Making money 3 mints at a time!
Yesterday after a dinner at a Bangalore restaurant, my colleagues and I were offered mints: miniature packs of 3 Tic Tac mints each!
The price on these packets for retail sale was 50paise (approximately a US penny).
I decided to do a comparison with US prices (I admit curiosity got the better of me). A Tic Tac box is available for 58 cents on Amazon if bought two dozen at a time, excluding shipping cost of course!. If I assume that each box contains 35 mints, I come up with approximate price of 1.6 cents per mint.
Interesting isn't it? The supplier is able to make a profit on these penny packets despite all the extra (though miniature) packaging and distribution costs.
To make the product affordable to millions of cash-flow sensitive customers, manufacturers package consumer products in single use packets -- everything from Tic Tac mints to shampoos and laundry detergent, or even a single text message sent across the country. The trick is in how to maintain profitability even as product sizes (and therefore transaction sizes) shrink to zero.
Comments
Small packets are suitable to enhance market penetration. This is one of the main strategies enter into markets where per capita income and expenditure is low. It helps manufacturers to achieve economies of scale.
Posted by: Nikhil Kumar Jain | January 19, 2007 05:24 AM