This is yet another questions only article. Answering the questions is left as an exercise to the reader, which you can do from other articles in this blog.
Take a look at the picture of menus from Pinkberry frozen yogurt chain. The one on the left is the online menu for their New York stores and the one on the right is from one of their stores in California. You may notice the price difference between New York and California for the same flavor and size but that topic is not the question I want to pose here.
Notice the price difference between Original and Flavored varieties for a given size? (click on the image to enlarge it)
Notice how the price difference varies between the two states?
In New York,
- The smallest size, Mini is priced the same for Original and Flavored varieties
- For the rest of the sizes, the Flavored varieties (all flavors) are priced 50 cents more than the Original
- Mini is priced only 50 cents more than the Original
- The rest are priced $1 more than the Original
Why are the Original and Flavored varities priced differently – between the two states and between sizes?
Before you answer this question let me point you to a research that asked a different question.
The yogurts in this question are the normal kind we find in supermarket aisle. The researchers who studied the question by looking at store sales numbers concluded,
We find that consumers value line attributes more than flavor attributes. Given that consumers value line attributes more than flavor attributes, firms have a lot to gain by pricing their product lines differently whereas they have little to lose from pricing all flavors within a line the same. We also find that the value of a product line is not merely a function of the number of flavors it includes
Now you can think about the answer.
For extra credit, think about the cognitive cost to customers making purchasing decision from the price differences between Flavored and Original choices. Do you believe the additional profit is worth the cost to customer and the likely degradation of customer’s buying experience?
Do self-serve yogurt chains like Tutti Frutti that offer same price for all flavors and toppings are at an advantage in both delivering better buying experience and average sale price?