Today is a really warm day in Sydney- the weather forecast tells us that it may be the hottest ever day in September – with the temperature rising to 34 degrees. A perfect day you would think to kick back and stop thinking about pricing. But of course – I really like pricing so please forgive me. The warm weather got me thinking on the concept of price acceptance – I will explain how.

 

I have always been interested in the role of Coca Cola in pricing in general – we had previously covered the interesting history of Coke and price increase policy – and strangely found that though it is the world’s most powerful brand – they actually grew by keeping reasonably flat pricing for many years.

Anyway – back to explaining why I am thinking about price acceptance and Coca Cola.

 

I was sitting in the back garden and thought I would really like a chilled can of Coke to cool down.

Price-acceptance-coke-can

 

I do not consume as many soft drinks as I used to – I guess I am more health focused than previously.

 

After enjoying my can – I remembered reading an article recently that Coke were considering reducing the size of the average can.

 

I found an article – after a brief internet search and indeed it was correct.

 

According to the NZ Herald newspaper – linked here:

 

“Coca-Cola has confirmed plans to shrink the size of its cans – but says the price will also be coming down accordingly.”

 

“The can size has been reduced by 7 per cent, from 355ml to 330ml.”

 

“Coca-Cola Oceania spokesman Keith Mason said the move was made following research showing people preferred a smaller size.”

 

“Research and consumption trends showed that 330ml was a more convenient and enjoyable amount for individual consumption while at home, Mason said.”

 

Why price acceptance is vital for consumer brands

 

This article highlights a number of themes that we in the pricing community (see our blog on pricing career challenges) will immediately understand – firstly, by reducing the size of the can, Coke is basically expecting to sell more.

 

This tactic could be expected to appeal to a more health conscious demographic which has been avoiding soft drinks. It could be seen as making the product more prestigious i.e. a smaller serving could be perceived as more socially acceptable (and social acceptance and signalling is vital in today’s marketplace).

 

The other (more important) aspect is ensuring price acceptance from loyal consumers and ensuring that people do not feel the goal posts are being moved – i.e. paying the same for a smaller or inferior product.

 

Price-acceptance-on-hot-summers-day

In reality – the cost of production of the can of coke will change very little (I assume a few cents at most) – but the retail price will likely have to decrease noticeably to ensure it does not look like a cheap cash grab.

 

In this case – as in may areas, perception is the most important thing.

 

Particularly when you have a multi billion dollar brand to protect.

 

How much would you reduce the price by? It shows how important it is to be customer centric.