Carragee Consulting

I read this article in the Motely Fool about why al a carte pricing at restaurants, particularly for condiments is likely to be a poor business decision. It presents the results of some interesting survey research to draw some conclusions that I feel are too broad.

I don’t think the right conclusion, as the title would lead you to believe, is that businesses should avoid add-on pricing because it can sometimes be proven to be unpopular. It seems to me that the implication is narrower: that market research is a valuable function in B2C pricing decisions and can be used to understand when pricing concepts from one industry (in this case airlines) can be applied to another (fast food).

I worked with a Marketing Manager who could have used some coaching on when pricing strategies can applied across business contexts. Our jobs crossed paths when were working for an online, for-profit University. My confused colleague’s previous work history was at a major CPG retailer. We were in a meeting discussing if it was better to list fees as a semester all inclusive amount, regardless of the number of courses a learner was enrolled in, versus a price per course fee. We were having little success in communicating our research results because the former CPG Marketing Manager kept drawing false parallels between clearance schedules at big box stores and pricing for PhD programs.

What’s great about the Motely Fool article, and this one by my former colleague at Vendavo, is that it disabuses people of the notion that just because the airlines do it, it’s right for your business too.

With the Ketchup study, the commonality for PhD tuition pricing is the law of unintended consequences and the need to account for both value perception and behavioral implications when changing pricing structures.

http://www.fool.com/investing/general/2014/05/05/why-businesses-should-avoid-add-on-pricing.aspx