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| Thursday, June 12, 2008 |
| Paying more for less |
 USAToday warns Shoppers beware: Products shrink but prices stay the same which illustrates how inflation in hitting us in ways we may not be fully realizing. There's a science to downsizing products, and few have studied it as closely as John Gourville, a marketing professor at Harvard Business School. He studied purchasing patterns for 157 ready-to-eat cereals in 2004 and concluded that consumers are far more sensitive to higher prices than to less product. "People are generally unaware they're getting less," he says. Most of those who are aware say they'd rather get less than pay more.
All this price and size confusion has created a new job market: recession consulting gurus. Last month, retail specialist The New England Consulting Group, created a "Recession Price/Profit Management Consulting Practice."
In other words, a group to advise companies on when and how to downsize products or boost prices.
The need for expert advice is keen, CEO Gary Stibel says, because the last cost-driven inflation of this scope was decades ago. "So you have guys running companies with zero experience in this."
He's advised many clients to make product size reductions, but also to slightly lower prices. Most consumers like smaller-portioned packages that cost less, even when they're paying more per ounce.
It's a consumer mind game that's not always logical.
"This isn't mathematical pricing," the retail guru says. "It's behavioral." Labels: Inflation Intimation |
| posted by Boston Gal @ 10:02 AM *
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| 5 Comments: |
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I have noticed this for years. They do it under the covers - but they change the size of the package. For example, I used to eat Chex for breakfast. They used to be in 16 oz boxes when I was in high school and be 110 calories per serving of one cup. Then they went to 15 oz boxes in the mid 90's with no change in price ($3.49). Then they went to high fructose corn syrup (changing it to 120 calories) and moved to a 12.4 oz box, with the same price.
So now - they are selling me something with cheaper ingredients, less healthy, and 22.5% smaller box than they did a little more than a decade ago.
Don't even get me started on Soda :)
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Doesn't Andy Rooney have an ongoing commentary about this on 60 Minutes?
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I buy a new bottle of Oil of Olay face moisturizer once every 9-10 months or so. My last three bottles have each gotten smaller and smaller with each purchase. The one I bought yesterday was tiny! I always compare products by their unit cost, though. I find it particularly annoying when products in the same category have different units. For instance, when I was looking at lotions yesterday, some lotions in the "body lotion" section were priced per quart and others were priced per pint or per gallon. Sure, we should all know basic conversions, but come on -- there should be standard units for each type of product so I don't have to spend an hour comparing the brands!
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I noticed this last week with my beloved Breyers Ice Cream. The package seemed just a touch smaller, but I wasn't sure if it was imagined or not. Sure enough it looks as though the package went from 1.75 quarts to 1.5 quarts. Darn it!
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I have noticed this for years. They do it under the covers - but they change the size of the package. For example, I used to eat Chex for breakfast. They used to be in 16 oz boxes when I was in high school and be 110 calories per serving of one cup. Then they went to 15 oz boxes in the mid 90's with no change in price ($3.49). Then they went to high fructose corn syrup (changing it to 120 calories) and moved to a 12.4 oz box, with the same price.
So now - they are selling me something with cheaper ingredients, less healthy, and 22.5% smaller box than they did a little more than a decade ago.
Don't even get me started on Soda :)