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July 26, 2012


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I find that a lot of people get into trouble when they focus too much on unit cost at the expense of cash flow. Even if you correct for the bad math in the above example, I'd still prefer a 33% price reduction over a 50% product volume increase.

Why? Cash flow. When I go to the store to buy shampoo, I expect to pay about $5 for a 16oz bottle. It lasts me about 6 weeks (I'm a dude with short hair). If given the option between spending $5 on a 24oz or $3.35 on the 16oz, I'd take the latter deal all day long, even though unit costs are the same. The savings in my pocket today can be used to pay down debt, invested, or added to the "fun budget" (thus preventing cost overruns in that oh-so-important category).

Cash is king, and I don't want my assets tied up in commodities.

I very rarely picnic or eat picnic items. On the occasions I need to buy ketchup or mustard I turn a blind eye to unit price and just grab the smallest container knowing full well I will not use it all up before its expiry date. Unit price is not important in this circumstance even if the find price of the larger item is a tad lower because then I'd be eventually wasting food.

In most other cases paying attention to unit price is part of being an intelligent shopper.

Most people wouldn't do the math- especially since the problem statement makes them seem like they would be the same. The grocery store I shop at has the $/unit size printed on the price labels... so I usually just check that out. There have been a few instances when they use different unit sizes for different brands of the same product and I will do the calculation but I really HATE having to do it- shopping for groceries is bad enough without making me do unit conversion calculations!

-Rick Francis

I have seen major companies commit this pricing error - raising the price some percentage and then discounting the same percentage. They didn't realize that they reduced the price more than they intended to.

I normally look at the price per unit and if I can't figure it out right away in my head i'll break out the smart phone and do the calculation. Seriously :)

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