Business model development is an exciting and challenging task for any company. At UFIS 2023, we looked at a very specific business segment: Ice cream parlors. They are perfect for thought experiments. They are businesses that we are all familiar with and yet they present major challenges. Let's take a look at these challenges and present innovative pricing strategies that could open up new opportunities and evaluate what SMEs can learn from them.

Ice cream parlors and their challenges

The ice cream parlor industry is facing numerous challenges that require an innovative approach to the business model. Some of these challenges include

  • High competition: ice cream parlors compete intensely with each other, often in a very small space.
  • Lack of differentiation: Most ice cream parlors offer similar products, which makes differentiation difficult.
  • Dependence on tourists: Many ice cream parlors are heavily dependent on tourists, whose presence and consumption patterns can fluctuate greatly.
  • Extreme seasonality and weather dependency: Ice cream parlors are heavily dependent on the season and the weather, which leads to strong fluctuations in sales.
  • Low profit margins: Despite the low production costs of ice cream, profit margins are often low, especially according to traditional cost accounting.
  • High rental costs: Top locations in particular incur high rental costs, which require a significant amount of ice cream to be sold to cover them.

Pricing for ice cream parlors

If you're wondering how to best integrate business management principles into your SME, the example of an ice cream parlor offers surprisingly valuable insights. This guide examines how clever pricing and innovative product lines can increase sales and maximize profits.

Prices according to demand: variable pricing

Introducing variable pricing can be an exciting and profitable strategy for ice cream parlors. Think of a gamified approach where ice cream prices vary like stock prices. For example, prices could fluctuate based on supply and demand, weather conditions or even time of day. With the help of a specially developed app, customers could view the current prices in real time and place their orders. Not only would this speed up the ordering process and reduce the logistical burden on ice cream parlor staff, but it would also encourage customer interaction and engagement.

Imagine a digital board, similar to the stock market, displaying the current prices for the different ice cream flavors. Customers can follow the price fluctuations in real time and try to "buy" their favorite flavors at a lower price. This gamification makes the ice cream experience more interactive and exciting and could attract more customers.

Variable pricing is also easier

Another approach to variable pricing could be the introduction of special weekend flavors or flavors of the day. Similar to bakers offering special buns on Sundays at higher prices, ice cream parlors could introduce special ice cream flavors or exclusive weekend blends that are only available on certain days and are priced higher.

These special ice cream flavors could include exclusive or seasonal ingredients that justify the higher price and would add variety to the weekend offerings. By limiting it to certain days, a sense of exclusivity and urgency could be created, which can help to increase demand and sales. In addition, this strategy could help to increase customer loyalty by bringing an element of anticipation and excitement to the ice cream purchase. An app could also be used here to inform customers about the new weekend flavors and take orders.

Enforce higher prices: Reduce comparability - get rid of the bullet!

Comparability is often a major reason for the intense price pressure among ice cream parlors. One way to stand out from the competition and enforce a price premium is to abandon the traditional "scoop" format. The standardization of the ice cream scoop leads to direct comparisons and thus to price competition. Ice cream parlors could instead introduce unique shapes or sizes for their ice cream, which would allow them to position their products as incomparable and unique.

For example, instead of a traditional scoop, ice cream could be served in the form of "slices" or "blocks", or different sized cups filled to the brim. This could also be combined with creative forms of presentation, such as serving the ice cream on natural fruit bowls or edible containers. Another option would be to offer larger "premium" scoops that are enriched with special ingredients and flavors. This could also be supported by using solid cups branded with the ice cream parlor's name and presented as a sustainable option.

By transforming the way the ice cream is presented and served, ice cream parlors could not only command higher prices, but also create a unique customer experience that helps to strengthen brand identity and increase customer loyalty.

Upselling: Toppings - make the difference

Adding toppings to your ice cream range can be an effective way to upsell and increase your sales. By offering customers a choice of toppings such as sprinkles, fruit, chocolate chips or nuts, you can increase the value of each ice cream flavour and offer customers a personalized taste experience. Toppings can be added quickly and efficiently by simply dipping the ice cream cup in sprinkles or using automatic topping dispensers.

