How much is the price of water?

Is the water in a 350ml bottle better than water in a 600ml bottle or even a 1.5l bottle? You would hope so considering in some cases you are paying 50% more for this convenience.  Let’s looks at the price of buying water at Coles in Australia at the moment. A 600ml is twice as much per litre as a 1.5l, yes double the price for a lesser quantity.

bottle image one

And yes it doesn’t stop there. Packaging in smaller quantities increases the price further with the most expensive bottle for standard natural spring water being sold for nearly 15 times the price of a 1.5l bottle.

So why do we buy for convenience and how do retailers get away with charging so much?

When choosing products consumers make a decision between functionality and usage convenience. This is interesting as those who are focused on the health benefits of water care about the functionality of a product while those who are simply thirsty are buying for convenience.  A further willingness to pay a price premium for water being chilled, a matter of convenience or just taking advantage of the Queensland summer heat?

bottle image'

So what would you pay more for?

When consumers buy for convenience they are not giving much consideration to the purchase process. They are not interested in the best deal or negotiating, some buy impulsively and some on regular basis. Some research even suggests that for convenience items, consumers pick the store to buy from then decide what to buy afterwards (Feichtinger, Luhmer and Sorger, 1988). Is this why retailers can get away with charging so much for so little and are they taking advantage?

One could argue the company is there to make a profit and provided there is consumer demand, no advantage is being taken. It is the consumer’s choice to buy the product after all. At what point does demand decrease as price increases, how much are you really prepared to pay for convenience?

The other side of the argument could conclude that organizations are explicitly building their advertising and pricing strategies to take advantage the ‘psychology’ of consumers. They know that convenience is a growing trend and they exploiting this by market skimming simply to make more margin.

Are you prepared to pay more for convenience items if so why? What do you think about the pricing strategies for convenience products, should we really be paying more for less?

Sharon Jones and Helen Drijfhout

References

Feichtinger, G, Luher A and Sorger, G (1998) Marketing Science, Optimal Pricing and Advertising Policy for a convenience goods retailer 7(2)(P 187- 201)

Iacobucci, D.F (2014), Market Management (MM), Student Edition, South-Western Cengage Learning

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40 thoughts on “How much is the price of water?

  1. Quite scary what major companies are now resorting to for a few extra cents. As you’ve said, it is the consumers choice to buy the product hence the companies cannot be blamed and I too find myself making these purchases quite often. Can’t argue with the facts; guess I’ll just have to be more careful from now on. Well written article on the whole; hope to hear more from you!
    -McCall

    Liked by 1 person

    • Thanks for your response. We keep buying because the price is right, so how much does the price of a bottle of water need to be before we stop buying and demand drops?

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  2. Why do we pay more for less? Is a valid question from a logical argument perspective, but when we think about products that are available in bulk packs also consists in different sizes of packaging; the water example is a very simple one. Why are the companies doing this? Don’t they understand simple calculations? The answer would be that everyone understands they shouldn’t pay more for less of the same product. Then why do they produce in different sizes & volumes? This is an interesting thing.

    Both Companies & consumers are aware of this simple logic, but if you really monitor, the smaller packages / bottles are more popular than the big /bulk packaged items. Personally, I have seen more people buying packs of smaller water bottles compared to buying bigger bottles. This is not based on any research, but my simple observation when I go to Coles or Woolworths.
    That says the consumers talk very logically but their purchasing decisions are not always based on logical reasoning, but driven by number of other factors.

    Convenience is one of those factors, how many people carry 1.5L water bottles with them? Do you feel comfortable to take a 1.5L bottle with you to a class room or for a meeting? There is nothing wrong and it is the more logical & cost effective option. But, we tend not to do it because majority of others don’t do it; therefore, we tend to go with the norms and don’t want to look odd in a place where everyone else is carrying a smaller, sleek water bottle. Therefore, we will have a tendency of going for the smaller bottle and end up paying more for less. Of course the psychological factors, brand associations, perceptions, etc. also will play a role in this process.

    Companies are well aware of these and that’s how they are able to position their products in such way that they make the best out of the opportunity, but still have more economical choices for those who put bit of extra effort to analyze and want more for less.

    Liked by 1 person

    • Thanks for your feedback, do you have any comments as to how pricing strategies impact the social norms you refer to?

