Imagine you are interviewing for a
consulting firm. The interviewer
presents this case to you :
A bagel shop New York Co. has been
selling $1 bagels over the past twenty
years. Costs of the raw materials needed
to make the bagels continue to rise, but
the price of the bagels has not changed.
How can the bagel shop continue to sell
their bagels for $1?
First step to solving a case is
identifying the possible framework
the given case fits in.
Which framework does this case
seem to fall under?
Market entry framework
New product framework
Pricing strategy framework
Inorder to reach an effective solution for
our client, you would use a combination
of which two strategies ?
Cost strategy
Market strategy
Demand pull strategy
We can use a combination of
cost and market strategy
inorder to reach our solution
Here, this case seems to fall under the
pricing strategy framework.
The primary goal of a pricing case is to
recommend a price that maximizes profit,
taking costs for product/service and market
considerations into account as setting the
optimal pricing for products or services
directly impacts profitability.
If the primary challenge or question in
the case revolves around setting, adjusting,
or optimising prices for a product or service,
it likely falls within the pricing strategy
framework.
Cases that involve considerations of
how pricing decisions affect the overall
profitability of the business are indicative
of a pricing strategy framework.
The central challenge in the case
revolves around the discrepancy between
the rising costs of raw materials and the
unchanged selling price of the bagels at
$1 highlighting a pricing-related
dilemma which aligns with the core
considerations of pricing strategy, that
involves setting prices in a way that
ensures sustainable profitability.
Reasons being:
Cost strategy : Helps to understand the
current and potential future costs associated
with producing the bagels. Running a bagel
shop would include both fixed and variable
costs.
Market based strategy : Evaluates how
our client’s pricing strategy compares to the
other competitors in the market. Since the
bagel shop has been in business for about 20
years it can price its goods similar to those
of its competitors.
Demand pull strategy : It is a
reflection of how much are the
customers willing to pay for the bagels.
How can the client streamline the bagel-making
process to reduce labour costs and increase
production efficiency?
Workflow Analysis:
A detailed analysis of the current bagel-making
workflow.
Identifies each minute step, from ingredient
preparation to final product delivery.
Perform time and motion studies to understand
how much time is spent on each task.
Invest in Technology:
Explore technology solutions, such as automated
mixers, dough dividers, or cutting machines, that
can streamline manual tasks.
While there may be an upfront cost, the long-term
labour savings can be significant.
While conducting competitive analysis you
realise that $1 bagels are the key differentiator
of the client. What would you do differently in
order to tackle this price point problem?
1. Ingredient substitution:
Explore potential substitutes or alternatives
for raw materials that may be more costeffective, consider local or seasonal sourcing.
Negotiate favorable contracts with suppliers.
Diversify sourcing options to ensure
consistency in the case of market fluctuations.
2. Product diversification:
Introduce new bagel varieties/sizes at higher
price points to cater to customers willing to pay
more for premium options.
Create combo offers that include other items
such as spreads or beverages to increase the overall
transaction value.
3. Customer loyalty programs:
Introduce loyalty programs to incentivize
repeat business and reward loyal customers.
Offer discounts to frequent customers to ensure
retention of customers.
These solutions aim to strike
a balance between managing
costs and maintaining the $1
price point while also
considering customer
perceptions and market
dynamics.