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 typically involve 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 for the consumer.
- Convenience goods are often purchased through habit or impulse and are relatively inexpensive.
- Pricing is important for convenience goods to ensure that demand for the goods among consumers does not wane with the ebbs and flows of mainstream markets.
- The inexpensive price of consumer goods makes them susceptible to being exchanged for substitutes.
Understanding Convenience Good
Convenience goods are often purchased through habit or impulse because they are easily obtained by consumers and relatively inexpensive. 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 convenience good price changes. 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 1,000 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 the 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 chooses 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, give the buyer greater choice. 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 purchase instead if prices rise.