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  3. Supermarket water is probably bought mainly for convenience and thus the smaller bottles are probably most in demand. The pricing is main, is what the market will stand. The price for different sizes , per litre, is distorted as the water cost is very small compared to the packaging, filling, logistics etc

    Liked by 1 person

    • This is a good point and something we considered but we found that a 10l of water in some cases was more expensive than a 1.5. Also in NZ there appeared to be a very linear trend regardless of brand, the smaller the bottle the higher the price. We could argue the very small items are priced for convenience (grab a drink om the run) while the larger items is priced for functionality (having a self pouring tap for kids camps etc). Food for thought.

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  4. The other aspect is that water is considered to be the healthy option when buying convenience soft drinks, therefore people are willing to pay for what they consider to be ‘good for them’ and avoid carbonated sugary drinks. However, the points you raise are very valid.

    Liked by 1 person

    • Yes we agree the ‘health’ factor also contributes to pricing but does it explain why we are not filling up our own water bottles and carrying them with us? This would cost us nothing and still be healthy. There are a number of factors contributing to pricing of bottled water with different companies applying different strategies. Thanks for your feedback.

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  5. Interesting topic ” How much is the price of water”.
    How good is the bottled water anyway, Spring water, Mineral water or Rain Forest Water?
    Why is water priced up there with the fuel we put in our vehicles?
    Is it all consumer driven? No I do not think so, water in the retail stores is just a little under the price of other drink options on the shelves. Most of the wholesalers that supply the water also supply the other options of drinks, in many cases they are given the recommended retail pricing.
    So who is really making the good profit out of the water?
    Water for thought, one of the dearest products on the shelves, who would have thought that bottled water would have grown to what is now, when we all have it to pack and take with us.

    Liked by 1 person

  6. Purchasing water for ‘convenience’ makes no sense to me – you can get some out of the tap. We do not live in a country where contaminated water is an issue, so why but it? The further issue of the empty bottles cluttering our planet with even more waste is also of concern. I think we should be making a concerted effort to stop buying bottled water and start filling our own bottles from our taps at home. This would reduce the profits made by companies on a commodity that we all are lucky enough to have access to AND help us to protect our environment.

    Liked by 1 person

  7. All very good points, I think bottled water prices are also the same as soft drink prices and milk, if you buy the smaller versions they are so much more expensive and yet as consumers, we do think of convenience and perhaps about drinking on the run holding a 1.25 litre and drinking out of it is difficult and heavy whilst walking or driving compared to the standard 600 ml which conveniently fits in cup holders in our vehicles or slips in handbags etc. and is lighter. More and more people I know in my area though seem to be filling water bottles because the costs of purchasing them in small bottles is huge and when you have families on budgets, it becomes an important factor. Take for instance going to kids sports days, you can take an esky with you with your own water in drink bottles rather than purchasing from the canteens or food vans where the prices are way beyond the supermarket prices, same with coffee. I know myself I have often bought them because of the convenience, but it adds up with children wanting them also and suddenly you find yourself thinking about the cheaper option and taking the time to do it.

    Liked by 1 person

  8. My beef is that we should/would pay for water at all. NZ has some of the cleanest tap water in the world, for free. Why would anyone pay for something that is endless in supply (in NZ at least) and proven clean enough to drink, and costs nothing (other than the cost of infrastructure through your property rates). The modern consumerist society has conditioned people to believe that it is better to buy water in a plastic bottle fabricated from fossil fuels, which in turn becomes a disposal issue along with the millions of tonnes of other plastic waste. Why pay for some “posh” water from France, Switzerland, or even Fiordland, when you can have the same goods from turning the tap on for free. It’s the biggest commercial deception in the modern economy. Next, will they bottle fresh air because it isn’t natural to simply open a window?!

    Liked by 1 person

    • Thank you for your feedback. Generally, bottled water companies don’t position their product as an alternative to tap water. Instead an alternative to the unhealthy soft drinks that consumers might otherwise buy when they go out. Which would you choose?

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  9. Interesting topic. I can see many different marketing strategies when I buying water in supermarket. Some companies emphasise the quality of their water while other companies attract customers by using fancy convenient bottles. Although what their customers want is just water, these marketing strategies really make huge differences on customers’ purchasing behaviours.

