Author Archives: Ingo

I would like to share with you, how icecream is priced in France. In Germany you will experience a linear pricestructure, this means e.g. 1€ for one scoop, 2€ for two scoops, 3€ for the third scoop and so on. In France the structure looks like this: The price for one scoop is 2,80€, for 2 scoops 3,80€ and for 3 scoops 4,80€. This first difference is that the scoops are bigger but in the end you get the same quantity for your money as inGermany. This makes the life of the personnel easier because they have to serve less different flavours. The second difference is that the first scoop is overpropotionally expensive, capturing a premium of the people just eating one scoop. It might also be akind of lump sum for the cone you get the icecream in.

Every Saturday I walk to the bakery to buy some rolls and the newspaper. Normally I buy the Bild-Zeitung, the most popular German Newspaper.

At my village in western German this newspaper costs 0,80 €. Recently I spent my holidays in a little town near the Baltic sea. In the morning I went to the bakery and bought the Bild. And guess what – I just paid 0,70 €!

Back in my appartment I made a Google search and found out:

In the former Eastern part of Germany – 0,60 €

In and near big cities like Cologne, Frankfurt – 0,80 €

In the rest of  Germany – mainly countryside – 0,70 €

An interesting approach! And the only fencing is just the distance

between the sales regions.

This week-end I went to our local grocery store to buy the usual food for the next days. Additionally I needed some tissues and the most common brand in Germany is “Tempo” When I reached the shelf I was delighted to see that the big package (30×10 tissues) had a red price tag, which means “Promotion!!!”.

However I was surprised to see, that the mentioned big package had the exact same price as the small package with half the size (15×10 tissues) –> this meant 50% Discount. Well I am not an expert in the tissue market, but such a big discount? I can only image that the no-name products have gathered quite some market share and Tempo is fighting to survive. As a pricer I thought: Maybe the customers would have bought even with a 30% discount – Are they leaving money on the table?

And my next thought was: Who is going to buy the small package?

Every Saturday and Sunday I get up early to buy some rolls at our local bakery. Normally – I have to confess –      I don’ t really look at the prices of the single rolls. This time I did and guess what: This clever guy of a baker increases his prices every sunday by 5- 10% – this means a roll which costs 95 cents on Saturday costs one Euro on Sundays. Maybe the employees get an higher payment and the baker is trying to pass on these extra costs to his customers.

I think on one of the next weekends I am going to ask him about his experiences and how many people recognised this little extra profit

During my holidays at the Baltic Sea I had the chance to buy some groceries in a local supermarket. When waiting to get served at the cheeß counter, I recognised a box with ice cubes and crushed ice.

Immediatly I noticed, that the 2 kg bag was more expensive than the 1 kg bag – looking at the per kg price. while the bigger bag costs € 1,99 (0,995 €/kg) the smaller one costs only 0,99 €/kg.

Price Psychology? Having a “99” at the end? I guess, not many customers notice this little inconsistancy and even less probably will care.

Taking the extra cent of the bigger bag – 0,5% extra margin isn’t that bad

After spending a great week on a houseboat travelling the channels in Burgundy/France  I stopped over in Metz – a nice city in Lorraine I had the pleasure to live in some years ago. After one week living on a boat and eating ready-to-eat meals my family wanted some real good food for dinner – preferable steaks!

We were attracted by a restaurant called “crocodile”, which was named after the  famous swiss locomotive. The railway theme was also stressed by using two old wagons as dining room.

But what are the pricing lessons I learned from this restaurant?

Price segmentation – When entering the restaurant I noticed two different menus with different prices – one for the working days and one slightly more expensive for the weekend (beginning on friday evening).

When I asked the waitress she explained: “During the week our main customers are shoppers and employees of the stores around – here we have to compete with fast food restaurants and the little bars offering a low priced menu. On the weekend we are mainly visited by young couples and families, who we offer some great food in a nice atmosphere.”

Solution Pricing  – When I looked at the “weekend-menu” I realised not only the big steak but all main course had three different prices…

Sorry not every main course – but the “offers” build around the main courses. Called “Express -€ 18,95 ” , “Confiance  €24,50” and “Gourmand € 26,95” . While Express was a bundle of main course and free beverages (including a selection of wines and beer) Confiance gave you the choice of additionally serving yourself at the starter- or the dessertbuffet. Gourmand then was the full package offering free beverages, starter buffet, main course and dessert buffet.

