Walmart has reverted to lowering prices.

Walmart’s recent price cuts indicate that its attempts to change its business model aren’t faring well.  For decades Walmart has enjoyed tremendous success with its “Always low prices, always” strategy.  The length of its run has far exceeded that of most businesses for one simple reason.  Walmart has a passion for cutting costs.

Unfortunately, as is always the case with a low-price strategy, Walmart has hit the floor on cost cutting. You need no further evidence than the change in its tagline from “Always low prices, always” to “Spend less. Live Better.”

To its credit Walmart realizes that it has hit the cost floor and it has been attempting to change its business model. However, it is discovering just how difficult that is.  Walmart’s customers have become accustomed to thinking of “Walmart” and “low price” as synonymous terms.

Any attempt to change a company’s business model, whether it’s Walmart or any other business, involves the creation of a clear, new direction and equally clear communication of that new direction. Otherwise you simply confuse buyers.  It’s counter-intuitive, but clear communication of your new strategy will allow you to minimize the revenue losses you experience during the transition period.

Walmart has not created a clear strategy as evidenced by its recent price cuts in the face of declining sales. It has also has failed to acknowledge that it’s going to lose sales during the transition from its old low-price strategy to its new, albeit ill-defined strategy.  Until Walmart can define and communicate its new direction clearly and concisely, I’m afraid that it will continue to be the victim of its own strategy.

Discover how easy it is to command higher prices for your products and services, call me at 314-707-3771.

You can get Pricing for Profit online from Borders.com, BarnesandNoble.com and Amazon.com.

Tags: counter-intuitive pricing, price management, Pricing, pricing errors, pricing for profit, pricing for profitability, pricing management, pricing mistakes, pricing strategies, pricing strategy, strategic pricing, value pricing, value-based pricing

This entry was posted on Tuesday, April 27th, 2010 at 6:00 am and is filed under Marketing, Pricing, Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.