Thursday, November 12, 2015

Choose How to Use Unit Pricing

Stating prices in terms of units, such as per ounce, is required by law in many localities. Then, too, retailers might choose to use unit pricing even if not required to do so. They see it as a service to price-conscious consumers.
     According to researchers at Monash University, unit pricing not only serves price-consciousness, but also stimulates it. In their studies, a highlighting of price-per-unit on store shelves motivated purchase of less expensive options. This effect occurred even when the choices for the shopper contained the same quantity.
     Let’s say you offer five packages of flour, each with an identical number of ounces and each carrying a different price. Shoppers don’t have to depend on labels with unit pricing to figure out the comparison. So what happens if we contrast purchase patterns among one group of consumers given unit pricing and another not? The answer is that consumers in the first group spend less, on average, for their flour package purchase.
     This enhanced price sensitivity leaves the price-quality link intact when the packages are of different sizes, not all the same size: Why would consumers consider a cleaning product in a smaller package to be of better quality than another brand of cleaning product which comes in a larger package? According to research findings from University of Texas-San Antonio, Hong Kong University of Science and Technology, and Chinese University of Hong Kong, it’s because the smaller package generally carries a higher cost-per-unit than does the larger package. Consumers associate higher costs with better quality.
     When the researchers distracted the consumers sufficiently to keep them from estimating cost-per-unit prices, the effect disappeared: The product in the small package was no longer rated as being of higher quality than the one in the larger package.
     Judging a product to be of higher quality can make it more attractive. Perfume manufacturers depend on this when using small containers for their offerings at retail. Catch the curiosity of the shopper by highlighting that the product carries a high price. Then say why it’s worth it.
     If you can choose which units to use in unit pricing, you’ve ways to frame value statements. Based on their field study results in retail stores and shops, researchers at London Business School and European School of Management and Technology recommend you quote the price in terms of units of use. A tire retailer could state prices by how much it costs per 1,000 miles.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Utilize Unit Pricing
Depend on Interdependency for Price-Quality
Use Familiar Measurement Units
Put Large Quantity Before Odd Price

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