Price Realization Through Creative Package Sizes

[tweetmeme source=”pricingright”]The most common type of price realization method employed by CPG brands is using creative packaging to reduce the amount of product for the same price. We seen examples of this from Cadbury and Haagen Dazs. If you walked by ice cream aisle and looked at Haagen Dazs (14 oz)  and Ben and Jerrys (16 oz) you would not be able to tell the difference. What is the best possible way to  change package size so the customers won’t notice it? Chandon and Ordabayeva, researchers from INSEAD, did experiments on customer perceptions of package size   changes and conclude that, “Downsize in 3D, Supersize in 1D” (pdf). From the three experiments they conducted they found

that changes in size appear smaller when products change in all three dimensions (height, width, and length) than when they change in only one dimension

 

tutti_frutti
Wider base and Shorter height

 

There is another not so uncommon practice of creative packaging for price realization that seem to have taken the lesson from Chandon and Ordabayeva and applying it to extract more revenue per customers. I came across a frozen yogurt chain called Tutti Frutti  that in theory does unbundled pricing, selling yogurt and toppings per ounce. They charge a flat price of  35 cents per ounce. They give you a choice of containers and ask you to serve yourself any of the flavors and toppings available. The fun is in letting each customer serve themselves and in the container design (shown left).

Their intention, I surmise, is to maximize price paid by the customer every time they make a purchase. One way is to get a customer to purchase more than they intended which can be achieved with a container with wider  cross-sectional dimensions (radius) and shorter height.

Does this work? In a 2003 study,  professor Wansink of Cornell  did experiments “to determine whether people pour different amounts into short, wide glasses than into tall, slender ones.”  He found that “both students and bartenders poured more into short, wide glasses than into tall slender glasses”. So it does work. Professor Wansink is also the author of the book, Mindless Eating and  writes a blog on healthy heating habits.

Won’t consumers figure this out? Is this a viable way to increase customer revenue per visit? No, definitely not. Judging from the comments in Yelp on Tutti Frutti people figured this out. The first time a customer buys she is going to be shocked to see the bill, as one Yelp reviewer noted her surprise from a $8.5 charge for a container. But from next time on they are bound to be more careful in pouring yogurt into their cups.

10 thoughts on “Price Realization Through Creative Package Sizes

  1. James
    I must have been primed to see the size the very first time I went in (about 4 years ago). Still I was shocked to see $5 for the cup. Next times, as a family we share one cup.
    I wonder that even if we discount for the initial higher price we stand to pay more than we would have been with fixed size offerings.
    Here is a follow-up I wrote https://iterativepath.wordpress.com/2011/08/28/self-serve-and-price-realization/

    TCBY collected data on the two container types

    Like

  2. Leigh
    You are right about questioning longevity on the other hand people seem to remain irrational longer than most expect. While a read of the yelp reviews seem to warn this effect there isn’t any data whether people calibrated their purchase amounts.

    By the way I checked the AtoZDatabases for how much these stores make. I am surprised to see them hauling in $1.8M a year. Either this is an overstatement or that wider bottoms are working.

    -Rags

    Like

  3. Great post. I had the same experience in DC this summer that the Yelp user had – ended up filling the standard-sized container, but was shocked to find that I was being charged over $8 for some ice cream.

    I think a rather obvious but important point to make is that, given the high level of choice, the default cup size is going to have to be SOMETHING, and the owner will just have to weigh the costs of unexpected high prices (for first-time buyers) with the guaranteed benefit of higher revenue. Like Leigh said, I think the consumer will realize what’s going on, and adjust, but you may still see a less-exaggerated over-consumption with the experienced customer, I think.

    Like

  4. I agree the gains won’t be maintained in full (I had the same sticker shock the first time I went to one of those stores, though I was more worried about calories than dollars!) But I do think average consumption will be higher in the long term with this type of cup than a narrower, taller one, even after the consumer tries to compensate.

    Compensation is imperfect, as is memory. No doubt the longevity of the effect could be tested, either in the lab or in the field – presumably one would expect the store to have done so, though experience shows companies usually under-test this kind of variable.

    Like

Comments are closed.