4A -- Forming an Opportunity Belief
Context/Issue:
"Drinking a milkshake through a regular straw is always fun: not. I would probably pay $.25 more for a milkshake if they would give me a stout, huge straw to enjoy my milkshake with. Lack of competition in this specific area is likely the cause behind the inadequate-straw epidemic.
--PDQ has tried but their straws aren't stout enough to handle a strawberry milkshake with real strawberries in it. So sad. I hope someone will catch on and supply this important, underserved market."
I believe a significant number of customers would pay more for milkshakes at say, PDQ, and maybe buy milkshakes more often if the shake came with a stout, large straw. I don't even think PDQ serves strong enough straws. I want a straw that can handle a triple-thick, strawberry malt shake with chunks of strawberry without collapsing. I believe businesses that serve thick milkshakes should consider charging an additional $.25 for milkshakes and include straws that are substantial enough to last the customer all the way through their dining experience. I believe this is an underserved, not untapped market.
Prompts:
1) Do you drink or spoon your milkshakes?
2) If you drink them, do you often get frustrated with the straw provided with milkshakes?
3) Would you pay an additional $.25 for a milkshake if it came with a straw so strong it could handle an entire, thick, strawberry milkshake?
4) How much would you pay for a regular-sized shake with such a straw?
5) Do you have a better solution?
Ryan C. -- Ryan is my old roommate and he loves PDQ milkshakes. He also hates when straws can't last through a whole milkshake. He said he is willing to pay an additional $.25 for a significantly better straw but only if the milkshake is thick, like PDQ-thick. However, he is concerned that too large of a straw doesn't allow you to get the last few drops/sips because it's too large of a surface area (yes, he's an engineer). But, he did admit you can often drink the remaining liquid one you have gotten almost all of the shake with your straw. Ryan doesn't have a new idea but he does patron PDQ partly due to their stronger straws. When asked what is maximum willingness to pay for a shake in general was, he said $5 even.
What did I learn? -- I did not expect such a technical response and had not considered how big of a straw would be too big or that the thickness of a shake would determine the willingness to pay of customers. Both are significant factors in the success of this potential product. A firm can actually help build and hold a customer base specifically because of their straw choice. But, firms can't get too carried away because there is a limit to willingness to pay.
Jon S. -- Jon is a good friend of mine from a small town similar to mine. He is also an economist and occasionally orders a milkshake. Jon absolutely shocked me. He said: "For a good straw. I'm talking good diameter that I can get a good suction on, and good sidewall construction that won't bend and flop around. The Gucci of straws. I'd pay like $.65." He also said he does not go to PDQ because they are "too expensive". Jon said his max willingness to pay is only 4.25 with a "Gucci straw" and that $3.25 was his preferred price.
What did I learn? -- He is looking for stronger competition to bring the price of shakes down to a point that paying an additional $.25 would be justified. This is a good point and an important factor to remember. In the end, people still have an upper limit on willingness to pay. So, people are only willing to pay a certain amount regardless of how good the straws are. Perhaps people who don't buy shakes often are more likely to pay more for one if they have a better experience?
Antoine H. -- Antoine is another friend of mine who I met freshman year. He LOVES milkshakes. He actually said that. He said he would not pay one penny more for a better straw. He said the normal straws at places like McDonald's aren't terrible and he'd rather have a cheap shake. His maximum willingness to pay for a milkshake is $6.00 but it would have to be a good shake.
What did I learn? -- I am surprised that any customer would not pay even one cent more for a better straw. That means there is likely a significant portion of the market that doesn't care about better straws at all. This is also great info because it provides a healthy concern that leaves me wanting to ask more people more questions to attempt to decipher if it would be worth it for any firm to charge more and include bigger straws.
Summary:
I am surprised by the data. I never imagined I'd get such strikingly different answers after asking just three people a series of questions. I think it the assignment as a whole was incredibly interesting and I would love to study the market in greater depth.
a) I do still believe there is a significant opportunity to capture more of the market share for milkshakes. However, this product would probably serve businesses that count on milkshakes are a signature item, like at PDQ than at firms such as McDonald's that don't necessarily count on them as a significant portion of their income. Keep in mind, McDonald's ice cream machines rarely work after lunch in the more rural locations so ice cream and milkshakes surely don't account for a significant amount of their revenue.
b) I do believe the opportunity is more accurate now because I have much more information. However, a much more encompassing survey over a much larger population would need to be conducted to paint an usefully-accurate picture of the demand for better straws.
c) I think entrepreneurs must know a decent amount about their customer base before adapting too much. I think the silent majority is often overlooked. There may be a few people blasting away on social media that a product or even firm is terrible. But, what does the income statement say? Is income rising or falling? How many customers are actually upset and were they loyal customers to begin with?
