Imagine you’re standing in the laundry-powder aisle of a supermarket. There’s a cacophony of competing brands. Also, individual brands have different-sized packages. How do you determine which option offers the best value?
Trolley trials: unit prices are meant to help shoppers make well-informed decisions in the face of overwhelming choice.
Australian governments, like their counterparts across the developed world, believe unit pricing allows consumers to make well-informed decisions. That makes intuitive sense. Yet even unit-price boosters have had to concede that lots of consumers either aren’t aware of unit prices or aren’t influenced by them.
Along with two colleagues, Dr Jun Yao, a lecturer at Macquarie Business School, set out to discover whether making unit-prices more obvious would change how Australians shopped.
Decisions, decisions, decisions
The average trip to the supermarket involves ‘inter-brand’ and ‘intra-brand’ decisions.
“Do I buy OMO, Cold Power, Earth Choice or the store brand?” Dr Yao says. “Once I’ve worked that out, do I buy the small, medium or large packet?
“Let’s say I’m an OMO man and I need to choose between a 1kg packet for $10, a 5kg packet for $45 and 10kg packet for $80,” Yao continues. “I understand there’s a discount for buying in bulk. But if I’m not aware of unit pricing – or can’t locate unit-pricing information – I can’t calculate the laundry-powder bang for my buck I’m getting. If unit-prices are available, I’ll know the unit prices are $10 per kilogram for the small packet, $9 per kilogram for the medium and $8 for the large one.”
There’s scant evidence Australians – even those that shop at Costco, Aldi and Kaufland – pay much attention to unit prices.
Complicating matters further, packaging sizes are not always consistent.
“The store brand might only come in a 2kg packet that costs $19.50 [i.e. has a unit price of $9.75 per kilogram],” Dr Yao says. “Without the unit price information, it’s not immediately obvious whether the 1kg packet of OMO is better value than the 2kg packet of store-brand laundry powder.”
Theoretically, Australians could reduce their grocery bills by purchasing products with low unit prices. (Indeed, this is precisely the marketing pitch of retailers such as Costco, Aldi and Kaufland, which promise their customers low-priced groceries.) However, there’s scant evidence Australians – even those that shop at Costco, Aldi and Kaufland – pay much attention to unit prices.
More visible prices: Dr Jun Yao says user-friendly price information would allow shoppers to make well-informed decisions.
A cynic might put this down to retailers making such information as inconspicuous as possible (a low unit price usually translates into a modest profit margin for the retailer).
“There’s no standard format for the presentation of unit pricing in Australia,” Yao notes. “The unit price can appear anywhere. It’s typically put on the price tag in standard black ink in a 4mm font – even smaller than the 6mm font American retailers use.”
Do looks matter?
So, could more prominent unit pricing information change shoppers’ buying decisions?
Yao and his colleagues recently carried out an experiment to determine if it could. They recruited a representative sample of 200 Australians. They got them to answer a series of questions (e.g. “I will grocery shop at more than one store to take advantage of low prices”) to determine how price conscious they were. Then they asked them to do an online grocery shop in front of a computer with a (subtle) infrared light trained on their pupils to track their eye movements.
This allowed Yao and his colleagues to discover whether, for example, highlighting the unit price in yellow, or putting it directly under the retail price, or writing ‘unit price’ above it, firstly, led shoppers to pay more attention to unit prices and, secondly, resulted in them opting for brands with lower unit prices.
Unsurprisingly, it turned out that if unit prices were made more obvious than shoppers paid more attention to them.
The future of unit pricing
The Consumer Federation of Australia is currently lobbying for “grocery unit prices to be much easier for consumers (including those with disabilities and in vulnerable or disadvantaged situations) to notice, read, understand”.
The results of the experiment suggest the Federation’s belief that 'more and better' unit pricing will be of 'great benefit' to consumers is optimistic.
It’s shoppers who are less price-conscious, who are more likely to be affluent, who start noticing unit prices when they are presented boldly
Yao and his colleagues made two significant discoveries after conducting their experiment:
1) Price-conscious consumers ‘fixated’ less on unit prices than big spenders You would expect the price consciousness of, for instance, an old-age pensioner and a middle-aged corporate lawyer to be different. Interestingly, it was the lawyers rather than the pensioners who spent the most time looking at unit pricing.
“This suggests price-conscious Australians, who are more likely to be on low incomes, have greater experience in looking for unit prices and taking them into account when making buying decisions,” Yao says. “It’s shoppers who are less price-conscious, who are more likely to be affluent, who start noticing unit prices when they are presented boldly.”
2) Big spenders care less about unit prices “If I’m not price conscious, you wouldn’t expect me to buy the store brand laundry powder over, say, OMO, just because it had a lower unit price,” Yao says. “This is how the less price-conscious shoppers acted during the experiment. Unit prices impacted intra-brand choices significantly more than inter-brand ones. That is, unit prices rarely prompted shoppers to switch brands, but they had an effect on whether the shopper bought a smaller or larger serving of their preferred brand.”
Clear pricing information remains a worthwhile goal
Despite the results of his experiment, Yao remains a proponent of unit prices.
“Even if many of them won’t avail themselves of it, consumers should be provided with user-friendly price information that allows them to make well-informed decisions,” he says.
“The research in this area suggests that grocery buyers who have access to prominently displayed unit prices end up being more satisfied with their purchases, regardless of which brand they opt for.”