Prepared by Ian Jarratt, Queensland Consumers Association, Australia. Email: firstname.lastname@example.org.
Unit pricing review
The results of the federal government’s review of the mandatory Grocery Unit Pricing Code, which started in November 2018, have still not been announced. Unless renewed, the Code will cease to exist on 1 October 2021. The previous 1 October 2019 expiry date was extended for two years to allow completion of the review.
Given the high level of consumer use of, and support for, the grocery unit pricing provided by the retailers covered by the Code, it is highly unlikely that review will recommend that the current Code be allowed to expire on 1 October 2021. Therefore, the key issues for consumers are whether the review will also recommend, and the government will take action that results in:
- changes to the Code’s provisions and administration that will improve the quality and amount of grocery unit pricing provided by retailers; and
- other types of retailers, such as chemists and hardware stores, also being required to provide unit pricing for products sold in prepackages of constant measure.
Unit price differences
The Association has recently investigated differences in the unit price of several pre-packaged grocery items and the impact of assumed consumer brand (national and supermarket own) and pack size preferences on potential unit price savings. Three types of unit price comparisons were examined (pack size only within brand, brand only within pack size, and both pack size and brand) for seven homogenous pre-packaged products (butter, flour, sugar, rice, cheese, milk, and olive oil) in similar types of packaging. Homogeneous products were chosen to reduce the influence of quality differences and only regular prices (not special offers) were used.
The range in unit price savings possible within each type of comparison was very large between items. For example, when comparing pack sizes within brand the range for the national brands was 4% to 42% (average 20%) and 0% to 34% (average 14%) for the supermarket’s own brand. Interestingly, the unit prices for different pack sizes of two items were equal and very small (2% and 4%) for two other products. This illustrates very well why using rules of thumb (heuristics) for product choice is less effective for achieving savings than comparing unit prices. Relevant also to the need to compare unit prices, in this exercise all the unit prices of the large packs were either lower than, or equal to, those of the small packs i.e. there were no quantity surcharges. However, quantity surcharges do exist.
Regarding between brand differences in unit price for the same pack size, the unit price of the supermarket’s own brand was always substantially lower than the national brand’s. The range was 23% to 67%, and the average was 37%.
When it was assumed that the consumer was indifferent to pack size and brand and would choose the lowest unit priced item the % differences between the highest and lowest unit prices (the maximum potential savings) were very high (the range was 38% to 70% and the average was 52%).
The Association has also investigated the differences in the unit price and potential unit price savings of nine grocery items pre-packaged as individual serves/portions (e.g. pouches and mini cans) and in regular packs. The unit price of all the individual serves was much higher than the regular pack and the potential unit price savings from buying the regular packs ranged from 28% to 75% and averaged 53%.
In November 2020, the New Zealand Commence Commission began a market study into the grocery sector. Its Preliminary Issues Paper stated that: “Healthy competition is facilitated through consumers having: access to the information they need to compare the offerings of alternative providers; the ability to assess this information; and the ability to act on this information.” It also mentioned the relevance of unit pricing to informed consumer choice and asked questions about “the factors which may affect consumers’ ability to make well-informed decisions.”
Submissions on the Paper by Consumer NZ and Ian Jarratt said the unit pricing currently provided voluntarily by the two dominant grocery retailers is unsatisfactory for consumers due to non and inconsistent provision, use of inconsistent units of measure, and inconsistent and inadequate display. Both submissions called for called for major improvements to the current arrangements. These, and other, submissions are available here.
The Commission is due to release its draft report for consultation in mid-2021 and a final report to Government by 23 November 2021.
Only a few US states/territories require food retailers to provide the unit price of products sold in prepackages of constant measure. And, the unit price display requirements vary greatly between these jurisdictions which results in great variation between them in the quality of display (legibility, prominence, etc.) and the usefulness of unit pricing to consumers.
This is illustrated by the following photos of shelf labels taken in stores of the same retailer in two states (Massachusetts and Maryland) that require the provision of unit pricing.
In Massachusetts (which has very specific display requirements) the unit price is in large print on a specific coloured background and indicated by the words “unit price”, which make it easy for consumers to notice and read. However in Maryland (which does not have any display requirements) the unit price is in small print and much less easy for consumers to notice and read.
The quality of the display of unit pricing also varies greatly in states/territories which do not require its provision, but where some retailers provide it voluntarily, and the quality is often low. This is despite some of these state and territories having laws that require voluntarily-provided unit pricing to comply with certain display requirements, and despite the existence of the: National Institute of Science and Technology (NIST) Unit Pricing Guide – “A Best Practice Approach to Unit Pricing” (free) International Standards Organisation (ISO) Standard ISO 21041:2018 “Guidance on unit pricing” (for purchase).
