What is a 'Convenience Good'
A convenience good is a consumer item that is widely available and purchased frequently with minimal effort. Because a convenience good can be found readily, it does not require the consumer to go through an intensive decision-making process. Convenience goods, such as newspapers and candy, are different than specialty goods, such as cars, which are more expensive and often carry a greater opportunity cost to the consumer.
BREAKING DOWN 'Convenience Good'Convenience goods are often the products of habit or impulse, as they are easily obtained by consumers and are inexpensive enough for most consumers to purchase. Because the inexpensiveness of a good can be dependent on the income of the consumer, economists often use the cost of a good to the average consumer when determining if a good is inexpensive. If discretionary income falls, consumers may forego purchasing goods impulsively. Product managers need to determine viable pricing points to ensure that demand for convenience goods does not wane with unpredictable market behavior.
Price Elasticity of Demand
Consumers are sensitive to price changes in convenience goods. Marketers need to consider price increases with respect to demand for items that a buyer may bypass due to a price hike. The objective for suppliers is to strike a balance between price movement and demand so that an incremental increase does not adversely affect the quantity sold. If the price of a candy bar is $1 and the supplier sells 1000 bars in a month for $1,000, then a price increase to $1.25 would necessitate the sale of 800 units to equal the same amount of revenue. Price elasticity of demand equals percentage change of the quantity demanded/percentage change in price, where the goal is to maintain relative inelasticity with a resultant value less than one. Relative inelasticity exists when large price fluctuations do not significantly change demand.
The purchase price of a convenience good largely determines whether a consumer makes a choice to buy the item. These inexpensive, spontaneous purchases result from conspicuous demand that differs from the decision to purchase gasoline and other necessary consumer nondurables. Food and fuel have no substitutes. Convenience goods, by contrast, impart a variety of choice on the buyer. If a consumer purchases a bag of peanuts every day at a local shop for $1 and the price of peanuts increases to $2, the purchaser may forego the purchase or opt for a bag of almonds at a price of $1. Unlike essential goods such as gasoline, convenience goods have many substitutes to which a consumer can turn in the face of rising prices.