When looking around most of the guests were ordering the the Gourmand option. Especially the families – I guess it is quite difficult to explain to your kids they should eat a salad, but no dessert.

Additionally when you were entering the restaurant you already saw the big good looking buffets and you really had the desire to serve yourself.

Reference Price

For those guests, who like comparing prices, the crocodile restaurants included one full bundle without a main course (just starter buffet and deserts and beverages) Priced relativly high the main course in the Gourmand package suddenly looks to have a very attractive price.

Up- /cross-selling

For those guests who wanted something special – not included in the packages – ,you could always order some additional drinks e.g. cocktails or a coffee for a fair price.

Conclusion

It really made a lot of fun to eat in this restaurant, not only because of the excellent food and the nice location – especially the kids enjoyed drinking as much coke as they wanted and having not only “one” dessert. If I compare it to other restaurants nearby  the price I paid in total was the same – the value I received was much higher.

As a pricing manager I always keep my eyes open for creative and innovative pricing models and really had the desire to share this one with you

http://www.restaurantscrocodile.fr

Yesterday I read a quote of a German Top Manager in the newspaper:

“Expensive, what is expensive? If you buy a Brioni suit to repair your car, this is expensive.
If you wear the suit in a bar and meet a beautiful girl, who becomes your beloved wife, it was a great investment.”
I think, this a real nice example, why we should focus on value and not on price.

Currently something interesting is happening in the German food retail landscape. While discounters like Aldi are perceived by most of the customers as the cheapest option to buy food in Germany, “branded retailers” like Rewe are trying to scratch away this image. The main weapons Rewe and also Lidl (a discounter offering a broad range of branded products) are using are special temporarily price promotions and reductions. Recently the price of Coca Cola was reduced  below the price of Aldi.

Now like often in price wars – there might not be too many winners. The brand of Coca Cola is now getting damaged – away from the premium image, the company ist trying to build up. Price increases are getting more difficult – maybe they are even asked by the strong retail chains to compensate for margin losses due to the lower prices. The retail stores might walk into the trap, which already caused  the home-and-garden markets “Praktiker” to go bankrupt – motivating the customers only to buy, when special offers are granted. And considering the sugar in this soft drinks,  a higher consumption might as well harm the health of the customers.

You would normally think, that good books  – especially business books have a comparable value (and price) in many countries. At least I thought his until I was looking at Amazon (German Shop) for a book of my favorite pricing author, Tom Nagle. His book – “Strategy and Tactics of Pricing” – IMHO one of the best pricing books ever  – costs

more than 60 € for the English edition and

less than 6€ (!) for the German edition.

What could be the reasons for this significant price difference? It can`t be cost reasons. The other way around it would have made maybe sense arguing, with costs of translating the book into German and probably having a much smaller number of printed copies.

The low price could be the result of a stock clearing – if there is no demand for the book in the German business world. Does this in consequence mean, that the Germans are less interested in Pricing?

Well, I guess I will never understand it – nevertheless I used the opportunity and bought myself a copy and gave it as a gift to a colleague – well invested money for me. The vendor didm`t make a good deal. I would have paid much more for this excellent book -he “left money on the table”

Yes, they did! I guess we all made at least once the experience, that gas stations are good and dynamic pricers. Just imagine, you fill the tank of your car and in the afternoon, the gas price is lowered by 8 cents / litre. Of course it won`t ruin us, if I have to pay 4 € more, but nevertheless we all feel a little bit annoyed and cheated, don`t we?

However last month, I faced a situation, which really let my pulse go up. I had to fill gas and I guess it was the wrong time because the price was already quite high – 1,49 € / liter.

But when I came back from the cashier, I realized that the price was lowered in the meantime by 2 cent – and this really annoyed me.

In total amount I just “lost” 1 €, but I was so mad at this gas station, I ignored them at least for four weeks.

The lesson I learned from this experience:

price fairness is not rationally linked with the total amount involved, rather it is about the feeling to be treated in an incorrect way (you could also call it “being ripped off”) and motivates you to strike back.