Explaining price increases on frequently purchased items

12Apr12

During a recent visit to the store, I noticed that the price of the multi-vitamins that I’ve been buying for years went up 20%. I haven’t read about any global vitamin shortages, so I’m guessing that the supplier or the retailer just decided it was time to up the margins on the product.

However, this approach may backfire, since logic dictates that shoppers will be more price sensitive towards products they purchase on a recurring basis. Simply put, people are more familiar with the price and how much it’s changed because they buy the product regularly, and these repeat purchases likely represent a larger share of wallet than similar items that are only purchased a few times a year.

While some percentage of unit sales will typically be lost with any price increase, a little bit of consumer-facing communication can help mitigate this effect. For instance, if the supplier increased their pricing, you might put up a little sign near the item explaining that the change was outside the store’s control. Or, if the change is only temporary, perhaps because of a regional product shortage, then tell customers that. Either way, it pays to make an effort to help shoppers understand the reasons for the price increase, so they’ll be less likely to take their recurring purchases elsewhere.



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