Everyday “Fair” Pricing – The End of Hi-Lo as We Know It?

Is Alix Partners on to something?

Every shopper loves a deal and today, finding one only takes a swipe. With smartphone in hand, your shoppers can compare your shelf price against the competition in seconds.

Price too high and risk losing that customer. Price too low and risk margin deterioration, or worse, a race to the bottom.

We’re all familiar with hi-lo and everyday low price (EDLP) pricing strategies, but a very insightful study by Alix Partners highlighted a more balanced approach called everyday fair pricing (EDFP).

What is Everyday Fair Pricing?

Aimed at improving price perception and cementing shopper loyalty, an everyday fair price strategy blends more competitive everyday pricing with less frequent, strategically planned promotions. Think of it as a hybrid of the more traditional hi-lo and EDLP strategies.

To shoppers, EDFP means not needing to plan shopping trips around weekly promotions. It’s about feeling like the value they receive aligns with the price they paid. Ultimately, it’s pricing they trust across the whole basket.

Why Now?

Since trust goes hand-in-hand with loyalty, it’s not surprising to see shoppers continue to seek out EDLP competitors. According to Alix Partners, more than half of consumers spend most of their grocery budget in a channel other than traditional grocery. This is a marked departure from the dominance of traditional grocery in previous decades and reflects shifting customer shopping preferences.

Progressive Grocer’s 76th Consumer Expenditures Study said that “price” is ranked the most important factor in store selection. Followed by “product quality,” “convenient location,” and “sales and promotions.” Combine that with data showing the majority of shoppers shop at least once per month at mass/supercenter (79%) and discount grocery chains (51%)… and you can see why hi-low retailers are feeling the pressure.

The shift is even more pronounced by younger generations. Millennials and Gen Z are more digitally savvy, price-aware, and loyalty-agnostic than ever before. Instead of generating loyalty, frequent promotions create barriers to savings that drive cherry picking and leakage to discounters and mass merchants who offer clear, consistent value.

Our Take

It’s obvious that pricing becomes more important when implementing a EDFP strategy, but we believe the same for promotions.

If you lessen the frequency and depth of your discounts, the events you do choose to run need to be more impactful. This means eliminating ineffective, dilutive, and mistimed promotions in favor of those that truly drive traffic and value. When paired with more competitive everyday pricing, you get a modernized take on hi-lo – one that aligns with today’s shoppers.

At ClearDemand, we’re here to help you make this shift. We’ll help you plan and optimize promotions that serve a purpose while eliminating ineffective spend. We’ll ensure you price so that your shoppers feel value. We’ll work with you to leverage optimization and competitive intelligence to create a pricing and promotion strategy that builds loyalty and positive price perception.

The Full Picture: Cannibalization, Halo Effect, and Promotional Effectiveness

When determining which promotions to run (or not), it’s important to consider the broader impact on the shopper’s basket. Failure to do so results in less accurate forecasts that don’t account for shifts in demand on substitutable (cannibalization) or complementary (halo effect) items.

Cannibalization: when a promoted item takes sales away from another product on your shelf; lowering overall margin without creating new demand.

Halo effect or affinity: when a promotion boosts sales of complementary items (like a promotion on chips increasing the sales of salsa).

Promotional effectiveness: when you use the analysis of past promotions to score effectiveness, calculate ROI, and identify opportunities to eliminate unproductive spend.

This is where an optimization solution comes in: ClearDemand simplifies the complexity with the following features:

• Elasticity-based modeling: We model demand shifts not only for the promoted SKU but also for related SKUs in the same category. If sales increase for the promotional item while dropping for a similar, non-promoted item, that shift is flagged for you.
• Cross-product relationships: Our science accurately models product affinities and substitutes across categories to reveal if demand gets redistributed instead of expanded.
• Basket analysis: With comp intel + price optimization, you can detect patterns — like if chips and salsa are frequently bought together.
• Value measurement: Use our solutions to analyze past pricing decisions against forecast, providing full transparency to your success. We assess factors such as seasonality, promotions, stockouts, and competitive shifts in order to isolate the true value; helping you understand where you may need to reoptimize or refine strategy.

By finding these hidden effects, we’re empowering you to stop running promotions that look successful but hurt your margin through cannibalization. You’ll feel confident doubling down on offers that have strong potential and lift overall basket size. And your team will continue to align promotional decisions with both customer and financial goals in mind.

Making Value Visible

Fair pricing isn’t just about internal metrics; it’s the sum of all aspects of the shopper’s value equation. That means EDFP may look slightly different from retailer to retailer, depending on other aspects of the value equation such as quality, freshness, convenience, or service.

Whatever your model, ClearDemand helps retailers: 

• Price and promote with confidence, knowing that your strategy has the backing of a market-leading AI and machine learning-driven optimization tool. 

• Identify and manage KVIs to protect price perception on the items that shape shopper trust. 

• Use market basket analytics and value scores to understand what customers care about most and where you can flex pricing without damaging perception. 

• Segment shoppers and align expectations, from traffic-driving items to margin-generating categories. 

• Test different strategies using what-if scenarios to understand the impact before implementing price changes. 

Smarter Pricing Within Your Strategy

Regardless of who your competition is, you need pricing that meets your shopper’s value equation and works for your bottom line. Our platform is built to support whatever pricing strategy you run –whether that be aggressive promos, steady everyday pricing, or a blended model. 

ClearDemand gives you the flexibility to define – and pivot – your pricing strategy to meet the needs of your customers. Contact us today – we’ll deliver the tools you need to execute pricing with confidence.