Tuesday, February 05, 2008

Adjustment at Multiple Margins

In today's edition of the HK Standard, a research study tells us that:

" [A] City University survey of more than 10,000 people last summer, found that overall consumer satisfaction last year hit a record high of 70.2 percent, up 0.1 percent from the previous year."

This is not the case for fast food because the survey found that consumers' satisfaction index for such food category fell last year.

According to the author of the study, the drop in satisfaction is attributable to the fact that "[t]he prices for those items went up but the quality remained the same or even deteriorated," he said. "Consumers may have felt they suffered a loss."

Everybody knows from reading newspapers that costs of materials needed for fast food industry like beef, pork as well as flour have increased a lot of late. Sometimes, you just can't pass on these cost increases through price adjustments, other margins exist for adjustments as well. And in this particular case, quality or/and portions of the food served.

In fact, customers of the fast food chain are partially to blame for the need to adjust prices, quality and serving portion. If less of them go to eat at those fast food restaurants, demand for inputs needed in the production of fast food will become less, and this in turn will probably lower the pressure for the fast food chains to raise prices in the first place!

No comments: