Unit price

Not to be confused with Unit cost.

A product's average price is the result of dividing the product's total sales revenue by the total units sold. When one product is sold in variants, such as bottle sizes, managers must define "comparable" units. Average prices can be calculated by weighting different unit selling prices by the percentage of unit sales (mix) for each product variant. If we use a standard, rather than an actual mix of sizes and product varieties, the result is price per statistical unit. Statistical units are also called equivalent units.

Average price per unit and prices per statistical unit are needed by marketers who sell the same product in different packages, sizes, forms, or configurations at a variety of different prices. As in analyses of different channels, these product and price variations must be reflected accurately in overall average prices. If they are not, marketers may lose sight of what is happening to prices and why. If the price of each product variant remained unchanged, for example, but there was a shift in the mix of volume sold, then the average price per unit would change, but the price per statistical unit would not. Both of these metrics have value in identifying market movements. In a survey of nearly 200 senior marketing managers, 51 percent responded that they found the "average price per unit" metric very useful in managing and monitoring their businesses, while only 16% found "price per statistical unit" very useful.[1]

In retail, unit price is the price for a single unit of measure of a product sold in more or less than the single unit.[2] The "unit price" tells you the cost per pound, quart, or other unit of weight or volume of a food package. It is usually posted on the shelf below the food. The shelf tag shows the total price (item price) and price per unit (unit price) for the food item. Research suggests that unit price information in supermarkets can lead shoppers to save around 17-18% when they are educated on how to use it, but that this figure drops off over time.[3]

Unit price is also a valuation method for buyers who purchase in bulk. Buyer seeks to purchase 10000 widgets. Seller One offers 1000 widgets packaged together for $5000. Seller Two offers 5000 widgets packaged together for $25000. Seller Three offers 500 widgets packaged together for $2000. All three sellers can offer a total of 10000 widgets to Buyer. Seller One offers widgets at a unit price of $5. Seller Two offers widgets at a unit price of $5. Seller Three offers widgets at a unit price of $4. Buyer uses unit price to value the packages offered by each of the three sellers and finds that Seller Three offers widgets at the best value, the best price.

Unit price is a common form of valuation in sales contract for goods sold in bulk purchasing.

The stock price of securities is a form of unit price because securities including capital stocks are often sold in bulks comprising many units.[4]

Unit price is also often used in the trade of consumable energy resources.[5]

  1. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project.
  2. ^ Unit Price
  3. ^ Weeks, Clinton S.; Mortimer, Gary; Page, Lionel (September 2016). "Understanding how consumer education impacts shoppers over time: A longitudinal field study of unit price usage" (PDF). Journal of Retailing and Consumer Services. 32: 198–209. doi:10.1016/j.jretconser.2016.06.012.
  4. ^ Guthmann, Harry G.; Archie J. Bakay (December 1965). "The Market Impact of Large Blocks of Stocks". Journal of Finance. 20 (4). American Finance Association: 617–619. doi:10.2307/2977250. JSTOR 2977250.
  5. ^ Slate.com (oil measured by barrels)