Pricing Term Paper

Pricing Based on Capturing Market Share:

A Look at Lowe’s and The Home Depot

Procurement 5830

Webster University, Fall 2011

By: Angela Grubbs

Introduction

The home improvement industry is highly competitive and determined primarily by price, store location, customer service, and merchandise sold. In each individual market there are many minor competitors who concentrate on providing consumers with products related to electrical projects, plumbing, building materials, flooring, and lumber. In many large cities, the home improvement market not only includes Lowe’s and The Home Depot, but other smaller businesses such as True Value Hardware and Menards. The home improvement market is considered competitive in terms of sales and market share. Lowe’s and Home Depot are the leading controllers of both. The Home Depot is the industry leader, maintaining 20% market share as of the end of fiscal year 2008 [ (Nick Ciffone, 2010) ]. From a financial perspective, Lowe’s is the industry’s second most powerful corporation, directly behind The Home Depot [ (Nick Ciffone, 2010) ] [ (Lemberg) ]. Both of these companies have developed a pricing perspective that fits their corporate goals. However, perspective is not the only element to pricing. By itself it will tell you how to price (high, low, middle of the road), but not the exact price itself. So why do Lowe’s and The Home Depot sell at different prices? The answer can be found in one or all three of these pricing strategies [ (Lemberg) ]: Price to time. This is what most services people do. They set their prices by the hour, or by the day. The biggest problem is this makes it way too easy for prospects to compare your price. It also puts them in control of your time if they do buy; Price to competition. This is the most common form of pricing, and is the core of all prices based on market research. And it makes sense if your offer is comparable to that of your competitors; or, one last common pricing...