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Context in Pricing: The Waffle House Edition

February 12, 2019

My son is a Waffle House fan and has been since he was old enough to know what’s going on. He’s 18 now and there’s a Waffle House story in which he’s the featured star that I love to tell him now. It’s the kind of story parents tell their kids when they’re teenagers to remind them that they weren’t always as cool as they think they are as teenagers. (It’s also the kind of story they secretly love to hear you tell, too.)

My son’s standard order, for a long time, involved a waffle. When he was preschool age, kid’s waffles at Waffle House were $1.00. Kids’ waffles with bacon are now $4.25, so this long-ago gone value was indeed quite a deal.

If you’ve been to Waffle House, you know that all the waffles come out of the same sized griddle, which you can see, so it’s no big secret. A kid’s waffle, therefore, was priced significantly below an adult waffle even though the product was the same. Same waffle mix, same size, same plate, one dollar. This was a great deal for that age and stage when as much of the waffle ended up on the table and floor as in your kid’s mouth.

At a certain point, things changed on our Waffle House trips. One day, my son, by now about five or six years old, changed his order.

On this trip, I verified his usual order.

“A kid’s waffle for him,” I said to our server.

“Dad, I want an adult waffle,” he said.

The server stood there, her pen poised over her order pad, wondering what Dad’s next move was going to be.

“The kids’ waffle and the adult waffle are the same size,” I said.

“But Dad, I want the adult waffle.”

“It’s the same waffle, John. Comes out of the same griddle my waffle does. See over there?”

I pointed to the waffle griddle, but he was having none of it.

“Dad, I want an adult waffle.” He started to cry.

Our server stood there looking at me. “What now, Dad,” her eyes searched me, “now that reasoning with a five-year-old is a complete flop?”

At this point, in that uncomfortable moment when my kid is crying and the server is waiting, my willingness to pay shifted dramatically.

“OK, get him an adult waffle.”

I was suddenly willing to pay an adult price for that same exact waffle. If my server had told me that adult waffle prices had suddenly doubled for cheapskate Dads with crying kids, I would probably have been willing to pay that amount.

A customer’s willingness to pay is subject to context as well as the geography they find themselves in. This lesson is one takeaway from the undercover “Palessi” shoe store promotion conducted by Payless Shoes. Customer expect to pay more for a soda at the ballpark or the movie theater even though it’s the exact same cola they enjoy for a lot less at home.

It should work the same in services, however, but professional services providers often miss the mark on this. A rushed completion timeline for the same work should command a premium price for the added benefit of speed, but service providers often miss this opportunity to differentiate.

How does context work for the customers in your business? If you’re not factoring in the context and geography of your customers, your price is probably wrong.

 

©Ray Business Advisors, LLC and John Ray

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About me:  I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.

 

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