Why would a retailer use a "blended margin" strategy?

A "blended margin" strategy is utilized by retailers to manage profitability across a wide range of products within a category. This strategy allows for the combination of various pricing and margin approaches to achieve an overall category margin that meets the retailer’s financial objectives.

By balancing lower margins on select products, the strategy acknowledges that some items may need to be offered at competitive prices to drive traffic or meet consumer demand. At the same time, higher margins on other products can help offset these lower margins, ensuring the retailer achieves a healthy overall profit. This approach is particularly beneficial in categories with a mix of high-demand, low-margin items and lower-demand, higher-margin items, allowing for strategic discounts while maintaining the category’s profitability.

In contrast, the other choices do not align with the fundamental purpose of a blended margin strategy. Reducing prices across all items does not consider profitability and could harm overall business performance. Simplifying pricing structures may not necessarily relate to managing margins effectively. Lastly, avoiding promotional pricing contradicts the essence of using lower margins strategically within the blended margin approach.