Why are @Pinkberry yogurt flavors priced differently?

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
In California the prices are different across all sizes,
  • 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.

Why are strawberry and raspberry yogurts priced the same?

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?

 

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.