A Model of Supermarket Pricing Behaviour

DOI 10.14707/ajbr.150016

James A. Henry
University of Otago, New Zealand
John C. Guthrie
University of Otago, New Zealand
Geri F.H. McLeod
University of Otago, New Zealand


This research aims to shed light on how prices in supermarkets for consumer items are set. It also explores the changing power relationship within the retail food distribution channels.For this qualitative study supermarket employees and manufacturer employees were interviewed about their perceptions of price setting. The research identified that for Key Value Items (KVI) a number of common characteristics in regards to costing and pricing policies applied to both suppliers and supermarkets. Both supermarket customers and supermarkets competitors also influence these items. While the qualitative method used in this project elicits rich commentary it does expose the project to biased data. The fact that it is country specific could be regarded as a limitation or a starting point for international comparisons.

As a consequence of the research it was possible to develop an integrated model of supermarket pricing behaviour. The model follows two streams, one for standard products, and one for KVI, and how they are applied in practice. This model has application to multi-product organisations where their offering is frequently purchased. The role of the supermarkets in the New Zealand distribution channel has come under scrutiny in recent years. Consumers are demanding knowledge of supermarket pricing practices and are voting with their feet if it is not provided. This paper lifts the lid on pricing behavior to some extent. The research is based on primary research and as such is original. It seeks to build on earlier commentaries on supermarket pricing behavior.

Key words: pricing, supermarkets, channels, FMCG, New Zealand

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