Aggressive Example Of A Stealthy Price Increase

Dec 29, 2015

 

A "stealth" tactic for raising prices without anybody noticing stops being stealthy when the effective increase is wildly aggressive.

 

Recently a cinema chain used a common "stealth" tactic to increase the prices of their soda. Rather than raise the prices they decreased the sizes. The old regular size is now the large, and sells for the old large price. The old small is now the regular, and sells for the price of the old regular.

This tactic is most commonly used when the vendor feels they can't get away with raising the advertised price. It's easy to see why a cinema might feel that way – most people already consider their prices to be outrageous by any standard. Even with the old (larger) sizes the soda prices seemed too high, and raising them would have been very risky.

But they almost certainly wouldn't have tried an increase of almost 30%, which is exactly what they did with this stealth increase. The new "large" is 32 ounces, down 12 from the old large at 44 ounces. Keeping the price the same means a stealth increase of almost 30%. No chance they would have risked raising what was a $6 soda to almost $8.

Such an aggressive increase tends to undermine the "stealth" aspect, and people are going to notice.

When they did the cinema went with a handful of different explanations, none of which really made sense.

First they pointed out a general trend towards smaller sizes, and a desire to better serve customers that wanted smaller sizes. This doesn't really hold up – customers were always able to choose smaller sizes, and even if there was an overwhelming demand for smaller sizes across the board then prices could have been reduced alongside them.

They also tried to employ a fitness angle. This is commonly used with indulgence products like candy bars – the seller focuses on the fewer calories in the smaller size and tries to sell it at an effective premium.

In this case the cinema tried something similar, pointing out that geographically relevant legislation, the "Making Healthier Choices Act" (requiring fast-food chains to display calorie counts on their menus) factored into the decision. But the act was two years away from coming into effect and again... how did it necessitate such a massive price increase? The point of the act is to encourage people to choose smaller sizes.

The flower business equivalent of this would be to start selling boxes of eight or nine roses on Valentine's Day instead of dozens - such a move would be incredibly bold and ill-advised. Perhaps an acceptable risk for a cinema that has an absolute monopoly on cold fountain drinks, but disastrous for a business that faces competition.



Category: Examples

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Related Material

Charging More For Less By Redefining Value

The idea of charging more for less and calling it a bargain might seem crazy, but if it makes sense if the smaller size is presented as a greater value.

Slack Fill, De-Sheeting and Weight-Out: Stealth Price Increases

Slack fill, de-sheeting and weight-out – different terms describing the common practice of stealthily increasing price by decreasing quantity.

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