Robert Kurtz
IOM 483 W/M Noon
March 6th, 2013
Henkel

Henkel Iberica (Question #4)

What does an Everyday Low Price (EDLP) strategy mean? What are the costs and benefits of this strategy?

An Everyday Low Price strategy is a retail strategy that will consistently have low prices without the need for sales or promotions. One of the best examples of this pricing strategy is Wal-Mart, and it is even in their minimal advertising campaigns. Some of the benefits of EDLP are that it can reduce variability in sales for the year. Consumers are no longer waiting for a sales promotion to be advertised. Another benefit that it produces is how it greatly lowers the advertising costs for a company. If a company is known as having an EDLP strategy, minimal advertising is required to increase or maintain sales. Similar to less advertising, implementing an EDLP can indirectly lower labor costs. There is less need for employees to make new signage on a daily basis due to the lack of price changes. Another benefit, as mentioned in the Henkel case, is that manufactures reap some benefits as well by not having to change the packaging that the product is shipped in. One of the problems in the Henkel case was that due to the vast amount of promotions offered, they were constantly changing container graphics, or content size, which increased packaging costs. One could also argue that it can, in some cases, increase consumer loyalty to a store because the consumer will have more confident that the prices don’t fluctuate. While EDLP has its many advantages, it also has some disadvantages. Operating on lower profit margins, as in normal in an EDLP strategy that focuses on driving profits through volume, customer service is usually hindered in these kinds of stores. For example, while Wal-Mart is considered an EDLP with high consumer loyalty, the general perception