When it comes to the supermarket business, there is little room for error.
Margins are razor thin compared to the profits enjoyed by other retailers.
That makes grocers keenly aware of pricing strategies. Marketing and Management Science Professor Rajiv Lal went shopping to find out why the low-price leaders, who offer the cheapest daily prices, do as well as they do. Working with Ram Rao of the University of Texas, Lal discovered that both types of stores actually benefited from the other's strategy. They found that consumer choices were based on more than just price. Promotional stores offered a higher service level, such as longer hours and a greater assortment of goods, as desired by busy consumers.