The CAIPS Retriever

Pricing: a challenge for retailers

One bad marketing experience with Torontonian retailers is pricing. Here is just one annoying example of the retailers' pricing policy. Contrary to anybody's expectations, retailers offer no perceivable per unit price discounts for larger packages. In fact, higher per unit prices are quite common. The following is factual: a .95 liter liquid soap refill sells at $2.99 while a 1.9 liter liquid soap refill (same brand and product, just double the quantity) sells at $7.29, a 22% per unit price increase. Most notably, the two packages sit next to each other for direct scrutiny and comparison on a grocery store shelf.

Consumer benefit is key

One of the greatest benefits that retailers bring to consumers is convenience. Nowadays, nobody will go get a loan from the bank to buy one year's stock of groceries in order to get a price per unit deal. That is, nobody except retailers. If they do it in a professional manner, everybody is better off. Consumers are ready to pay for convenience because they would probably fare worse if doing bulk shopping themselves. But confusion ensues in consumers' minds when they are presented with an alternative where a larger package is more expensive per unit than a smaller package.

The case for logical pricing

Even though consumers might perceive the lower quantity package as a relative deal, it still does not sound right. "If something is not logical, it probably is not true" as an American pop-culture icon puts it. What happens is that if consumers want a larger quantity, they can buy more smaller packages instead of one large package. But why buy more since the lowest price is there, in smaller packages? Not only consumers feel mislead, but also retailers sell less. If retailers sell less, their turnover is bad, suppliers offer less discounts and retailers most probably increase markups. Who benefits? Well, I cannot think of anyone. Thus, retailers have to step in and perform in a professional and logical manner, especially when dealing with suppliers that do not impose advanced and strict price maintenance policies.

A handbook case

Coca Cola is the handbook case of dealing with quantity when pricing groceries. Based on observations, a rule of thumb can be formulated like this: double the quantity, increase the price by half and keep halving the price increases. For example, if a half litter bottle of soda sells for $1.00, a one litter bottle sells for $1.50 and a two litter bottle sells for $1.75. (All are hypothetical and approximate.) This way, the consumer either gets a per unit deal or spends less money on a smaller package. It's her choice.

Among other advanced marketing features, Coca Cola demonstrates mastery in pricing by presenting a crystal clear proposition which is enticing and, by way of consequence, profitable. The interesting thing about pricing is that it can be replicated at no cost (actually at a gain) - there are no barriers to that. But hard and expensive things are there in Torontonian retail (large buildings, large parking lots etc.) while soft and inexpensive features like good marketing still lack.