Frozen Yogurt – Low Fat, High Price?
2013
Summer has officially arrived and frozen yogurt is on our minds – pricing of frozen yogurt, that is.
We have noticed a flurry of new frozen yogurt store openings recently and thought it would be a timely topic to investigate. Besides being low in calories, the main attraction seems to be the do-it-yourself nature of the business model. If you have not been to one, here is how it works:
So what does all this have to do with strategic pricing, you may ask. Plenty, and here is why:
Innovative price structure:
Pricing psychology:
Price execution
The checkout counters are equipped with high tech scales that weigh, calculate the price and are tied into the cash register. It seems obvious, but without this equipment the pricing model would not work. An example of the importance of price execution.
Price structure adjustment due to market forces
Recently, our local outlet started to advertise “have your cone and eat it too.” While it had been cup-only, now they were offering frozen yogurt in a cone. I can only assume that this was in response to those consumers who wanted their frozen yogurt in a cone (like me). But how does that work with the variable pay-by-weight price structure? It does not – it is really hard to weigh a cone, it will mostly likely fall over and make a big mess. So management made the logical decision to change its price structure for cones and charge a fixed amount per cone: $3.99 regardless of how much you fit in it. The price point it well chosen, as it is really difficult to put more than 6 ounces in a cone, so selling a cone is actually more profitable than selling the same amount in a cup (6 x $0.59 = $3.54) . This is an excellent example of how market realities and an inability to execute (i.e. weighing cones) demanded an alternate pricing structure.
We hope this has whetted your appetite for frozen yogurt and better pricing. If so, call us. We’d love to share our expertise with you in the latter while savoring the former.