Payless Shoesource Case Study

Karolina Klambatseas

Marketing 2210/ S. Vondruska

10/27/2012

Company Case:

Payless Shoesource: Paying Less for Fashion

Q: Which of the different product mix pricing strategies discussed in the text applies best to Payless’s new strategy? Discuss this in detail.

A: There are five different product mix pricing strategies that can be utilized. These include product line pricing, optional-product pricing, captive-product pricing, by-product pricing and product bundle pricing. In the past, Payless only had a small selection of shoes that it sold based on their prices. Their limited product line resulted in losses in the future because customers felt that they kept on selling boring shoes, and even though the price was low, the shoes were just not fashionable. As a result, Payless implemented two different product pricing strategies. The first one is product line pricing strategy. First Payless hired a new CEO Matt Rubel in June of 2009. Matt Rubel had extensive experience with high-end brands like Cole Haan and J. Crew. He knew he had to redesign a new range of footwear that consumers would interest and attract consumers while still maintaining them at a price they could afford. With this new range of footwear, Payless had to change its past image of selling boring, cheap footwear into a trendy merchant of that kept up with fashion trends. By doing so Payless managed to regain its market leadership which retains and attracts new customers again. Reflecting to this new strategy, Matt Rubel said, "We have the ability to make shoes at the most affordable prices anywhere in the world, and we want to marry that with the greatest creativity." Moreover, Payless had then launched the new "Fashion Lab" and "Hot zone" store formats which instead of selling normal footwear, Payless decided to sell a wide range of footwear such as flats, pumps, dancing shoes, and boots to meet consumer needs.

The second strategy that Payless used was optional product pricing. They began...