Retailers Using "Go To" Concept To Raise Prices
Retailers use an old trick that basically always works with consumers when it comes to raising prices.
Purdue University Retail Expert Dr. Richard Feinberg says it's called the "Just Noticeable Difference." Feinberg says that refers to the point where consumers barely notice higher product prices and perhaps smaller package sizes. In short, it's how companies can maintain or boost profits and/or decrease overhead without making consumers angry.
Feinberg says Starbucks is the latest case in point. The coffee chain raised its prices ever-so-slightly today. Starbucks is blaming higher overhead costs. Prices for cups of coffee have increased from five to 20 cents, depending on the coffee size.
Feinberg says Starbucks, Apple and McDonald's among others are very strong brands that have made their way into the consciousness of consumers. He says consumers associate their favorite brands with convenience and pleasure and often don't care when they detect something just below a "just noticeable difference" in prices.