Irrelevant Price Comparisons – How They Work
Surely you’ve heard many more of these shocking comparisons. Read any of these linked articles and you find they are justifiably true. On a price per weight basis, rice flavoring is more expensive than a Porsche. On a price per volume basis, the second two statements are true as well. Although true, they are misleading and irrelevant.
What is going on? The answer is simple. We all have expectations about what items are worth. Although we don’t explicitly rank the value of all of these items in our minds, there is an implicit ranking. For example, you probably think a Porsche is worth more than rice flavoring, blood is worth more than ink and gas is worth more than water.
These comparisons are created when some imaginative person uses a common measure for the two items even though both products are not purchased using this single measure. We don’t buy a Porsche by the pound. We don’t buy blood at all. These are the easy ones to figure out.
What about water and gas? The bottled water “study” linked to above shows that a 9 oz. bottle of Evian water sells for $1.49. Do the math and that results in $21 for a gallon of Evian, way more expensive than gasoline. But typically when you’re at the gas station you buy a small amount of water and 10 gallons or more of gasoline. It’s not a reasonable comparison.
What would it cost to buy 10 gallons of “bottled” water? A check of Alhambra’s web site finds they will deliver 10 gallons of water to your house every two weeks for under $15. That is only $1.50 per gallon. It would be even more economical if you drove to pick it up yourself.
Although fun, each of these price comparisons is completely irrelevant. They do not add any value to a potential customer making a decision. The only possible value they have is to grab someone’s attention, to shock them.
Of course sometimes there are absolutely shocking price comparisons that are true, like this one: “This T-shirt is more expensive than a car.” However, if you’re even considering purchasing this t-shirt, money doesn’t matter to you anyway.
Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author
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Photo by Kokopinto
Thank you to my friend Jon Manning for the blog on Price Benchmarking that got me thinking about this.
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