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One way that retailers are selling products with better value is through private-label brands. However, national branded manufacturers also are grabbing more value by promoting the right product size and prices at the right time of the month.

According to the so-called Paycheck Cycle, consumers spend more when they have more money, but as the money runs out, they spend less. Therefore, when a customer receives his or her salary, he or she buys larger multipacks at higher prices. At the end of the month, or the end of the Paycheck Cycle, the same products sell in smaller quantities for lower prices. The same is true for Social Security checks, which prompt senior citizens to buy certain products.

Frito-Lay, Heinz, and ConAgra have all considered the Paycheck Cycle for determining their promotion and merchandising cycles. Doing so can prevent against too much discounting and increase value, because the inventory provided to the retailers is consistent with sales patterns and more predictable.

Manufacturers continue to struggle with the rising costs of commodity ingredients, which increase the prices of basic products such as milk. To disguise such price increases, many manufacturers try changing the product packaging or decreasing the content contained in the same sized container. By considering the Paycheck Cycle in its decisions, a manufacturer also predicts consumers’ needs, knowing when they will want larger packages and when they might need to opt for the smaller packages.

Discussion Questions:

  1. What is the Paycheck Cycle?
  2. How are manufacturers and retailers capitalizing on the Paycheck Cycle?

Anjali Cordeiro, “Consumer-Goods Makers Heed ‘Paycheck Cycle’,” The Wall Street Journal, February 23, 2009.