A few days before Christmas I was in the grocery store doing the normal weekly shopping and a large chalkboard sign greeted me as I made the first turn: “Christmas Items 50% off!” I stopped.
The first item to catch my eye was the 42-ounce bags of holiday M&Ms. These candies are a weakness of mine and $4.28 for a large bag seemed like a great deal. And then I realized I didn’t know what a good price was for M&Ms.
Sitting next to them were small plastic candy canes filled with same red and green chocolates. The stocking stuffers were $2.28. They were eight times more expensive per ounce than the bulk bags. But then I wondered about those little packages at the checkout counter. I suddenly got very interested.
I searched out every package of M&Ms that existed in the store. The christmas clearance section had two seasonal versions. The store stocked three different package size in the candy aisle. The rack at the checkout carried the single serving above the larger Tear ’n Share bag. The Mars Company tempts customers seven different versions from grocery store entrance to exit.
The graph isn’t too surprising. The more you buy, the better deal you get. Mars is following what economists call the law of diminishing margin utility. Our satisfaction drops with each additional unit we buy and the only way to encourage us to purchase more is to keep lowering the price.
You might be interested in the ebook Free to Flexible: Four Simple Lessons About Cost, Price, Margin and The Options Available to The 21st Century Business. You can download it here.