Running Case: TSL | Product OptionsIs Less Really More? Another Email As part of her Director of Marketing duties, Chloe routinely scanned all emails from customers to gain a better understanding of the market. Since she was in charge of marketing, part of her job was to scan emails to gain a better understanding of customer perceptions of the product and perhaps to keep an eye out for good ideas. She held an email up to the group assembled around the conference table. "Here's another email. We've gotten a bunch of these in the last couple of months." She handed out copies of the email for the team to read:

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This Saves Lives, Chapter 8: Founders Discuss Product Issues

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Hi TSL,

I just love your bars. They are delicious and my friends at the studio think they are fantastic too. They "stole" almost all of my last order. I have to hide them so I have some for myself . I love your bars, and I want to reorder. But, I have a problem. I like all the flavours. I do. In fact, I can't choose which flavour I want, so I like to keep a selection on hand so I can choose one based on whatever I am feeling for that day. Problem is, it is expensive to order a box of each (four flavours at $20 per box is $80! Ouch). And then I find myself thinking they will go stale since I only eat one a day and some days not any. What I want is a variety box with all four flavours. Two of those would be perfect for me for the month. When is this going to be an option? I am sure there are more folks like me who want a little variety. Can I order a mixed box? Thanks.

Sincerely,

Lisa Christie

Aliso Viejo, CA

PSLove the BOGO. Makes me feel great every time I eat one thinking of a child getting food!

Chloe knew she would respond with a polite email thanking the customer for the good idea and explaining that a variety pack wasn't currently available. She asked the team to read and think about the email because she thought maybe a variety box would be a good idea. Chloe watched the team reading, and when they had all read it and looked up, she said, "That's the third request for a variety pack this week. It's a common request. What do you think?"

Too Much or Too Little Variety? Chloe's question sparked debate among the team. The consensus was that the option of a variety pack was a potential benefit for customers, but not necessarily for TSL. There were several concerns voiced by the group for consideration.

The biggest issue was cost. Offering a variety pack meant several additional costs. Currently, TSL sold four flavours online: Dark Chocolate Cherry & Sea Salt, Madagascar Vanilla Almond & Honey, Dark Chocolate Peanut Butter & Sea Salt, and Wild Blueberry & Pistachio. Each of the four flavours was sold in boxes of 12 bars for a price of $19.99. If TSL were to include a variety pack option, it would need to design a new package for the variety pack. There would be additional printing costs to add the fifth box. Production costs would increase since the production process would have to be changed to put three bars of each of the four flavours in the same box. While it doesn't sound that difficult, the variety pack would actually require significant changes in the production process. The variety pack would require TSL to coordinate the production runs to have quantities of all the flavours available at once for packing in the variety box rather than being able to make a full product run of a single flavour. In addition, the packing process needed to mix flavours during packing would increase costs.

Chloe nodded as they finished listing the potential production cost increases, then asked another question of the team: "I think the cost increase for production is pretty clear, but the real question is, would the increase in cost be worth it? Would the variety pack excite customers enough to outweigh the increased costs? Let me do some homework and I'll put together some more information so we can have a more thorough discussion of the variety pack next week. It is definitely something we want to look into, but I want to be careful so we don't make a mistake." The team turned their attention to a shipping issue, but Chloe was already thinking about what she was going to do about the variety pack decision.

The following week, she sent the team members a succinct summary of her observations regarding the variety pack. She didn't have firm numbers yet, but she did have some initial feedback from customers on the variety pack. She listed several key factors that would affect a decision on whether to add the variety pack, along with a set of options the group could consider. Key factors for variety pack decision were:

Customer requests for a variety pack option were increasing, and some of TSL's competitors offered variety packs.

Virtually all customers she talked to said they would like the option of a variety pack, even if they would typically purchase a single-flavour box most often. Customers preferred more options.

Some customers indicated they would purchase only the variety packs if they were available. In the worst-case scenario, if everyone just switched from buying the single-flavour boxes to the variety packs, TSL would actually be worse off since the cost was higher for the variety pack. This would mean the only way for TSL to be better off financially would be to see an increase in sales of additional boxes to existing customers or to lure new customers to the brand specifically because it offered the variety box. Otherwise, it would have to charge more for the variety box than the single-flavour boxes to offset the additional production cost of the variety pack.

Based on her analysis, she provided three options, with pros and cons for the group to discuss:

Option 1: Don't change anything. Don't add a variety pack. The variety pack would be nice, but it doesn't make sound business sense to add the variety pack at this time. The biggest advantage of this option is that TSL would not incur the additional product costs of adding the new package or the production costs associated with changing the process. In addition, while most existing customers indicated they would prefer the variety option, the fact remained that the lack of a variety pack wasn't keeping customers from ordering single-flavour boxes. In fact, the most common order was for two boxes of different flavours. Offering a variety box might mean some customers would order a single variety box because they could get multiple flavours they wanted in the same box. If customers actually ordered less because they had the variety pack option, TSL might not only lose sales, but also donate less food, which would go against the company mission. On the other hand, the biggest drawbacks to this option included the fact that more customers were asking for the option and that some competitors already offered variety packs. Not giving the customer what they want can be dangerous, especially when competitors do give them options.

Option 2: Add a variety pack, but pass the additional cost to the customer. Since the biggest concern for adding the variety pack was the increased cost, adding the cost to the price for the variety pack would take this major concern out of the picture. The single-flavour boxes of 12 bars sold for $19.99 each. To cover the additional costs of the variety pack, the price for the variety pack of 12 bars (three bars of each of the four flavours) would be $22.99. Customers could then get the variety assortment if they were willing to pay a little extra to cover the added cost to make the variety pack available. At this price, TSL would actually make a little extra for each variety pack sold compared with a single-flavour box. The main disadvantage of this option was the possibility that the price would deter purchases. While most of TSL's customers were not generally very price-sensitive, $20.00 was an important psychological price threshold for a box, and now the bars would be closer to $2.00 each. Several competitors had lower prices. If customers didn't buy as many bars due to the higher prices, food donations would decrease, which would again thwart the company mission.

Option 3: Add a limited variety pack that still makes it possible to sell under $20.00. To keep the price of a variety pack in line with the single-flavour boxes, TSL could drop the count in the variety pack to nine regular-size bars. The recommendation was two bars each of three flavours and three of the bar with the lowest cost to produce. The company already had different package and bar sizes for its kids' bars (five smaller bars per box for $4.99), so it has some experience with different package options. This option would keep the price under the $20.00 threshold and still offer customers the potential variety they sought. In addition, this option would cover the added costs to add the new package or bar-size options because the company would save on product costs by offering less product (fewer bars). Customers have seen variety or special packs with fewer products inside, so this would not be something new to them. The biggest disadvantage of this option was the increased cost of the packaging and the need to redesign the production process to accommodate a different size of box. Also, fewer bars in the variety pack might mean customers would buy the same number of boxes, but with fewer bars. TSL dollar sales would be the same, but it would sell fewer bars and donate less food. This was not desirable for the company.

The team decided to think about the options and meet the following week to decide what to do. Should they offer a variety pack at all? If so, what type of variety pack? It was an important product decision with significant consequences.

Running Case Questions What are the major advantages of the variety pack for the customer? For TSL?

What are the potential disadvantages of a variety pack for TSL, and do these outweigh the potential advantages of the variety pack for the customer?

Is this a case where TSL should give the customers what they want or not? Explain.

How to evaluate each of the options the team suggested? Justify.

Suggest TSL in this situation, given the options suggested and why?

Is there a way TSL can give customers what they want but also achieve its marketing goals?