Reference no: EM133339708
Assignment:
A recent article in Canadian Businessexplains that Canadian icon Tim Hortons is tricking consumers into buying more coffee. The trick, if you want to call it that, is a well-established pricing strategy similar to price lining. You offer consumers a little more of a product, in this case, coffee, while you more than offset the extra product by charging more. In this specific case, Tim Hortons increased the size of its extra-large coffee to 24 liquid ounces, up from 20 ounces, which resulted in an extra 0.19 cents in profit per cup sold.
While 0.19 cents may not seem like a lot, think about the thousands of cups of coffee sold daily in every Tim Hortons' store. Tim Hortons states that the change in cup size had more to do with customer demand than raising profit, as marketing research indicated that their old extra-large cup was not large enough. The result of the change was an increase in all cup sizes, as the old extra-large became large, large became medium, and the medium became small. The original "small" cup size was abandoned.
Koert Van Ittersum, a marketing expert in behavioral bias that leads to overconsumption, says, "Most consumers will continue to order the same size of coffee out of habit and not pay attention to the size difference. The result is consumers will pay more and consume more." Tim Hortons, of course, is not the only restaurant chain to embrace upsizing as a way to increase consumption and profit. Starbucks, with its 31-ounce Trenta, and 7-Eleven's 32-ounce Big Gulp are still much larger than Tim Hortons' extra-large offering. Still, health experts are wondering how much bigger drinks and food servings can get and if consumers won't ultimately say no to bigger and bigger portions.*
QUESTIONS
- Are companies acting ethically when they increase the size of their portions as a way to get consumers to consume more and ultimately pay more for a product?
- What are some of the potential advantages and disadvantages of increasing the size of your products?
- Do you notice when your favorite restaurant or coffee shop changes the size of its portions? If so, does it impact your purchasing behavior? Why or why not?
- Using the Internet, do some market research to determine what companies are selling the largest soft drinks and cups of coffee. Has there been any backlash to these extra-large sizes from health experts and consumer advocates? Can you find any incidences where companies reduced the size of their products as a result?