A special focus could be on premium toppings that justify a premium price. Consider luxury toppings such as handmade caramel sauce, imported chocolate chips or organic fruit. These can help enhance the taste experience and increase the perception of value, enticing customers to spend more. In practice, even the cheapest ingredients will be enough to differentiate.

At the same time, it's important to note that adding toppings can take time and in a busy ice cream parlor, throughput is often the name of the game. This is where the method suggested in the previous paragraph could come into play: Instead of individual scoops, an entire sundae could be dipped in sprinkles or other toppings, providing an attractive, crunchy coating and a unique flavor experience without slowing down service. In this way, ice cream parlors could improve their sales strategy without sacrificing efficiency.

Increase willingness to pay: Start a trend e.g. Loaded ice cream

Following the trend of "loaded fries", where the toppings take center stage, ice cream parlors could follow a similar approach and offer "loaded ice cream". In this concept, it would no longer just be the ice cream flavors that are presented as the central element, but above all the elaborate and fancy toppings. Think lavish toppings with homemade caramel sauces, hand-scooped chocolate chips, fresh fruit, special sprinkles and more.

By emphasizing the toppings as the main component of the product, ice cream parlors could increase the perception of the value of their offering and thus also increase customers' willingness to pay. This is because if the toppings and their quality take center stage, the ice cream becomes a kind of "accompanying product" and comparison with standard ice cream parlors, which focus on the ice cream itself, becomes more difficult.

The result would be a novel and exciting product that is able to justify higher prices because it is no longer directly comparable to traditional ice cream. In addition, this approach could encourage customers to discover new flavor combinations, enriching the experience of buying ice cream. "Loaded ice cream could quickly become a popular trend and help to strengthen the ice cream parlor's brand.

More prices - more sales: from low-budget to premium ice cream

Partnering with popular brands can be a great way to increase customers' willingness to pay and set an ice cream parlor apart from the competition. Rather than testing the boundaries of trademark law with the creation of flavors like "Nutella ice cream" or "Roche ice cream", an ice cream parlor could go the opposite route and form official partnerships with these and other brands to offer exclusive, co-branded ice cream flavors at premium prices.

This could be particularly effective with impressionable audiences such as children, who could exert buying pressure on their parents. Imagine a Paw Patrol ice cream, a Marvel ice cream or a Frozen ice cream. These could even be low-cost ice cream flavors that don't necessarily have to contain real branded ingredients, but have a higher value in the eyes of customers because of the association with the brand.

Not only would such a partnership increase the appeal of the ice cream parlor to children and their parents, it would also provide the opportunity to charge higher prices for these exclusive and sought-after ice cream flavors. Such brand partnerships could be a key element in a strategy to increase willingness to pay and differentiate in a highly competitive market.

New target groups - new willingness to pay: ice cream with alcohol and breakfast ice cream

Another way to attract new customer groups and extend business hours is to introduce innovative product lines such as alcoholic ice cream or breakfast ice cream. The main aim is to break the traditional concept of ice cream as an afternoon snack and make it a product that can be enjoyed at any time of the day.

Ice cream with alcohol, for example sorbet with Prosecco or ice cream with whisky, could be an attractive option for adults, especially in the evening. With an appropriate liquor license, the ice cream parlor could serve alcoholic ice cream and thus appeal to a whole new target group that is willing to pay for this unique experience.

At the same time, the idea of breakfast ice cream could increase Morgenand start the day with strong sales. Imagine an ice cream enriched with healthy ingredients such as oatmeal, fruit, nuts and maybe even some protein powder for an extra nutritional boost. This delicious and nutritious way to start the day could be the next micro-trend.

Both approaches could help extend the business beyond traditional peak times, increasing overall sales. This would be an innovative way to increase willingness to pay and make the most of operating hours.

Psychology and pricing: size gradations and influence

Applying psychological principles to pricing is an innovative approach that can be used by ice cream parlors to increase sales. The introduction of size gradations plays a central role in this.

Incorporating size options such as S, M and XL into the pricing strategy can have a significant impact on customer perception. If the price difference between the smallest (S) and the middle (M) size is small, customers tend to choose the middle size because it is perceived as the "better deal". This is an example of the 'relative price perception' principle, where customers make purchasing decisions based on perceived value compared to alternative options.

