New Business

Now that Easter is safely past us and the last of the Easter candy has been added to our waistlines, I'm prompted to write about an observation I made while picking up this year's supply of brightly-colored, sugar-coated, marshmallow chicks and bunnies. This is a lesson in pricing that can perhaps be applied to your business situation as well.

As I was walking down the aisles of the grocery store where I shop last month, I was struck by the pricing decisions that management had made at the store. It seemed that from week to week, the exact item I had come to the store for would jump dramatically in price. Whether it was a loaf of bread that had gone up 20% in a week or a frozen food item that had jumped more than 30%, I could hardly believe the cavalier way in which the store was gouging me. Was the high price of gasoline getting me at the grocery store as well as at the pump? Was it a conspiracy to extract revenue from the winter visitors before they left? Or perhaps it was a computerized pricing system that had run amok trying to test the elasticity of prices for groceries? I had visions of night stock clerks coming to work each evening to a new stack of printed price tags waiting to be put up on the shelves. In each case, I substituted for a lower priced item, or if there wasn't a substitute, I purchased less. Not really the effect of their pricing decisions that they were hoping for, I'm sure.

Now for my walk down the seasonal aisle that held the soon-to-be contents of the Easter baskets in my home. As I picked up boxes of those sugar-coated chicks and bunnies, I was relieved to see that they were the same price as they were last year - $.99. "At least some prices don't ratchet up," I thought to myself. But something was different. The boxes seemed smaller...somehow lighter. In fact they were both. The box that used to hold 15 chicks held only 10 and the box that held 16 bunnies contained 12. They had reduced the amount of marshmallow candy goodness by a third and a quarter respectively. The funny thing was, I didn't purchase less but purchased about the same number of boxes I would have anyway. I didn't even have any hard feelings about it. Instead, I thought to myself how it was an interesting pricing tactic, and wondered how many people noticed. My guess is not that many.

The fact is, the psychology of consumer reaction to price increases will always be much stronger when the number creeps up as compared to getting less for the same price. Just think of the indignation that you feel when the price of gasoline goes up a nickel a gallon. The reality is that even a small price change can create hard feelings even if it doesn't immediately affect buyer behavior. Keep this in mind the next time you're faced with having to raise the price. Can you reduce what you're providing for that same price instead? It's a subtle difference, but an important one.

Shane Turner is currently Professor of Entrepreneurship at Arizona Western College. He is owner of the following websites http://www.nursingfacultyjobs.com, http://www.hirewelders.com, and http://www.yournewventure.com.

I have worked in higher education and HR for over 12 years and am currently a college professor teaching entrepreneurship. Some of my interests include nursing education, welding, and entrepreneurship.

Article Source: ArticlesBase.com - What I Learned About Pricing From Peeps®