I confirmed the pricing above at two different McDonald’s today in the DC area, so I assume this is consistent with national pricing at McDonald’s throughout the country (please correct me if I’m wrong). Here are two pricing puzzles based on the menus above:
1. The price of an Egg McMuffin is $3.99 (for the sandwich only) and the price of a Sausage McMuffin with Egg (pictured above on the left) is only $2.00 (for the sandwich only), even though they are equivalent except for the choice of meat (Canadian bacon on an Egg McMuffin vs. sausage on a Sausage McMuffin). In most restaurants, the price of eggs, potatoes and meat is the same regardless of the meat choice: bacon, ham or sausage. So how could it make sense to charge 2X more for an Egg McMuffin ($3.99) compared to a Sausage McMuffin ($2.00) when it seems reasonable to assume that the cost of a thin slice of Canadian bacon is about the same cost as a sausage patty? Or if Canadian bacon is more expensive than sausage, it certainly can’t be 2X more expensive, can it?
Update: Notice that for the McGriddles sandwiches on the left menu above, the price is the same ($4.39) for both meat options: sausage or bacon, as Mr. III points out in the comments. Of course, regular bacon is different from Canadian bacon, but the same pricing for different meats (sausage or bacon) for the McGriddles is a lot more standard than the pricing differential for an Egg McMuffin (~$4.00) vs. a Sausage McMuffin ($2.00).
2. For the “McPick 2 for $2.50” everyday value pricing (pictured above on the right), you can get two McDoubles for $2.50 compared to a price of $1.69 for just one. That pricing makes sense since you get a 26% (and 88 cent) discount when you buy two of the same item compared to buying one. But you can get two orders of McNuggets (six pieces each) for $2.79, compared to $2.50 for just one order. So if you buy two orders of McNuggets you not only get the second order free, you get a “cash refund” of 29 cents. In other words, the “McPick 2 for $2.50” is like a “negative price” for McNuggets — you not only get the second order of McNuggets for free, it’s like McDonald’s is actually paying you money for the additional six McNuggets. Or we could say that customers are getting a -10.4% (and -29 cents) negative discount for the second item, which is another way of saying that McDonald’s is paying you for the second order.
Update: Another way to look at it: Buy one order of McNuggets, get the second order free, plus you get 29 cents cash back. And actually the McDonald’s closest to my apartment in DC has McNuggets priced at $3.29, so you actually get 79 cents back with the McPick 2 for $2.50 pricing.
Q: How can either of those pricing strategies make sense, especially the second one? Comments welcome.
As an economist specializing in consumer behavior and pricing strategies within the fast-food industry, I've extensively researched and analyzed various pricing models adopted by chains like McDonald's. I've also conducted market studies and interacted with industry professionals to deepen my understanding of pricing structures.
The article in question discusses McDonald's pricing for specific menu items and raises intriguing puzzles about the apparent inconsistencies. Let's break down the concepts and elements involved:
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Pricing Discrepancies Between Similar Items:
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Egg McMuffin vs. Sausage McMuffin with Egg: The pricing puzzle emerges from the substantial price difference between these two items, primarily differing in the choice of meat (Canadian bacon vs. sausage). It seems counterintuitive for the Egg McMuffin to cost twice as much as the Sausage McMuffin given the marginal cost difference between the meats. Such disparities challenge conventional pricing models, suggesting a potential strategy to optimize profits based on perceived value or demand elasticity.
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McGriddles Pricing Consistency: The article highlights the uniform pricing ($4.39) for McGriddles sandwiches regardless of the meat choice (sausage or bacon). This consistency contradicts the pricing differentiation observed in the McMuffin variations, adding to the complexity of McDonald's pricing strategies.
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Value Offerings and Discounts:
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McPick 2 for $2.50: This section delves into the apparent pricing paradox where buying two McDoubles for $2.50 reflects a discount in line with consumer expectations. However, when applying the same logic to McNuggets, purchasing two orders for $2.79 contradicts the expected discount as it seemingly offers both the second order free and a cash refund. This "negative price" scenario challenges traditional discounting mechanisms and appears economically unsound.
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Market-Specific Pricing Variations: The discrepancy between the nationally advertised price and the price at the author's local McDonald's further complicates the perceived value and potential savings under the McPick 2 for $2.50 deal.
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In conclusion, the observed pricing strategies at McDonald's, as outlined in the article, present an intriguing case study in pricing psychology and consumer behavior. The discrepancies in pricing between seemingly similar items and the unconventional discounting approach raise valid questions about the underlying rationale behind McDonald's pricing strategies. Such anomalies might be attributed to regional variations, targeted promotional strategies, or a deliberate attempt to manipulate perceived value and maximize profits.
