FREAK-Shots: Tequilanomics, and Fenway Gas

From a reader in Annandale, Va., named Christopher Galen, who earlier sent in his daughter’s third-grade economics quiz (never too young to start!), comes this pricing quirk:

That’s right: the cost per unit is cheaper on the smaller version, which isn’t the kind of pricing we’re accustomed to in this supersize-me era. (For an interesting related read, see “Does Food Marketing Need to Make Us Fat?” and a Forbes summary of same.) As Christopher writes:

I’m passing along a photo I took Friday at one of the state-run ABC liquor stores in Fairfax, Va. … Neither [bottle] was on sale, and it contrasts with most other liquor offerings, where larger product offerings tend to have a lower unit cost.

Which led me to wonder — and no, I had not done any in-store sampling — is this simply the counterintuitive marketing strategy of a state-run enterprise? Is the store trying to discourage excessive alcohol consumption by making smaller product sizes less expensive?

Is the store counting on the fact that most tequila patrons may not be able to focus on the fine print?

All fine questions. But I fear — as with many pricing anomalies we’ve seen on this blog — there may well be less strategy involved than we think, and the quirk may be simply due to human (or computer) error.

While we’re on the subject of creative pricing, let me pass along a photo I took a summer or two ago at a gas station very near Fenway Park in Boston, where the Red Sox play:

Hmm — no gas. What do you think happened? Had there been a terrible storm that strangled the gas supply? Had there been a strike of gas-station workers?

Hardly. The occasion was nothing more dramatic than a Red Sox home game. The station’s real estate is apparently more valuable for parking than for selling gas:

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  1. Nylund says:

    Maybe the idea that larger sizes have lower per-unit costs has become so ingrained in the consumer’s mind that it’s become an automatic assumption that sellers can take advantage of.

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    • Jason says:

      Target does this all of the time. The Consumerist blog has lots of pictures where Target sells a 2 pack of toothpaste for more than the price of 2 tubes, etc. Calculating unit price at Target is one of my least favorite activities and keeps me from shopping there. Presumably they get a lot of people this way, though.

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  2. Mike says:

    I used to live next to that gas station. They are remarkably efficient at jamming cars into the lot. I figured they fit about 75 cars into the lot at $50/car. There’s no way they could make that kind of money selling gas in an area that sees little evening traffic after the game has started.

    I’d like to see how bad the Sox have to become in order for them to decide to start selling gas again. Demand for games is already dropping and this station and the one across the street have lowered their prices.

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  3. Adam says:

    I’ve seen paper towels sold individually cheaper than buying 6 roll packs when calculated at price per square foot of paper towel.

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    • Chris says:

      I’ve read that many gas stations actually don’t make much profit on the gas they sell and mostly rely on items sold in the attached stores.

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  4. Justin says:

    Sometimes liquor stores can get better pricing on select sizes / liquours based on the distributions need to move product and the quantity bought. A friend who runs a liquor store has sold 1.75s for less than 1 liter based on a sale price he received and needed to move a lot of inventory

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  5. AJ says:

    I can’t make out the numbers, can someone put them in the comments?

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  6. Howard Brazee says:

    I drink a fair amount of Ocean Spray Cranberry juice. Almost always, I skip the more convenient larger bottle (with a handle) because it is more expensive per ounce (around here in CO) than the smaller bottle. I have no idea why this is so.

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  7. Charlotte says:

    I used to live near that gas station too. The parking became much more economical when it was late in the season and the Red Sox had no chance to make it to the World Series.

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  8. pjt says:

    Over here, milk is sold in 0.2, 0.5, 1.0 and 1.5 litre cartons. The cost per litre is lowest in 1 litre carton (about 0.75 € depending on shop) and slightly higher in the largest carton (about 0.80 € per litre).

    The reason given by shops is simple: logistics. The one litre carton is most popular, and sells much higher volumes. Thus the cost to handle it is lower.

    That’s not the real reason, of course. The real reason is that people who buy largest cartons are prepared to pay slightly more. They may not care, or they may not think and compare the prices at all, just assuming that largest carton is cheaper per unit. It isn’t. The unit price is clearly marked at the stickers on shelves (as required by law).

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