A battle of the big and cheap The general manager of Woolworths’ Big discount department store chain, Julie Coates, is responsible for setting the prices of her store that are cheaper that the direct competitors (Mitchell). Part of this job’s responsibilities is to constantly check the prices of competitors such as Kmart so an appropriate pricing strategy can be formulated. Julie would like to offer prices that are 10% lower than direct competitors, but it is tough when Kmart has been reducing their prices by up to 60% on basic shopping items.
Big W has a focus on offering cheap and quality items that will attract a large market segment. Julie Coates remarks, “We’d like to continue to be the lowest everyday prices operator—that’s what we do (Mitchell). This pricing strategy has historically been successful for Big W, yet in 2010, the comapny suffered a major setback when it recorded a loss of just under two percent in sales. However, in the last financial year, sales have picked up and Woolworths is expected to reach it desired net profit.
One of the major drivers for this upturn in profit is the rise of customer foot traffic and unit sales growth (Mitchell). If this growth can be sustained, then Big W is expected to return to a normal sales growth. Julie Coates has been central to Big W’s rise, as she has over twenty years experience in retailing and has worked for companies such as David Jones, OfficeWorks, and Target, not to mention her current role at Big W (Mitchell). One of the pricing strategies that Coates has used to her advantage is value-based pricing (Kotler and Armstrong 315).
This pricing strategy is all about fixing prices according to the emphasis the buyer places on value rather than the importance that the seller has on costs. This marketing strategy keeps the customers’ needs in mind and builds a pricing strategy around that. The two major factors that customers consider when purchasing is cost and value. If neither one is up to standard, then customers will avoid a certain product because it simply does not offer any value. In addition to the value that Big W offers it customers through its products, it also has an advantage over competitors in logistics and warehousing.
Coates introduced automated ordering, which reduced stock on hand by nine days (Mitchell). Also, Big W has made plans to build an additional distribution centre. Finally, the company has initiated a program known as Flash that will cut renovation costs by 75%. Kotla, Philip and Garry Armstrong. Principles of Marketing. 13th ed. New Jersey: Pearson Prentice Hall, 2010. Print. Mitchell, Sue. “A battle of the big and cheap. ” Financial Review. 24 Aug. 2010.
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