Friday, September 26, 2008

Saving by Buying in Volume? Think Again...

Buying in quantity, so the thinking goes, is an excellent way to save money. Strangely enough, if you follow that thinking you often pay more on your purchases than you would if you bought smaller packages.

Case in point, the other day I was grocery shopping at Safeway, and my shopping list took me to the cereal aisle. I was shopping for some snap, crackle and pop. As do many cereal brands, Rice Krispies come in a number of sizes, and typically, larger boxes cost more but offer a lower price per ounce of product. Not that day - this time, the 12 oz box had a cost per oz of 20 cents, while the larger, 18 oz box cost 31 cent per ounce... about 50% more per unit of weight...

But wait - as they say on the infomercials - there's more. That particular week, Safeway was running an even more aggressive promotion. If you bought 5 small boxes, you got an extra $5 discount, or another $1 per box. Talk about saving money by buying small...

Why does this happen? Who knows? Maybe Safeway just got stuck with a surplus of small boxes. Maybe Kellogg's brand manager just bumped his or her
head on a hard surface. I have no idea. This certainly makes no sense from an economic perspective, but if there's one thing that I have learned over the years, it is that people (and especially companies) typically have an economic reason for what they do... Regardless, if I had gone after the large boxes assuming I am getting a better deal, I would have paid more for my purchase. So what's to be learned from this little experience? For one thing, if you are buying products that are offered in multiple sizes, don't get into the habit of buying one specific size. Check the prices each time.

Another lesson to be learned is that the price on the box itself is no indication of the relative price of the product you are buying. The different sizes of containers makes such a comparison difficult. If you really want to know what you are paying for your products, take a look at the price per ounce or the price per unit. That's the only meaningful, apples to apples comparison.

By the way, adding pictures to your blog is much easier when you are walking around with an iPhone. I love that machine.

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