Pricing At Buffet – Again

I am going for seconds on buffet pricing.

If you take the buffet itself, some people go for seconds, thirds etc, some load up on desserts, some on meat, some on salad etc. If the restaurant can offer a wide variety of food (10 types of soups, 25 types of desserts ….) it stands to attract a large number of people, each however attracted by a few that are important to them. Larger the variety higher is their fixed cost, but once they have scale there is no marginal cost per customer.

Buffet restaurants chose their pricing strategy as one fixed price for their offering. The buffet offers all these foods  at one fixed price as a bundle. Bundled pricing delivers higher profit than a la carte pricing only if different customers value the components differently. There is only one major lever they have to control – price. There are many fine tuning knobs like drinks that are usually not included in the price and special occasion pricing. Ignoring those – there is only one price.

Previously I have written about multi version pricing and how the need for designing a version that different segments can self select themselves. Buffets allow customers to put together their own version (potentially infinite version) but at one price. Customers who prefer some of the variety and usually eat less and have lower willingness to pay will not be able to put together a version that they like because of the fixed price. Buffet pricing is hence “pure bundling”.

One way to serve these low WTP customers is to have mixed bundling, offer buffet and a la carte menu. But there are ways the buffet restaurant can serve these customers without straying from their  “pure bundling” strategy. Can you think of one?