four underlying dimensions: price consistency, price-promotion intensity, price-promotion coordination, and relative brand price. These four pricing dimensions are statistically related to: (1) competitor price and deal frequency (competitor factors), (2) storability and necessity (category factors), (3) chain positioning and size (chain factors), (4) store size and assortment (store factors), (5) brand preference and advertising (brand factors), and (6) own-price and deal elasticities (customer factors). These findings are useful to retailers profiling alternative pricing strategies, and to manufacturers customizing the levels of marketing support spending for different retailers.

Original languageEnglish (US)
Pages (from-to)28-49+172
JournalMarketing Science
Volume23
Issue number1
DOIs
StatePublished - Jan 1 2004

Keywords

  • Competitive strategy
  • Econometric analysis
  • Pricing
  • Promotion
  • Retailing

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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