Ice Cream Pricing Strategies Term Paper
...tween mixed and dietary varieties. And finally Healthy Choice who only offers ice cream for the diet restricted has priced itself above its competitors that do not specialize in low-fat, low-calorie ice cream hoping that the customer will value this specialization and assume that it correlates with healthier options than the competitors. All of the brands used price endings ending in nine in order to communicate a bargain and to make the price look cheaper in general by lowering left coefficients. Figure 1: Comparison of Premium Brand Base Prices per Liter Comparison of Super Premium Brands Creamy Commotions, Starbucks, Ben & Jerry's, Haagen Dazs, Godiva, and Dreamery make up the sample of super-premium ice cream manufacturers for this study and their prices increased from least to greatest in this order as well. Figure 2 below illustrates a summary of the data collected on the six brands for their common offering of regular basic and mixed flavors. The first thing to note by looking at the figure is that at the high end the approximate price of a liter of super-premium ice cream is up around $8 while it is only around $3.30 at the high end for premium ice cream. This is a quick visual representation of the greater margins that are possible within this market category and why so many companies have recently added a super-premium ice cream to their product line. Ben & Jerry's, Haagen Dazs, Godiva, and Dreamery are all priced within a small range. It seems that Godiva and Dreamery determined their value to the customer was at least that of the veterans of the category Ben & Jerry's and Haagen Dazs. An explanation why they have actually been priced slightly higher may be a reflection of higher costs due to being newer products meaning that they have not reached an equivalent level of efficiency as the others. Creamy Commotions, which is the newest of the super-premium ice creams that was discovered at Shoprite, has been priced significantly lower than its competitors. It is possible that it is just being tested in the marketplace with a penetration strategy to see the price sensitivity and loyalty of the current super-premium market. If customers were receptive I would imagine they would increase their prices to be more inline with its competitors and be made available in more stores. Starbucks while it has been placed in the super-premium category is hard to compare to the others for two reasons. The first being that it is not available in the same 1 or 1.5 pint sizes that have come to be expected. The second being that all of the flavors are "coffee-centric" which makes sense based on the brand name but would seem to restrict the number of customers that will highly value the ice cream. This may have been taken into consideration when they priced the ice cream below the more traditional super-premium brands. All of the brands used price endings ending in nine in order to communicate a bargain and to make the price look cheaper in general by lowering left coefficients. Creamy Commotions and Haagen Dazs were the only brands that were not on sale at any locations. It is possible that if they were doing an experiment on the initial price of Creamy Commotions it would not be good to advertise the price as a promotion. Figure 2: Comparison of Super-Premium Brand Base Prices per Liter WITHIN BRAND COMPARISONS Reference Exhibit A for the figures that illustrate the observations noted in this section. Some pricing strategies observed within brands were common among most of the brands surveyed. An example would be the use of promotions. Whether the purpose is to stimulate trial, get rid of excess inventory, or for purposes of high/low pricing almost all brands had some sort of promotion occurring during the week this survey was conducted. Most promotions were advertised both in the stores and through mailed flyers. Acme offered an exceptionally good bargain of "10 pints for $10", which was only advertised through the mail. This is a clear use of further price segmentation of those customers price sensitive enough to search for bargains because they would be the only ones knowledgeable of the sale. It is also an example of a large volume discount. All of these promotions demonstrated price segmentation by time of purchase through periodic discounts communicated through advertising, or high/low pricing. It segments the market based on time with the goal of selling as much as they can at the regular price before decreasing the price allowing those who are more price sensitive and value the ice cream less to wait and purchase it for the lower price for a limited time. Price segmentation by product quantity was also seen in every brand that offered more than one size (Exhibit A - Figures 6 and 11). In all cases a decrease in total purchase volume was met by an increase in per unit price, which essentially sets a different price for those who value a smaller size and are not price sensitive. The most significant example of segmentation by quantity was that of BJ's wholesale market that always undersold its competitors and only offered the largest size available of the ice cream it sold. Their customers have higher price sensitivity and belong to the wholesale club for the purpose of getting these bargains. Price segmentation by place of purchase based on property was commonly observed (Exhibit A - All figures). A consistent trend was not observed for the difference in price based on property. Based on historical sales data they may have determined the associated value to the customer at each location. It was noted that most brands that offered smaller sizes and were sold in convenient stores always chose to place their smaller sizes at the convenient stores. The first reason why is that it makes sense that since there is limited freezer space at the convenient stores you can satisfy more customers if you can provide more containers in a smaller size. Also, the purch...