If you watch Parks and Rec, you may recall the episode where Leslie is running for political office. She is bound and determined to get one, specific man to vote for her. She ends up wasting a lot of time on the one man who simply doesn't like her. The costs of losing that one man far outweighed the benefit. I believe similar stories can be found in the real world and marketplace. Sure, some customers really care what you believe and may storm out in a fit because you do or do not offer a specific product or service the way they specifically want it. But, as famous economists and statistician once said after being hired to determine the perfect spaghetti sauce that everyone would like: "it's not the sauce, it's the sauces". The reality is that about 1/3 of people crave thick spaghetti sauce. Another third love thin sauce and the last third likes theirs somewhere in the middle. Therefore, firms should take criticism and the push to adapt with a grain of salt. [Dr. McFadden told us this story Contemporary Issues of Agribusiness Management].
"Drinking a milkshake through a regular straw is always fun: not. I would probably pay $.25 more for a milkshake if they would give me a stout, huge straw to enjoy my milkshake with. Lack of competition in this specific area is likely the cause behind the inadequate-straw epidemic.
--PDQ has tried but their straws aren't stout enough to handle a strawberry milkshake with real strawberries in it. So sad. I hope someone will catch on and supply this important, underserved market."
I believe a significant number of customers would pay more for milkshakes at say, PDQ, and maybe buy milkshakes more often if the shake came with a stout, large straw. I don't even think PDQ serves strong enough straws. I want a straw that can handle a triple-thick, strawberry malt shake with chunks of strawberry without collapsing. I believe businesses that serve thick milkshakes should consider charging an additional $.25 for milkshakes and include straws that are substantial enough to last the customer all the way through their dining experience. I believe this is an underserved, not untapped market.
Prompts:
1) Do you drink or spoon your milkshakes?
2) If you drink them, do you often get frustrated with the straw provided with milkshakes?
3) Would you pay an additional $.25 for a milkshake if it came with a straw so strong it could handle an entire, thick, strawberry milkshake?
4) How much would you pay for a regular-sized shake with such a straw?
5) Do you have a better solution?
Ryan C. -- Ryan is my old roommate and he loves PDQ milkshakes. He also hates when straws can't last through a whole milkshake. He said he is willing to pay an additional $.25 for a significantly better straw but only if the milkshake is thick, like PDQ-thick. However, he is concerned that too large of a straw doesn't allow you to get the last few drops/sips because it's too large of a surface area (yes, he's an engineer). But, he did admit you can often drink the remaining liquid one you have gotten almost all of the shake with your straw. Ryan doesn't have a new idea but he does patron PDQ partly due to their stronger straws. When asked what is maximum willingness to pay for a shake in general was, he said $5 even.
What did I learn? -- I did not expect such a technical response and had not considered how big of a straw would be too big or that the thickness of a shake would determine the willingness to pay of customers. Both are significant factors in the success of this potential product. A firm can actually help build and hold a customer base specifically because of their straw choice. But, firms can't get too carried away because there is a limit to willingness to pay.
Jon S. -- Jon is a good friend of mine from a small town similar to mine. He is also an economist and occasionally orders a milkshake. Jon absolutely shocked me. He said: "For a good straw. I'm talking good diameter that I can get a good suction on, and good sidewall construction that won't bend and flop around. The Gucci of straws. I'd pay like $.65." He also said he does not go to PDQ because they are "too expensive". Jon said his max willingness to pay is only 4.25 with a "Gucci straw" and that $3.25 was his preferred price.
What did I learn? -- He is looking for stronger competition to bring the price of shakes down to a point that paying an additional $.25 would be justified. This is a good point and an important factor to remember. In the end, people still have an upper limit on willingness to pay. So, people are only willing to pay a certain amount regardless of how good the straws are. Perhaps people who don't buy shakes often are more likely to pay more for one if they have a better experience?
