Playing the Price Game
Monday, June 11th, 2007
Last week, General Mills announced that it would be increasing the price of their cereals. The company says the reason for the price is increased costs of ingredients and fuel.
General Mills will be raising the price in an interesting way. It will lower the cost per box.
Yes, that’s right — it is lowering the cost per box.
One might wonder how decreasing the price per box increases the price of the cereal. Simple — the company will make the boxes smaller. So, even though the customer will be paying less per box, they will actually be paying more for the cereal.
I wonder if any other manufacturers will pick up on the price game General Mills is using. What if this concept were applied to trucks and SUVs? Think about it. What do you think the average truck or SUV owner is more sensitive to — how far he or she can get on a tank of gas, or how much it costs to fill it up? My bet is the latter. So, why not make the gas tanks a little smaller? That way even though the customer is having to fill up a little more often, it will cost them less each time they fill up the vehicle. It could have a huge psychological effect. Instead of thinking he or she has to take out a second mortgage to finance their fill up, they can think, “I filled up my SUV for only $60.00.”
It sounds crazy, but crazier things have been tried in the past.
What do you think?
Joe Escobar