Dollar Tree: Breaking the Buck

Name: Dollar Tree: Breaking the Buck (English version)
SKU: 522091

Avery, Jill; Bertini, Marco

Product #:522091

Supplier:Harvard Business School

Discipline:Marketing

Setting:United States, 2021

Details:Case (PDF) • 22 pages • 2022-06-09 (Rev: 2022-08-23)

Subjects:

Brand management Branding Marketing Marketing strategy Pricing strategy Sales and marketing Sales and marketing Marketing

Geography:

United States North America

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$12.40

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For thirty-five years, Dollar Tree, a discount retail chain selling general merchandise, had held it fixed price point steady, pricing all of its household items, food, stationery, books, seasonal items, gifts, toys, and clothing that made up its diverse and ever-changing assortment at $1.00. While all other dollar store chains had raised prices over the years to keep up with inflation, Dollar Tree had never budged on its price. However, in late 2021 the company announced that Dollar Tree was "breaking the buck" and raising prices on all goods to $1.25. Would the demise of the $1.00 price point bring about the downfall of Dollar Tree or could the retail chain weather its price change without alienating its price sensitive shoppers through smart marketing, pricing, and branding strategies?

Learning Objectives

This case was designed for use in an introductory marketing course to introduce basic concepts related to pricing strategy. Topics of discussion include demand curves, price sensitivity and elasticity, pricing strategies, and the implementation of price changes. Specific learning objectives include: Introducing the relationship between the price of an item and the demand for that item, showing the nature of and formula for a downward sloping demand curve, Calculating price sensitivity and the price elasticity of demand, Highlighting behavioral pricing theories and the psychological impact of pricing strategies, including the magic of price points like $1.00 or those that end in .99, Illuminating how consumers' pricing expectations establish reference prices for goods and how deviations from those prices evoke positive and negative consumer responses, Debating the pros and cons of fixed price vs. variable price strategies and everyday low pricing strategies vs. high/low pricing strategies, Anticipating the opportunities and challenges associated with the implementation and communication of pricing changes, Understanding low price strategies in the context of a firm's business model and how price impacts other decisions in the operating model, including financial structure, supply chain, merchandising, and others.