11 January 2016

The More You Buy, The More You Pay

Advertising for retailers often includes phrases such as The More You Buy, The More You Save. Yet the truth isn’t always so. While it is obvious that the more you buy, the more you spend, there is (should be) some truth / sense in the claim made by retailers.

Economic logic says that the more you buy, the less you (should) pay per unit. That is, if you buy 100 units of product X, the price per unit should be smaller than if you would have bought only 2 units of product X. This logic has its foundation in the concept of economies of scale.

Economic jargon aside, for most buyers it makes sense to buy a larger pack of X in order to pay less per ounce (gram) or other type of unit.

Retailers and manufacturers, however, know that most people are willing to buy in bulk (larger package) in order to get a better deal. Moreover, they know that buyers believe that if they buy larger packages, they get a better price per unit (save money!?).

Below are two examples in which buying a larger package, actually leads to paying more per unit of product.

The same trash bags cost more per unit if they are bought in a pack of 35, than in a pack of 20. A pack of 35 trash bags costs $5.49 (15.7¢ / bag), while a pack of 20 trash bags costs $1.69 (8.4¢ / bag).

It is the same product, same brand. You can take my word for it.

Going into a more appealing product category: beer, we find that Corona beer is cheaper in price per fluid ounce (ml) if bought in a pack of 18 cans (10.5¢ / Fl. Oz.) than in a pack of 24 bottles (10.7¢ / Fl. Oz.)

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