Posted by Michael Gilligan on 05/10/2022 11:41:28:
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In this context; maintaining a price, but presenting a poorer product for that price is equivalent to Ruskin’s “sell a little cheaper”
MichaelG.
Um, I know what Michael means, but have trouble with the concept of 'price' as a stable entity. At the moment inflation is running at CPIH=8.8%, CPI=9.9%, and RPI=12.3% (Consumer Price Index with Housing, Consumer Price Index, and Retail Price Index).
As the pound in our pockets is worth less now than it was last year, we get less for our money in one way or another.
Maybe Lidl/Aldi are indeed maintaining prices by selling us extra cheapo calipers, but it's not necessarily a permanent slide to the bottom. Consider Mars Bars and similar. Their size changes over time for the same reason. When the value of the pound drops the manufacturer keeps us happy by making the bar smaller for the same price. This goes on until the bar gets too small, at which point they jump back to a full-sized bar at a corrected price. We're happy with the new price because the new bar is bigger, yum yum.
Petrol prices are different – they vary with currency value because changes can't be hidden. Petrol prices are governed by the pound/dollar rate because oil and gas are bought wholesale in dollars, not pounds. Someone, somewhere in the UK buys dollars to pay for oil, and whoever sells dollars to the UK judges how much they think the pound is worth, which varies constantly. Although prices are smoothed, currency movements soon appear at the pump because it's illegal to alter the fuel's specification or the size of the litre. The confectionery packaging trick doesn't work on petrol.
Manipulating consumer expectations isn't a con-trick exactly, though we are a bit thick! I see it more a way of managing price expectations as the value of our currency changes. The reason I say consumers are thick is pricing stuff at £4.99 really does cause it to sell disproportionally much faster than charging £5.00. Many motorists drive several miles to get a penny off the price of a litre of fuel without bothering to compare the cost of the extra mileage with the cash 'saved'.
Unfortunately value, specification and price are all different and a bit unstable.
Dave