High-Low Pricing (HL) vs. Every Day Low Pricing (EDLP) Strategy: The Consequence of JC Penney’s Move from HL to EDLP

HIGH-LOW PRICING (HL) vs. EVERY DAY LOW PRICING (EDLP) STRATEGY: THE CONSEQUENCE OF JC PENNEY'S MOVE FROM HL TO EDLP ABSTRACT Retailers follow one of two pricing strategies - high-low and every-day low pricing.  The high-low (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 everyday low price (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 marketing mix, and also because it takes consumers a very long time to change their perception about a retailer's strategy.  This study proposes and tests ten hypotheses of the effects of a switch in pricing strategy by JC Penney from a high-low strategy to an everyday low pricing strategy.  The study finds support for all of the ten hypotheses.  The study finds that the financial performance of JC Penney suffered due to a change in its strategy.  Furthermore, consumers perceive JC Penney to be a medium-price department store that sells homogeneous and heterogeneous shopping goods with a HL strategy and it is very likely that JC Penney's change in strategy was not be very successful since consumers still perceive JC Penney as a retailer with a HL strategy. Keywords: High-low pricing (HL), Everyday Low Pricing (EDLP), Price-image, Consumer learning.