What I learned about Peeps prices

Website design By BotEap.comNow that Easter has safely passed and the last of Easter candy has been added to our waistlines, I feel compelled to write about an observation I made while picking up this year’s supply of brightly colored, sugar-coated marshmallow chicks and bunnies. Here’s a lesson on pricing that may apply to your business situation as well.

Website design By BotEap.comAs I walked through the aisles of the grocery store where I shopped last month, I was struck by the pricing decisions management had made at the store. It seemed that week after week, the exact item she had gone to the store for would increase dramatically in price. Whether it was a loaf of bread that had gone up 20% in a week or a frozen item that had gone up over 30%, I could hardly believe the arrogant way the store was deceiving me. Was the high price of gasoline affecting me both at the supermarket and at the pump? Was it a conspiracy to extract income from the winter visitors before they left? Or maybe it was a computerized pricing system gone crazy trying to test the price elasticity of groceries? I had visions of night clerks coming to work each night to find a fresh stack of printed price tags waiting to be placed on the shelves. In each case, I substituted a lower-priced item, or if there was no substitute, I bought less. It’s not really the effect of their pricing decisions that they were expecting, I’m sure.

Website design By BotEap.comNow my walk through the seasonal aisle that contained the future contents of the Easter baskets in my house. As I picked up boxes of those sugar coated chicks and bunnies, I was relieved to see that they were the same price as last year: $.99. “At least some prices don’t go up,” I thought. But something was different. The boxes seemed smaller… somehow lighter. In fact, it was both. The box that used to contain 15 chicks contained only 10 and the box that contained 16 bunnies contained 12. They had cut the amount of marshmallow treats by a third and a quarter respectively. The funny thing was that I didn’t buy less, but bought about the same number of boxes that I would have anyway. He didn’t even have any hard feelings about it. Instead, I thought to myself that it was an interesting pricing tactic and wondered how many people noticed it. My guess is not that many.

Website design By BotEap.comThe fact is that the psychology of consumer reaction to price increases will always be much stronger when the number goes up compared to getting less for the same price. Just think of the outrage you feel when the price of gasoline goes up five cents a gallon. The reality is that even a small price change can create resentment, even if it doesn’t immediately affect buyer behavior. Keep this in mind the next time you have to raise the price. Can you reduce what you are offering for that same price? It’s a subtle difference, but an important one.