Rafi Mohammed

Pricing Lessons From Thanksgiving Pies

Posted on November 25th, 2009 (0 Comments)

Sarah McBride wrote an interesting front page article in today’s Wall Street Journal (“Every Thanksgiving Turns Into a Pie Fight at Mommie Helen’s”). Sarah documents a “foodie” trend for this Thanksgiving – Americans want to feast on high quality pies at their Thursday afternoon holiday celebrations.

As a result of this heightened demand, pies are being baked 24/7 at upscale bakeries across America. In spite of her ovens’ 165 pie capacity, the Southern California storefront bakery Mommie Helen’s expects to sell 5,000 pies during the final few days of this year’s Thanksgiving rush.

Increased demand and limited capacity…what would a pricing strategist do? A holiday surcharge, of course! While the bakery owner has considered doing this, she’s opted to maintain prices as affordability is an important goal.

My advice to Mommie Helen’s and the many readers of this blog who are interested in affordability for their products and services is as follows:

Not all customers care about price. Clients of Mommie Helen’s include Shaquille O’Neal, Magic Johnson, Mariah Carey, and Stevie Wonder. Will a $3 holiday premium be the tipping point for these celebrities and fellow upscale customers to conclude, “We’ll try Sara Lee this year”? I doubt it. If price doesn’t matter to your customers, enjoy “second helping” profits whenever possible.

Some customers do care about price. Pricing techniques can identify the budget conscious and offer them a lower price. A 14 day advance purchase discount or coupons (on the web site) for instance. These tactics do a good job of segmenting customers with high and low valuations. Is Magic going to print out a coupon and bring it into the bakery for a $3 discount? He probably won’t even notice a holiday surcharge.

Look for opportunities to offer premium products. Some customers are bringing in their own dishes for Mommie Helen’s to bake their signature cobblers in. Why would customers do this? They want to pass off Mommie Helen’s work as their own. This is a definite value capturing opportunity: “For a $5 premium, we’ll bake our pies in your dish and promise not to tell.”

Mommie Helen’s has the opportunity to profit and grow by implementing a holiday surcharge, providing back door discounts, and offering higher margin product versions.

For gourmet pies (or any product or service), better pricing is about earning higher profits and generating growth by offering a variety of choices to serve as many customers as possible.

Have a great Thanksgiving.

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