Dishonest business practices
The following is a list of business practices that I find to be dishonest.
You walk up to the concession stand at a movie theater and ask for a small drink at the outrageous price of $3.00. The worker tells you that for an additional 50 cents, you could get a large which is twice the size. This seems like a much better deal, so you get the large.
The reason companies do this is because they want to sell as many larges as possible because they make the most money off them. Although the ratio of profit on smalls is higher, the total profit on larges is greater. Soft drinks are extremely cheap, so going from an 8oz to a 16oz, really only costs a few cents more. So even if there is only a 50 cent difference between the two sizes, they're still making more money with the large.
So, in order to manipulate customers into buying more larges, the company bumps up the price of their smalls. By doing this, the customers have no reason to buy a small because the large is such a better deal. The 8 oz drink costs about $0.38 an ounce while the 16 oz drink costs about $0.22 cents an ounce. So, practically nobody buys the small anymore, and the company makes more money.
So, the final outcome is that by raising the price of the smalls while keeping the price of the large the same, a company will make more profit. The only downside falls on the customers who would normally buy a small, they now have to spend more money than before.
- Credit card markups
- Tenth cent markups