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. Stanford Business School 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 University of Texas School of Management Professor Ram Rao, Lal found that both types of stores actually benefited from the other's strategy. The researchers looked at how consumers purchased a basket of goods, tracked price announcements by stores, factored in consumer expectations of unannounced prices, and examined service, convenience, location, and advertising. Lal and Rao also included data from the trade press and store surveys.