What Heinz Discovered

Retail merchandising strategy is almost completely governed by the principle of price elasticity.  It follows that if price of a product is increased overall units sold drop and vice versa.  But this is not always the case.  Heinz discovered by increasing the size of ketchup bottles from 24oz to 36oz sales increased with no reduction in buying frequency.  Turns out consumption of ketchup follows its own convention.  Mothers buy ketchup for kids so when there’s less than 3/4th left they ask their kids to go slow and consumption rate falls.  With the 36oz bottle 3/4th is still a lot.  When consumption was viewed side by side it was discovered they got over at approximately the same time.  The replacement of 24oz with 36oz helped Heinz increase ketchup sales 13%.  Kaching.

Related article: Price Elasticity Parabola

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s