A study by two Japanese researchers which investigated the underlying process by which a brand’s unit pricing for multiple package sizes influences consumer evaluations by incorporating several mediators and moderators has been published recently. Two-unit pricing tactics, quantity discounts (QD) and quantity surcharges (QS) were examined in experiments involving several hundred consumers. A QD is when, relative to a smaller pack size, the unit price of a large pack is smaller, and QS is when it is higher.
The findings included that the consumer evaluations of the tactics were influenced by the inferred motive of the price setter and that the effect is more potent when consumers have a stronger quantity discount belief. And, the effect is more salient when consumers are frequent users of unit prices. The conclusions included that when applying quantity surcharges to products, it is essential to provide additional information to consumers to preclude the possibility of negative evaluations. The paper is “Unit pricing for multiple product sizes: identifying moderators and mediators of consumer evaluations” byMiyuri Shirai and Takuya Satomura, Faculty of Business and Commerce, Keio University, Tokyo, Japan. It will be published in the European Journal of Marketing and can also be accessed here.
As indicated in the October 2020 Update, in May 2017 the EU published some very interesting (and not well known) information about unit pricing, including the results of:
- On-line experiments involved a total of 4,149 consumers in eight countries making on-line “mock purchases” of cookies and laundry detergents from 2 brands and 3 pack sizes and explored the effects of presence and absence of unit prices, negative (larger pack lower unit price) and positive (larger pack size higher unit price) size-unit price relationship, and different types of measurement units (only for laundry detergent).
- An on-line survey of 23,501 people from the EU28 countries, plus Norway and Iceland, that included the Price Indication Directive (PIR) (98/6/EC) which requires all member states to mandate via state laws the provision of unit pricing for pre-packaged products.
The work was part of the “Fitness Check of Consumer and Marketing Law and of the evaluation of the Consumer Rights Directive”. Information about the online experiments and the on-line survey is available in a report, Consumer market study to support the fitness check of EU consumer and marketing law, available here. Information about the experiments starts at page 370 and about the survey at page 108.
That Update indicated that some of the results would be provided in this edition and this is done below:
The experiment results show that the presence of unit price information affects respondent’s decision-making behaviour. When respondents had to indicate the product with the lowest unit price (i.e. unit price comprehension) the indication of the unit price had strong impact. When unit price information was present, a majority of respondents (65%-72%) did select the product with the lowest unit price. By contrast, when unit price information was absent, only 39%-45% of the respondents selected the correct product when the unit price-size relationship was negative and 26%-28% when the unit price-size relationship was positive. This difference in findings between the positive and negative unit price-size relationship may be due to consumers’ general belief that larger packages are cheaper per unit, which is not always true.
When unit price information was available, respondents shifted to buying larger packages that had lower unit prices (negative unit price-size relationship). There was an even larger shift to buying smaller packages where those had lower unit prices (positive unit-price size relationship) compared to the situation where the unit price was not indicated. As a result, the average price per unit paid decreased when unit price information was present, thus indicating that this information is used in decision-making. Again, this decrease was larger for a positive unit price-size relationship than for a negative unit price-size relationship. For detergents, the effect of unit price information did not depend on the ways this information was presented – the outcomes were not affected by whether the unit price was given per litre or per wash load.
The stronger effect for the positive unit price-size relationship can be explained by a general perception that unit prices decrease with increasing package size. The findings of the post-experiment survey, which was conducted after the respondents completed the unit price experiment, show that 78% of respondents said that larger-sized packages generally have the lowest unit prices. Consequently, it is likely that, in the absence of unit price information, respondents already chose larger packages in the belief that these packages offer a better deal. This left less room for a shift towards buying (even) larger packages when unit price information was added. By contrast, adding unit price information in a situation with a positive unit price-size relationship had a stronger effect in helping consumers to get a better deal.
At least half of the respondents perceived the unit price as important in advertising. Also, respondents indicated that they benefitted most from the right to see unit price information. 35% of respondents said they benefitted enormously or considerably from this right.
When asked to give details on their most recent problem, lack of indication of the unit price (18%) was the third most frequent response and it was the second most important problem reported being encountered in offline shops.
 I Jarratt’s Note: This result is not unexpected since the relative sizes of the unit prices were identical for both units of measure. Different results could have been expected if the relativities had been different, as would have occurred if the concentration of the liquid (and thus the wash loads per litre) had differed between the brands. The main justifications for using per wash as the unit of measure for laundry, and some other products, are differences in product concentration and the variety of ways the product may be sold e.g. powder, liquid, tablets, capsules, etc.