Thursday, May 02, 2013

L'eggs Pantyhose

Since I had such great success posting yesterday about a business-related issue, I thought I'd continue the trend and relate another business story I heard from long ago. A story about L'eggs Pantyhose.

Now just to be clear, I am not now, nor have I ever been a consumer of L'eggs Pantyhose. However, I may or may not have been a person who played with the packaging. You see when the product was first released in 1969, I was a 10 year old boy (if you want to devise my age from that, do the math). The product was packaged in what looked like a large white egg. I honestly don't remember playing with the eggs, but it seems like something I would have done.

Originally the product sold for 99 cents. However sales were weak. The manufacturer did what any good manufacturer would do, it brought in consultants. They evaluated the product quality and found that it was acceptable. They evaluated the packaging and (at the time) kept it. They evaluated the marketing effort and found it within expected norms. And then they evaluated the price.

The consultants found the pricing model to be good. The margins were good. The price was within the range that the expected consumer could pay and was, at 99cents, a bargain. So what did they recommend? Increase the price. To $1.49. Now that may not sound like much, but it's a 50% price increase. No change to quality, just 50% price increase. No change to style, no change to quantity, just 50% price increase.

And sales increased. Because the perception was that the product was now on the level of other products. (I've seen a similar reaction with pricing at an institution of higher learning) And consumers bought more readily.

So what do you think this says about the product? What does it say about consumers?

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