Unit price is the cost per unit of a product, regardless of packaging, used by both consumers and purchasing managers to determine the true cost of a product. It is important to check unit prices as larger packs may not always have a lower unit price and downsizing is common.
Unit price is a valuation method by which buyers can determine the actual costs of products. A unit price is the price per unit of the product, which can be calculated for any product, regardless of how it is packaged. The unit price has significant applications both in the industrial world and in the consumer economy.
Purchasing managers at industrial facilities must consider many product-related issues when determining their purchases. Although cost is not always the determining factor, it is one that applies to every buying decision, regardless of the product. However, not all competitive products are packaged similarly, and it is up to the purchasing manager to determine the true cost of each. For example, the purchasing manager may have to purchase powdered soap for a laundromat and must choose between two competing products, one of which is packaged in 2-kilogram boxes and the other in 5-pound boxes. To determine the actual cost of powdered soap, the purchasing manager must know the unit cost of each powder, that is, convert it to grams or ounces, and then calculate the cost per gram or per ounce.
The same principle holds true in the supermarket for the average consumer. Most states in the United States require unit prices at supermarkets to assist consumers in their unit price comparison. For example, if a dozen eggs cost $1.20 US dollars (USD), the unit price, in this case the price per egg, is 10 cents. If a package of 18 eggs costs $1.50 USD, it offers the best unit price of 8.67 cents per egg. Therefore, the package that is more expensive because it is larger might offer a better deal for the consumer.
The traditional rule of thumb in marketing was that the higher the volume, the lower the unit price. This was so because it moved large quantities and reduced the cost of holding inventory. Marketing phrases like “Great size of economy” validated that truth. However, since the late 20th century, this assumption has not always been true, especially in grocery stores. It is much more common for larger packs to have the same or higher unit price than smaller packs, even from the same brand. Another more common practice in the grocery industry is product downsizing, where the price and packaging remain the same, but the amount of product contained is reduced by a small amount.
Therefore, prudent consumers are advised to always check the unit price of each item they select to purchase at the supermarket. Likewise, their counterparts in industry, purchasing managers, must always determine the unit price of each item selected for their company’s operations. It will not always be the case that the item with the lowest unit price is purchased, but the unit price is a crucial element in the purchase decision.
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