“Passivity”: a model of grocery retail price decision-making practice

• Published in: European journal of marketing Vol. 49; no. 7/8; pp. 1040 - 1066
• Main Authors: Watson, Iain, Wood, Steve, Fernie, John
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Group Publishing Limited 13-07-2015
• Subjects: Competition; Competitive advantage; Decision making; Grocery stores; Marketing; Marketing strategy/methods; Price variance; Pricing policies; Profits; Rationality; Retail stores; Studies; Supermarkets; United Kingdom > UK; United States > US; Grocery; Retailing; EDLP; HiLo; Food retailing; Pricing
• ISSN: 0309-0566; 1758-7123
• DOI: 10.1108/EJM-01-2014-0047

Purpose
– This paper aims to explore the applied context of grocery retail pricing practice to understand how pricing executives approach “regular price” decision-making (as opposed to promotional pricing). The study seeks to inductively develop a model of regular price decision-making in grocery retailing.
Design/methodology/approach
– The research uses an inductive methodology involving interviews with pricing executives working for grocery retailers that account for approximately 85 per cent of the UK, and 64 per cent of USA, grocery market retail sales. The approach is appropriate given the underdeveloped research insights into regular pricing within food retailers.
Findings
– It is found that regular pricing is undertaken with little sophistication, typically, on the basis of simple, inflexible rules that result in conflicting goals. A typology of three pricing roles was identified, although all share an underdeveloped understanding of the effects of price changes on customer demand and the implications of competitor reactions. These contexts, causes and conditions lead to a range of consequences; notably, a degree of pricing inertia, “customer-less” pricing and “enforced symbiosis” – coping outcomes. Taken together, a theory of “passivity” pricing is identified.
Originality/value
– The research presents a contribution to new knowledge in the field of retail marketing by developing theory in retail pricing. In contrast to much extant research on grocery pricing, this paper accesses the insights and opinions of the pricing executives themselves. It exposes the realities of regular price decision-making across two developed retail markets and offers managerial insights.