Archive for the ‘Price points’ Category

Yep, the candy bar is getting smaller … it’s inflation’s evil twin: “shrinkflation”

May 21, 2021

Many companies masking inflation by holding prices … but shrinking products
=============

I used to remind students that there are two ways to increase prices: (1) you can just increase nominal price (i.e. “sticker price”) or (2) you can hold price constant and offer less product (i.e. increase the “unit price”).

For example, assume that a 5 oz. candy bar sells for $1 … that’s 20 cents per oz.

Shrink the bar to 4.5 ounces, hold the price per bar at $1 and it’s 22 cents per oz.

Presto … an 11% “effective” price increase … with customers probably none the wiser … and the Feds reporting: “inflation in check”.

============

You’ve probably noticed that gasoline and lumber prices have been soaring.

A gallon is a gallon … and an 8” board is an 8” board.

So,  those products show up clearly as inflation.

But, many companies can mask their price increases by shrinking their products by less than a “just noticeable difference”.

For example. Red Flag Deals reports that Costco has cut the size of its private label paper towels from 160 sheets to 140 sheets.

No harm, no foul, right?

Wrong.

That’s a 12.5% reduction in quantity and a 14.3% price increase

Assume that a roll is priced at $5 before and after the size change. The effective price before the size reduction was 3.125 cents per sheet … after, it’s 3.571 cents per sheet … that’s equivalent to a 14.3% price increase.

And, it’s not just Costco.

One price tracking site has noticed that the following products are among those that did the same in 2020:

  • Powerade (Was: 32 oz.; Now: 28 oz.)
  • Lay’s Potato Chips, party bag (Was: 15.25 oz.; Now: 13 oz.)
  • Nutella (Was: 14.1 oz.; Now: 12.3 oz.)
  • Puffs tissue (Was: 56 count; Now: 48 count)
  • Dawn dish soap, small (Was: 8 oz.; Now: 7 oz.)
  • Hillshire Farms Kielbasa (Was: 16 oz.; Then: 15 oz.; Now: 14 oz.)
  • Nathan’s Hot Dogs: (Was: 16 count; Now: 14 count)
  • Keebler Club Crackers (Was: 13.7 oz.; Now: 12.5 oz.)
  • Charmin Ultra Strong toilet paper (Was 286 sheets; Now: 264 sheets)
  • Hershey’s kisses, family size (Was: 18 oz.; Now: 16 oz.)

As they say in marketing circles (and sometimes in court) … caveat emptor!

==============
For more examples (pre-2020), see the list below…

(more…)

FTC makes it official: Size matters !

June 30, 2015

Have you ever shelled good money for “free” air.

Bet you have.

It’s called “slack fill”.

Say, what?

clip_image002

Let’s start with a confession …

(more…)

Prices: Get a Big Mac cheap …

February 9, 2013

OK, so you have to go to India …  it’s technically a Maharaja Mac, not a Big Mac … and, the cheap price is driven by relative currency values.

Still, one of my favorite price indices is the Big Mac Index … it compares the currency adjusted price of the burger across the globe.

According to Ryan Avent, chief economist at The Economist

The Big Mac index is based on an economic theory called purchasing-power parity (PPP), which indicates that over a long enough time exchange rates should adjust so similar goods cost the same across countries.

The index reveals that, at market exchange rates, the price of the same McDonald’s  burger can vary vastly from country to country.

image

I’m lovin’ it ….

Source

* * * * *
Follow on Twitter @KenHoma         >> Latest Posts

Price points: A McDouble for a buck … shoulda asked me.

December 11, 2012

In October, McDonald’s posted its first monthly drop in nine years.

The company immediately replaced the president of its U.S. business.

The new president “ramped up McDonald’s value messaging, focusing heavily on the Dollar Menu to help drive traffic”.

The company again renewed emphasis on low-priced menu options, such as $1 Sausage McMuffins and coffee.

image

The result?

McDonald’s sales sales bounced back in November.

Surprise, surprise, surprise…

Source

* * * * *
Follow on Twitter @KenHoma                         >> Latest Posts


%d bloggers like this: