DALLAS -- Retailers could see higher profits if they raised prices on certain foods, a researcher said, after releasing the results of a new survey that shows most consumers would buy the same quantity of product even if the price was increased slightly.
The survey results, unveiled at a seminar at the Annual Meat Conference here last week, showed many consumers quickly forget the prices of foods in their shopping cart. The findings suggest retailers may be underselling their merchandise.
"A small increase in the price without a subsequent drop in volume will go right to your bottom line," said Michael Zeman, vice president of client services for Roseville, Minn.-based Sorensen Associates, who headed up the consumer price-sensitivity poll for the American Meat Institute, Arlington, Va.
Zeman and his colleague, Mark Boyer, a partner with PMG, a Lindale, Texas-based consulting firm, covered the results of the consumer price-sensitivity poll at a workshop called "The Price of Success." The survey's conclusions provoked a flurry of questions and comments from the audience, made up primarily of retailers and suppliers.
The results suggest price is not a primary motivator in purchasing decisions, and that's not news for some retailers who know consumers are willing to pay top dollar for products that offer value and convenience. Members of the audience pointed to premium coffee and bottled water as examples.
What would happen if meat products had the allure premium coffee has? Boyer wondered. "If somebody could create cachet with meat that others have done for coffee?"
"We put too much emphasis on price, not enough on perceived value," one audience member noted.
"We in the meat department are guilty of pricing from a functional level, not the emotional level," a retailer said.
More than 300 consumers in six markets were interviewed over two days in March. Zeman said he and his colleagues felt it was important to question shoppers while they were shopping.
Using ground beef as an example, Zeman noted 65% of shoppers who were surveyed said they would continue to buy the same amount of meat if the price was raised 25 cents a pound.
"We've found most retailers undervalue what they sell," Boyer said.
Certain segments of the population are more sensitive to price, particularly women, consumers over the age of 45 and consumers with household incomes of less than $50,000. The research also found when prices are raised, a household of three or more is less sensitive to price, but when prices are lowered, consumers from larger families are more sensitive.
"They were more prone to stock up if you lowered price," Zeman said. "If you raised the price, the tendency, to a larger degree than a smaller household, is to buy the same amount. Part of the theory is a larger household needs to feed more mouths. If you raise the price, they still need to buy a large quantity of food."
The research also suggests retailers should be careful to run promotions with the demographics of their consumers in mind.
While the conclusions echoed earlier studies, the extent to which consumers lack awareness came as a bit of a surprise, said Zeman.
"One theory is shoppers are so busy," he noted. "They don't have a lot of time to ponder their decisions. They just grab and go and move on to the next item."