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The best way to price your single serve coffee


Coffee makers and single-serve coffee pods are tied goods, companion products whose sales are closely related. A company may sell a coffee maker for cheap—but make up for it with what they bring in from pods.

This category has generated high margins over time, but competition is changing that, according to Chicago Booth’s Pradeep K. Chintagunta, who studied optimal pricing strategies for tied goods with Temple University’s Marco Shaojun Qin and Maria Ana Vitorino from INSEAD and the University of Minnesota. The researchers investigated pricing strategies that can be beneficial for manufacturers on both sides of the equation.

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