An Analysis of Supermarket Pricing: The Case of Selected Supermarkets in Gaborone, Botswana

<p>The purpose of study is to explore price fluctuations (tracking of pricing trends) in essential consumer items among identified Supermarkets in Gaborone. The prices were read from shop displays at the beginning of the month, mid-month and at the end of the month. A triangulation methodology was utilised as it strengthened and confirmed results. Seven major supermarkets were selected for the study while a mall intercept survey was used to find out the consumer store and brand selection in relation to pricing strategies adopted by the store.</p><p>The study revealed that there were price fluctuations and differences between selected supermarkets during the selected period of study as well as amongst branches within a supermarket. Supermarkets utilised pricing for promotional than other element of retail mix. The results indicate that Promo pricing strategy was preferred by both stores and customers compared to Everyday Low Price (EDLP) and High-Low Pricing. While consumers shopped at the beginning and the end of the month looking at the price, mid-month shopping was done more looking at other retail mix elements. With well-educated customer’s base, EDLP and H/L pricing may not work as customers would be looking for the extras in the retail mix. The findings also indicated that consumers were aware of price differences and engaged in shopping in an opportunistic manner (cherry pickers). </p>

Contextual and Temporal Components of Reference Price

An emerging consensus in marketing is that consumers respond to price relative to some standard or reference price. Most researchers modeling brand choice have reasoned that this standard is based on past prices of the brand. The authors argue that consumers do use reference prices, but one that is also based on context—other prices in the store—rather than on past prices alone. An analysis of households’ brand choices in two subcategories and over three cities supports this premise. Within context, the lowest price seems to be an important cue for reference price, whereas within time, a brand's own past prices seem to be the most important cue. Households’ use of a contextual reference price also varies predictably across some consumer characteristics. Though their model can be applied to other categories, the findings have important managerial implications: Managerial focus on temporal reference prices could lead to an everyday high price, whereas focus on contextual reference prices could lead to an everyday low price. Only the inclusion of both contextual and temporal reference prices justifies variable pricing.