Type: Management
Pages: 4 | Words: 1199
Reading Time: 5 Minutes

Lowe’s main operations revolve around household improvement. Having had a healthy run over the years, it has not been spared by the impulse of the credit crunch and hence deeply depressing the market of its product. This is attributed to the Nature of its business as they deal with product as opposed to services. As CELEB team, we have had rather fruitful review of the areas that need immediate focus and researched on the possible way forward solely to restore the market position of the Lowe’s Company Products. Notably, pricing strategy, store location, merchandise, promotion, design and service are the key to Lowe’s retailing challenges in the middle of credit crunch. The above areas have been our basis of the recommendations that follow.

We suggest that Lowe’s consider the use of pricing strategy to arrive at maximization of market potential. This will be achieved by having prices that are based on the costs associated with production, and their mark up in order to sustain the business operations. Key decisions in the company should focus on vouching to reduce their production cost by eliminating lean time costs and channeling these costs to after sale services such as installation of their products at their customers’ premises. Profit markup should be reasonable other than exorbitant as this will influence retail turn over. There are several approaches to arrive at markup the most common setting a percentage on the total cost.  With time markup will require reviews to keep abreast with the dynamic market price patterns. In such a case, the company has to consider markdown either through reducing cost or the percentage on the total cost.

In its attempt to review its pricing strategies Lowe’s must be involved in a long-term campaign to gain an association with quality in their consumers’ minds. They should also balance their immediate proactive methods with their long-term targets. Finally they should prepare realistic, time bound, attainable, specific financial goals and also map well thought out and assimilate able mechanisms to check that the firm is working towards its goals.

Retail pricing strategy. Setting the price of a commodity is an intensive process that involves the analysis of various factors and trends in a market. One should consider their competitors’ prices for similar commodities, the zone of trade, and the respective demand and supply forces. An analysis of consumer tastes and preferences should also be done with a great understanding of their changes and fluctuations based on various statistical base points. Such an understanding will ensure only sound strategies that are in tune with actual facts are made. There exist many pricing strategies and we will attempt to delve into practical ones that are applicable to the Lowe’s scenario.

Mark-up. The markup margin on the cost of a commodity can be attained by comparing the profit amount as a percentage to the total cost of the product. This can be represented either as a ratio or a percentage.Retail mark-up is calculated by dividing a dollar’s markup by retail. Therefore Lowe’s should aim at keeping its initial mark-up value high so as to compensate for price fluctuations, discounts, shrinkage and unpredictable market trends. Lowe’s can embrace different mark-ups for its respective products and packages depending on their unique characteristics. Such a strategy would enable Lowe’s to take a precautionary measure to ensure they register maximum profits.

Vendor Pricing. Setting recommended prices for vendors by manufacturers usually labeled; Manufacturer suggested retail price (MSRP),  is an effective means used to ensure profitability is maintained and unnecessary price  problems are avoided. Lowe’s should therefore set a MSRP for all its vendors and to make the known MSRP known to its clients. This would allow for all vendors to have a level playing field and avoiding instances where some vendors have a competitive advantage over the others. It is important to put the retailer out of the decision making process so as to avoid overpricing and under pricing of its products and packages.

Competitive Pricing. Lowe’s should research and compare their prices to those of their competitors and develop strategies and means of standing out from their competition. They should also bear in mind that the consumer has various choices offered to him and always wants to gain maximum utility from minimum price. In this aspect Lowe’s should set prices that are at the market par but provide products that have been intensively advertised and of superior standing.

Pricing below competition. Another strategy for Lowe’s would be to adopt its saying ‘Everyday low prices’ and adopt the principle of bankrupting your competition out of business. This strategy would work if Lowe’s found ways of drastic cost reduction and developing it market strategy. It could shift its production facilities to cheap labor countries and also try and get cheaper suppliers for its raw materials. This drop in cost would enable it to set prices that are below market average, this would force its competitors to also adjust their prices and or be eliminated.

Prestige pricing. This mode of pricing has been proven as the most successful method of boosting a firm’s revenue while maintaining the same level of output. In this scenario Lowe’s would need to target a specific market segment that is the upper class. Identifying itself as a prestige commodity dealer Lowe’s would be able to boost its sales revenues without necessarily having to increase its output or expand its infrastructure. The only requirement would be to launch a marketing campaign to make its name synonymous with class and status.

Psychological Pricing. Psychological pricing is encountered when price ranges are put at a range that the consumer perceives as fair. Lowe’s will have to do an analysis on specific psychological interpretations of their clients and how their products and prices are perceived. A known method is odd-pricing for example 999, 9.97, 7.7. Research has shown that the human mind tends to round down such figures to the nearest whole figure.

Other Pricing Strategies. Keystone pricing:  this is doubling the cost incurred in the purchase or production of merchandise. However for such an approach to be used Lowe’s must do relevant research on its viability as its use in today’s economy has become limited. This has been caused by dwindling profit margins of businesses over the years that have been compensated by large scale production of units so as to benefit from economies of scale.

Multiple pricing is a method that involves the selling of more than one commodity for a single price. Research has proven that consumers tend to make more purchases when this method is used. Lowe’s can therefore develop such packages that would include complete bathroom installations i.e. Sinks, tubs, cisterns etc for a single price

Discount pricing, whereby waivers are made on purchases of Lowe’s products would be a good way to boost sales. This could take the form of seasonal sales, promotional discounts and quantity discounts.


The optimum strategy for Lowe’s can be reached after in-depth analysis of market trends and prices.  Such a development needs skillful decision making and implementation. If implemented these strategies would be of incomparable benefit to the firm. Many firms have gone bankrupt due to the economic downturn experienced but if CELEBS’s recommendations are implemented, then Lowe’s Home Improvement can once again experience economic growth.

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