How Much Does that Text Message or Bottle of Water Really Cost?

An article in WalletPop drew my attention. It talks about the most overpriced products on the market. Not that they are expensive. But do you know what is the markup on a product you use?

Convenience comes with a price, says the writer Aaron Crowe. But sometimes knowing the markup is enough to propel you into action and really look where your money goes to.

– Text messages – 6,000% mark up. An outgoing text message of 160 characters costs users 20 cents. It costs the carrier three tenth of a cent to process. “600 texts messages contain less data than one minute of phone call,” said Consumer Union policy analyst Joel Kelsey. Maybe you should rethink your small business cell phone plan?

– Bottled water – Estimates are all over the place as to how much more a bottle of water costs than home tap water, and are put on 4,000% mark up. Since 40% of the bottled water comes from municipal taps anyway, don’t you think there might be a better and cheaper way? If you compare the price of one gallon of individually packaged bottles of water to one gallon of gas, you are paying more for water.

– Movie Popcorn – 1,275% mark up. I expected that to be first on the list. What are you gonna do? Bring your own?

– Brand name drugs – 200% – 3,000% mark up. Between April 2009 and march 2010, the average annual drug costs for a person taking three generic drugs dropped by $51 while someone taking three brand name prescription drugs saw their cost increase by $706, according to the American Association of Retired Persons. Does your health insurance have a generic only drug plan?

– Hotel mini bar- 400% markup. Not only on the alcohol. How much are you paying for this small bag of peanuts?

– Hotel in-room movie – 200% markup. You will pay that much more for not leaving your room and going to the local movie theater.

– Wine – At least 300% markup in restaurants, and more than that by the glass. You can bring your own wine and you will be charged with only corkage fee. Worth doing if the bottle you want to bring costs more than $25.

This begs the question, when looking at the services your business offers, are you sure you’re charging the proper markup? Especially in beginning stages, businesses are likely to undervalue their services. This may serve as an (albeit extreme) reality check.

As Yogi Berra said: “In theory there is no difference between theory and practice, in practice there is.”

Image thanks to Flickr