Last I reported on Pinkberry frozen yogurt store prices I wrote about their decision to price different flavors differently. That is a form of price discrimination (second degree to be exact and it is a good thing). Typically ice cream shops and coffee shops price discriminate on the size dimension (small, medium and large). Pinkberry did that and some. They offered Plain (just plain with no flavors) at one (lower) price and priced all other flavors at a higher price.
Surely you did not think the flavors were priced higher because of the added cost, did you?
(Second degree) Price discrimination is good because it allows the marketer to offer different product versions to different customers and letting them self-select to the version they want to pay. If there were some who would like Pinkberry yogurt but did not want to pay $3.00 they could choose Plain (assuming they do not care for the lack of flavor). On the other hand for those who have higher willingness to pay the flavor less Plain acted like the third-class train car without roof.
But all these many different versions come at cost – the cognitive costs customers incur in making the choice from many different sizes, cup or cone, toppings, plain vs. flavor, and specific flavor. Besides there is enough evidence to show that customers do not allocate different values across flavors (that is why Strawberry and Raspberry yogurts are priced the same in stores).
My last report on Dropbox non-linear pricing made me go back and revisit Pinkberry pricing. After all I am not in their target segment I cannot be always up to date on their prices can I?
It appears Pinkberry has read my previous article, listened to their customers or looked at their POS data and decided to simplify. They no more price discriminate on flavors. See new prices from New York stores. Look carefully. Notice anything? What did they do to Plain prices which used to be 50 cents cheaper?
Yes, of course no more lower price for Plain yogurt. They likely found from the Point of Sale (POS) data that very few opted for Plain and if so they might as well pay higher price for it. And for those lower willingness to pay customers? Well they are not Pinkberry customers anyway.
How do you decide on your many different versions and their prices? Is it time to look at simplification?
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