    Liked by 1 person

  10. Water pricing has never made sense but as you read through the above points I guess it is a little clearer. Obviously consumers are paying for convenience and as Mile suggested the actual cost of the water is minimal compared to the other costs involved.

    Liked by 1 person

  11. Convenience is fast becoming an essential factor in selecting beverages, especially water, soda drinks and sports drinks. These drinks have one thing in common, that is, they are portable, healthy and thirst-quenching. People don’t think about the price of water, and the price they pay is not strictly budget-related. In fact, transforming water from a necessity into commodity has an enormous environmental price. I don’t think that companies are the ones to blame for taking advantage. Consumers are the ones who dictate production. In today’s throwaway society, convenience, rather than price, is key. Buying a bottle of water at Coles is faster than washing, refilling and remembering to bring your own. That is how a commodity is created.

    Liked by 1 person

  12. As a consumer, I’m willing to pay premium price for convenience. It’s not like I’m happy about it, but as an average consumer, I don’t really have a choice. It is hard to justify the price we pay for a bottle of water, when we can get it from the tap at home for free. But I do believe the demand for bottled water is elastic. For example, MCG used to charge $4.20 for a 600ml bottle of water. I was very reluctant to buy under this price knowing it only costs $2.20 at local supermarket. But they have changed their pricing for 2015 season. At $3 a bottle, I am more than happy to pay when attending a footy match. The decreasing in price will no doubt increase the volume, which may have minimal impact on the bottom line.

    In addition, the demand for bottled water also has environmental impact. Manufacturer such as Mount Franklin uses recyclable material in its water bottles. Maybe the price we pay is going to offset the environmental responsibility of the manufacturer.

    Liked by 1 person

    • Thanks for this, elasticity is an important part of this discussion. There are different types of elasticity, we focus on price elasticity (McTaggart, Findlay and Parkin (2013) state that drinks have a price elasticity of 0.78 compared to food 0.12, this makes them inelastic but a different perception could be taken when referring to income elasticity. which one are you referring to?

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  13. Interesting blog … although not totally surprising given that the prices of most of the products on our supermarket shelves, when scaled down, do increase as a result of the ‘manufacture/packaging-to-actual quanity’ ratio i.e. the more ‘bulk’ that the item in question is to produce and package, the lower its ‘unit price’ will be.

    The question you pose about whether the ‘average’ consumer really cares about the scaled-down price imbalance is, in my view, particularly relevant. It is a well-established fact that most consumer purchasing decisions are made with ‘buyer convenience’ high on the priority list, best exemplified by our habit of purchasing products that are portioned according to need.

    We pay for this privilege and retailers appear to be well-aware of (and, in my view, are quite happy to take full advantage of) this strange ‘quirk’ in consumer behaviour.

    Liked by 1 person

    • This is a good point but I think functionality has a part to play , as mentioned above for example the 10l pack was more expensive than 1.5l, we can only assume this was because it had additional features such as self pouring tap?
      Not a linear pricing model that is for sure.

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  14. Very interesting blog.. Personally, in some cases i would pay more for convenience items. It would depend on the purpose of the item. For example if i was walking down the street with friends and started getting thirsty, i would go into the supermarket and buy a 600ml bottle of water as oppose to a 1.5L or even 10L container of water – even if the larger containers were cheaper/better value. Connivence would be not having to carry around the big bottle/container with me.

    Looking at the pricing logically, it doesn’t make sense to pay more for less. However, the marketers have done their research and are taking advantage of the phycological side of its consumers as mentioned in your blog.

    Liked by 1 person

  15. Small bottles of water are mainly convenience buy. Thinking that the company charges for the water is absurd. They charge for packaging, storing, and selling them at a location where you need it. So be it 500ml or 1.5l their actual expense does not differ much. They charge extra because its evident that the buyer of small bottle is less price conscious.

