Let’s start with a market overview. Bunnings Warehouse hardware stores sell sausages in bread with tomato sauce and optional onions for $2.50. At the state election in March, some voters reportedly paid up to $5 for the same deal. But with the Sausage being a cornerstone of Aussie public life, can community groups and charities really charge substantially more?
This sizzling debate could only be settled through robust quantitative research. We surveyed 303 Australian citizens residing in Greater Sydney aged 18 and above with loose quotas by age, gender, and income. We exposed them to four different sausage offerings in a series of Gabor-Granger tests.
With 45% of voters purchasing from a Democracy Sausage sizzle at the last election, we confirmed that the Democracy Sausage truly is an Australian institution.
At a low price of $1.00, almost everyone seems eager to have a bite (though not necessarily the gluten-free option). While demand drops as price is increased from $5, but the curve is flatter for the gluten-free option.
Optimal (revenue-maximising) price is reached at around $2.50 or $3.00 for sausage with bread. It is higher ever so slightly at $3.00 to $3.50 if the snag is served in a roll. Bacon and egg goes best at around $4.00.
Gluten-free options will maximise revenue around $3.00 to $4.00, but the drop-off will be minimal at higher prices.
As one expects, higher-income consumers can sustain a higher price:
But results are not hugely different for Easties and Westies:
In this study, we did not consider costs of running the sausage sizzle, which differ by the seller, or labour hours. Factoring in such direct variable costs may make it more worthwhile to price up.
We also slid in a quick poll for the election, which indicates that Labor might beat the Coalition by 4% (result is not statistically significant, nor representative of the country).
Are these results shocking? Not much. Prices set by sizzlers are already close to optimum. If you want to learn something unexpected about your products, why not run your own pricing test?