Archive for the ‘Pricing’ Category

Companies plan to keep raising prices…

October 26, 2021

P&G: “We have not seen any material reaction from consumers.” 
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That’s the conclusion from a WSJ survey of company execs and industry analysts…

A couple of my takeways…

> Companies are quickly passing along cost increases … with many “adding a little extra” to “get healthy” after the lockdowns.

Example: “Last week, P&G  announced a third round of price increases and told investors to expect profitability to accelerate as the year progresses.”

> The pandemic has left many (most?)  consumers “cash heavy” since they haven’t been traveling, dining out and, in some cases, not paying their rent …  so, many have banked their government stimulus checks.

Many consumers accumulated savings amid the pandemic and are benefiting from higher wages, leaving them with extra cash as the highly contagious Delta variant of the coronavirus keeps them home and lessens the appeal of dining out, staying in hotels and traveling by air.

> So, far, price increases have paid off as shoppers have continued buying — or even buying more to stock up in advance of likely future price increases or supply shortages  to big-name brands.

“We’re seeing price increases that are quite shocking, yet consumers have absorbed these prices without a dip in demand,” said Ben Reich, chief executive of Datasembly, which amasses granular pricing data on a range of consumer goods.

> But, some analysts caution that there’s a limit to how long and how high companies can keep jacking up prices.

As some of the stimulus fades and more price increases kick in, consumers will become increasingly pinched by inflation.

Pricing is going to be more of an issue for consumers, limiting companies’ pricing power.

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Bottom line: Expect prices to keep going up for awhile.

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
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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”.

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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!

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

(more…)

What do colleges have in common with Kohl’s?

November 10, 2015

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

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Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

(more…)

Alert: Mickey is reaching for your wallet …

October 12, 2015

I’m conflicted on this one.

On one hand, I teach pricing strategy in some of my courses.

The explicit strategic goal: increase revenue and profits with aggressive pricing tactics.

On the other hand, I always feel sorry for “average” parents who get creamed financially when they take their kids to a ball game or amusement park.

 

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Based on recent announcements, Disney – Mickey’s parent company – is rolling some pricing tactics to fatten Mickey’s wallet and flatten your’s …

(more…)

Tipping the scales: Airline starts weighing all passengers …

August 17, 2015

You read that right …

Uzbekistan Airways is going to start weighing passengers before flight

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Here’s what’s going on …

(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?

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Let’s start with a confession …

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Smacked: TurboTax bungles a $25 price increase and retreats.

February 19, 2015

A couple of years ago I switched off TurboTax when they tried to start charging separately for each computer – meaning that I had to buy 2 licenses to have TurboTax on both my desktop and laptop.

I got back on the program when they backed off that silly pricing hack.

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Having learned nothing from that pricing backfire, TurboTax recently got itself in another brouhaha with customers when it tried another pricing sleight of hand.

Here’s what went down …

(more…)

What do colleges have in common with Kohl’s?

February 2, 2015

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

image

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

(more…)

What do colleges have in common with Kohl’s?

October 14, 2014

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

image

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

(more…)

Cheap Tricks … err, make that cheaper tricks.

August 19, 2014

Warning: Adult Content.

The Economist – a reputable publication — recently reported the results of a groundbreaking economic analysis.

Specifically, staffers “analysed 190,000 profiles of sex workers on an international review site … with data going back to 1999 … with prices corrected for inflation.”

What did they find?

“The most striking trend our analysis reveals is a drop in the average hourly rate of a prostitute in recent years”

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What explains the 30% drop in prices?

Well, pardon the pun, it’s pure economics …

(more…)

List price, realized price … and the war on doctors.

April 7, 2014

Have you ever really looked at the EOB (“Explanation of Benefits”) that you’ve gotten from your health insurance company after getting medical care?

I hadn’t … just threw the letters into the file … or wastebasket.

But, the ObamaCare launch has heightened my interest … and recently, unfortunately, I’ve been able to gather some personal empirical data points.

 

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Here’s the first part of my story …

(more…)

List price, realized price … and the plight of doctors.

November 4, 2013

Have you ever really looked at the EOB (“Explanation of Benefits”) that you’ve gotten from your health insurance company after getting medical care?

I hadn’t … just threw the letters into the file … or wastebasket.

But, the ObamaCare launch has heightened my interest … and recently, unfortunately, I’ve been able to gather some personal empirical data points.

 

image

 

Here’s the first part of my story …

(more…)

What do colleges have in common with Kohl’s?

October 14, 2013

I oft say that anybody who pays sticker price at Kohl’s should look over their shoulder to make sure that Darwin isn’t chasing them.

Maybe the same should be said of parents who pay list price tuition to fund their kiddies through college.

Lots of talk re: how college costs are soaring.

According to the WSJ

Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight.

Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards.

In other words, list prices are going up, but more stuff is being sold at sale prices.

 

image

 

Increasingly, colleges are using pricing methods previously the domain of airlines and discount retailers …

(more…)


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