    Liked by 1 person

  16. really well written and constructive piece of writing it would be interesting to see the difference in the cost to produce a 600ml bottle against a 1.5l bottle. I would suggest very little , a great piece of marketing by the water companies to target the size that people want and charge a premium

    Liked by 1 person

    • Pricing depends on packaging and brands, at Coles their branded water was $1.05 per litre if you bought a 24 pack of 350 ml bottles, compared to $.49 per litre if you a bought a 24 pack of 600ml compared to $0.46 per litre if you bought 8 pack of 1.5 litre bottles. ( as at 8 May 2015)

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  17. I rarely buy bottled water as I generally fill a bottle from the tap and take my own. However I have bought a small single bottle of water when out and about purely because of convenience and to be honest I never question the price. When people make a convenience purchase, price is of little consequence. I know that some people purchase bottled water for daily use because they believe it is a healthier option and depending on how they use that water from their home may determine how much notice they take of the pricing. As noted in the previous reply the smaller the bottle the more expensive per litre. Companies are definitely charging a premium for convenience.

    Liked by 2 people

  18. If the small bottles are selling well, it must have the market out there. I do agree companies are charging a premium for convenience. We wouldn’t carry a 1.5L bottle to walk on the street, also we wouldn’t order a 1.5L bottle when having the meal, because we know we aren’t going to finish it. Good blog.

    Liked by 1 person

  19. Definitely an interesting topic. I have no doubt that water and the so called various forms they come packaged in feature different pricing points. Convenience and sex appeal have historically played a part in consumer purchasing habits, which may be a reason as to why smaller bottles are more expensive. In today’s health conscience society, slugging down water as opposed to a can of soft drink creates a healthy perception of an individual as opposed to one making poor health choices. I recently travelled the U.S and stumbled upon “Smart Water”, triple distilled with properties to assist with increased focus. Go figure.

    Liked by 1 person

  20. Interesting Topic!
    Water becomes a basic necessity for a person when he/she gets tired or thirsty. Consumers at times don’t think much in purchasing a thing that is basic necessity for them. They feel if its a necessity then whatever is the price or the situation they will buy it. I agree that there is a huge difference in the price for which many companies are making a good amout of profit. But, I have noticed that people buy it because they don’t have an option left. For eg. People tend to buy 3$ bottled water in small stores like 7eleven or Coles express because they don’t have any other cheap water bottle than this.
    But, if you consider big supermarkets like Coles and Woolys then people will surely move to more cheap options. So, just because of this basic needs some water bottle companies are taking an advantage of people, which is practical and a good technique to earn as even they are here to do business.

    Liked by 1 person

  21. As an accountant I am always trying to save money and on a few occasions I prefer to say hell with convienance and buy the 1.5 litre bottle. It is sneaky because it costs less to provide the smaller bottle but if it is the highest selling product they can change what they want, as competitors still seem to charge a lot for their bottles as well. Great post

    Liked by 1 person

  22. Bottled water is a beverage industry phenomenon unlike any other. Since the 1970s when large-scale commercialization of the product began, the market has experiencednear-continuous and rapid growth across all world regions.

    This BCC Research report aims to examine the market, forecast market trends, trace significant developments, and profile companies that are active in the sector. The

    report contains information and conclusions that are unique, insightful, and have a forward-thinking knowledge of the subject that should be of interest to manufacturers,

    suppliers, and government entities.

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  23. How interesting a blog! Actually, I thought the price of bottled water in Australia relatively expensive. Therefore, I am so confused why the highly price of water in Australia. As far as I’m concerned there exist several reasons:

    Firstly, cost factors determine the cost of goods is the main content of commodity prices, so the cost factor is one of the main factors affecting commodity prices. Commodity costs include production costs, cost of sales and storage costs. Companies generally lower commodity costs by increasing production, thereby reducing commodity price.

    Secondly, marketing demand factors generally large commodity price elasticity of demand, when the commodity in short supply, prices rises.

    Eventually, market environment has a direct impact on commodity prices, in the modern market economy, according to the competition can be divided into four forms: the market perfect competition and completely monopoly market, monopoly and oligopoly market competition market, under the different forms of the market, its price have significant differences

    In a brief, marketing factors as a determined reason influenced the price of water in the Australia market.

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  24. I have read your blog and you have put a point forward regarding the pricing of products in a supermarket but i think you kept your research to limited resources as price of product varies in every shop , may it be a supermarket or even a small shop . for example lets take water as u have mentioned it how they can charge us double for less quantity ,i would say they do so because that is what a customer demands . you can get water form tap at no cost but you want to buy packaged drinking water which involves some costs and very business has the right to charge for services they provide.

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