Chew on This: Different Prices, Same Product
Have you noticed that the price of your favorite brand of chocolate is often very different from one country to another? If you did, have you wondered why the prices are so different? We did, and decided to find out from experts why the price of the same product (be it chocolate or something else) can be very different across countries, and even different within the same country.
During our last summer holidays, we had gone to different countries and cities and we checked the price of a Snickers chocolate bar wherever we could. In each case, we wrote down the price and weight of the bar (see table).
As can be seen, the prices were recorded in different currencies. We converted them to Indian Rupees, and then calculated the price per gram of chocolate. The prices varied from Rs. 0.56 to Rs.1.82 per gram, with the average being Rs.1.40 per gram.
We showed this information to many professionals including professors and business consultants. The reasons they gave us were the following:
(1) The types of competitors can be different from one country to another. So the product may be priced differently because of the various pricing strategies that the competitors follow in each country.
(2) Cost of raw materials affects the price of the product. Snickers uses peanuts, caramel, cocoa etc., the price of which may vary in different countries.
(3) Exchange rates fluctuate a lot, which affects the prices of the materials imported to make the product, and also affects it if the finished product is exported.
(4) People have their own personal preferences, so they may be willing to pay more for a certain kind of candy when compared to Snickers, so the company might have to lower the price of the product to attract customers.
(5) Different countries may have different costs of manufacturing or cost of distribution (small stores vs. malls vs. online etc.)
(6) The affordability of customers in different parts of the world is different, primarily due to the fact that salaries and wages are not the same in all countries. Thus not all people can afford to pay the same amount of money for the same product and this leads to different prices in different places.
(7) The import duties like quotas and tariffs are different in various countries and therefore the price of the product will be higher in the country with higher import duty.
(8) Local taxes such as VAT and taxes imposed on the company can also affect the price of the product.
As seen above, there are many reasons due to which price of the same product is different in different places. Thanks to the reasons given to us by the professionals, we have finally understood why this happens.
By Meera Pereira and Tanupriya Mehra