Antoine H. -- Antoine is another friend of mine who I met freshman year. He LOVES milkshakes. He actually said that. He said he would not pay one penny more for a better straw. He said the normal straws at places like McDonald's aren't terrible and he'd rather have a cheap shake. His maximum willingness to pay for a milkshake is $6.00 but it would have to be a good shake.
What did I learn? -- I am surprised that any customer would not pay even one cent more for a better straw. That means there is likely a significant portion of the market that doesn't care about better straws at all. This is also great info because it provides a healthy concern that leaves me wanting to ask more people more questions to attempt to decipher if it would be worth it for any firm to charge more and include bigger straws.
Summary:
I am surprised by the data. I never imagined I'd get such strikingly different answers after asking just three people a series of questions. I think it the assignment as a whole was incredibly interesting and I would love to study the market in greater depth.
a) I do still believe there is a significant opportunity to capture more of the market share for milkshakes. However, this product would probably serve businesses that count on milkshakes are a signature item, like at PDQ than at firms such as McDonald's that don't necessarily count on them as a significant portion of their income. Keep in mind, McDonald's ice cream machines rarely work after lunch in the more rural locations so ice cream and milkshakes surely don't account for a significant amount of their revenue.
b) I do believe the opportunity is more accurate now because I have much more information. However, a much more encompassing survey over a much larger population would need to be conducted to paint an usefully-accurate picture of the demand for better straws.
c) I think entrepreneurs must know a decent amount about their customer base before adapting too much. I think the silent majority is often overlooked. There may be a few people blasting away on social media that a product or even firm is terrible. But, what does the income statement say? Is income rising or falling? How many customers are actually upset and were they loyal customers to begin with?
If you watch Parks and Rec, you may recall the episode where Leslie is running for political office. She is bound and determined to get one, specific man to vote for her. She ends up wasting a lot of time on the one man who simply doesn't like her. The costs of losing that one man far outweighed the benefit. I believe similar stories can be found in the real world and marketplace. Sure, some customers really care what you believe and may storm out in a fit because you do or do not offer a specific product or service the way they specifically want it. But, as famous economists and statistician once said after being hired to determine the perfect spaghetti sauce that everyone would like: "it's not the sauce, it's the sauces". The reality is that about 1/3 of people crave thick spaghetti sauce. Another third love thin sauce and the last third likes theirs somewhere in the middle. Therefore, firms should take criticism and the push to adapt with a grain of salt. [Dr. McFadden told us this story Contemporary Issues of Agribusiness Management].
This was very well thought out and I enjoy the idea. I personally have always loved ordering milkshakes with wider straws because it is both easier to enjoy as well as fun! Is there a particular reason why thicker straws are not actively used to this day? Is it due to price or other factors? I feel like that would be helpful to see how this idea fits in. I think if there is a way to find the ultimate milkshake that fits in with all of their price ranges this idea could latch onto some of the corporate chains selling their iconic shakes.
ReplyDeleteOf course another great post! I am really impressed how detailed you were able to outline this assignment! I like how you came with the opportunity of better straws for milkshakes. Milkshake straws are such a little topic that is many times over looked, but you were able to catch that opportunity and make a statement through your post on the bigger topic of companies overlooking the silent majority.
ReplyDeleteThis was an interesting topic to see how much people value something that is overlooked so much. However, I believe that there is not much reason to pay such high attention on straws. In my opinion, to add on to the list of people in the market that you would interview, I would not care for a straw. If I am at a restaurant and the straw is not high quality I might ask for a spoon or just drink it straight from the cup (which isn't bad manners since it is from a cup, in my humble opinion). If its just a few cents and they give me the option to scale up when I'm at the register then I would simply for the thought of "it would not hurt". Not because it actually matters to me that much. If the price for the best straw is included in the milkshake and it marks it up by a lot then you probably will loose customers because it is now more expensive for the same quality of the milkshake. If you can include the price of the better straw and have it be the same final price (for the customer) by reducing the production cost of the milkshake then that would probably work as long as the quality of the milkshake is not jeopardized. Which if the quality decreases then that would probably cause you to loose customers as well. It is a tricky concept and it might be worth diving into if it matters that much to you. Either way interesting perspective!
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