In addition, the introduction of a very large (XL) size, which is significantly more expensive, can make the medium (M) price seem more attractive. This is an example of the concept of 'anchoring', where customers adjust their perception of price based on the first price they see.

In addition, the principle of "price pain mitigation" can help increase customers' willingness to pay. Breaking down the price of an ice cream sundae into smaller, less painful amounts, for example by splitting the price of the ice cream and the price of the toppings, can reduce the perception of the total price.

What SMEs can learn from the ice cream parlor: Revolutionize your pricing strategy!

As the managing director of a medium-sized company, you are constantly looking for ways to increase your sales and maximize your profits. You may not have thought of an ice cream parlor when it comes to business strategies. But the dynamic and innovative world of ice cream parlors can offer valuable lessons. Let's explore together how you can apply these lessons to your own business.

Maximizing willingness to pay through variable pricing and innovative product lines

One of the main lessons we can learn from ice cream parlors is the art of pricing. By offering variable pricing and a variety of product lines, you can make the most of your customers' willingness to pay. From introducing premium and budget options, to creating brand partnerships and special offers, to integrating innovative product lines such as alcoholic ice cream or breakfast ice cream, each of these strategies aims to increase the perceived value of your offering and increase your customers' willingness to pay more for your products or services.

Expansion of the target group and exploitation of new business opportunities

Equally important is the lesson of targeting. By developing products and services that are tailored to specific customer segments, you can expand your reach and increase your sales. This can range from launching child-friendly products, to partnering with well-known brands, to expanding your offerings beyond traditional peak hours. Each of these approaches allows you to reach new target groups and tap into new business opportunities.

With the right strategy, you can use these lessons from the world of ice cream parlors to transform your own mid-sized business. Harness the power of variable pricing, innovative product lines and audience targeting to increase your sales, maximize your profits and take your business to the next level.

Ten impulses to help you revise your pricing strategy

Realign, rethink, relaunch: Here you will find ten inspiring ideas to help you re-evaluate and optimize your pricing strategy. Discover innovative approaches and ways to create more value and increase your sales. Ready to take your pricing strategy to the next level? To help you evaluate and realize this potential, we offer a free 30-minute sparring session. Use this opportunity to get more out of your products and services and increase your profits in the long term.

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Conclusion: Lessons from the ice cream parlor industry and their application in SMEs

The ice cream parlor industry offers a wealth of lessons that can be applied to other industries in the SME sector. Although every industry has its unique challenges, there are universal principles and strategies that we can learn from this case study.

  • Differentiation in a saturated market: Competition in the ice cream parlor industry is intense, and differentiating yourself in such an environment is a challenge that many SMEs face. Finding creative ways to stand out from the competition is crucial. Be it through product innovation, exceptional service or a unique customer experience.
  • Flexibility despite dependencies: Many SMEs are dependent on certain market forces, like ice cream parlors are dependent on tourists and the weather. The ability to respond flexibly and adapt the business model can be crucial to surviving and thriving in times of uncertainty. This could mean, for example, offering alternative products or services in the off-season.
  • Pricing and value creation: As the example of ice cream parlors shows, innovative pricing can have a significant impact on profitability. The transition from cost-driven to value-based pricing, which focuses on customers' willingness to pay and perceived value, can be an important step. For SMEs, this means maximizing customer value while minimizing costs.
  • Tackling high fixed costs: Many SMEs, especially in urban areas, are faced with high fixed costs, similar to ice cream parlors with high rental costs. Strategies to increase sales, reduce costs or utilize resources more effectively can help overcome this challenge.

Finally, it is important to emphasize that innovation and creativity are key elements to excel in a competitive market and achieve sustainable success. This is true for ice cream parlors as well as for SMEs in a variety of industries. Through continuous learning, adaptability and the courage to try new approaches, managers can lead their businesses into a successful future.

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MORGEN is a specialized management consultancy that focuses on the development of new business models for medium-sized companies. In particular, it supports owner-managed companies in their future-proof transformation. Knowledge transfer is at the heart of its consulting activities, which is why the MORGEN Blog regularly publishes articles on key topics such as digitalization, transformation, customer centricity and sustainability.

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