The Economics of Pizza

Like most people I enjoy Pizza, especially when I order in rather than making my own, and like most people I consult the stack of coupons that arrive in the mail daily. Personally, I live in an area where there are no really good pizza places to capture my loyalty, so price becomes the deciding factor.

One trend I have noticed recently is the tendency to offer deals which are either buy one get one free, or offering value meals with a pizza, wings, salad and 2 liter for $20 or so, or offering a pizza with 1 topping for a low price. Here’s the problems with that.

It’s great for people with large families, or when your kids are having a party or you invite friends over to watch a game or something. However, it does leave a certain demographic out of options. My wife is not a big fan of pizza, so usually I’m the only one eating it (she will steal a slice or two later in the evening though). I usually prefer to have some left over (lunch the next day) and I like a number of toppings on my pizza. If pizza shops are offering to feed a family of 4 for 20 bucks, surely I can get a decent sized pizza with multiple toppings for about $10?

See, if I buy a 12 inch with two toppings for $10, and they have a buy one get one free, I end up with 2 crusts, 4 toppings and 2 cheese toppings. How about you just keep the other crust and throw the extra cheese and toppings on the other pizza? I end up with 4 toppings and extra cheese for $10 and you’ve saved the hassle of making, cooking and boxing a pizzas. Incidentally, Gina’s Pizza in Strongsville does exactly this, I can get a large (16 inch) with 3 toppings for $10 with a coupon. They are also very good.

Also, when you offer a cheap and cheerful pizza at a discount at least make it as good as your standard pizzas. Some pizza shops here have pizzas already cooked and waiting for walk-in customers to stop by and pick one up. Trouble is that there is very little cheese and pepperoni on them, and there is about 2 inches between the start of the cheese and the edge of the crust. Ok, it is a cheap pizza, but at the same time, it’s not great advertising for how well you make pizzas. If you are going to run a loss leader, at least make it something that is going to reflect and advertise your business effectively. Businesses often offer inferior products at a discount, but when doing so, they brand them under a different name, not as a ‘lite’ version. With pizza, it’s a little more difficult to do, but the pizza shops do try and brand them as discount pizzas to distinguish. However, that distinction is not always clear.

How can this translate into something more interesting than Pizza? Well, it’s worth remembering this when you are designing marketing and sales strategies. If you are going to offer discounts, make sure it is something that can apply to smaller businesses as well as bigger ones. If you offer 3 for 2 on training courses, that’s not going to do the smaller company, with only 2 developers, much good. You are giving them a free training course that they are going to throw away, or pay to send someone else who perhaps doesn’t need the training, but they may as well use the free space.

If you are going to offer a home or personal version of software (as opposed to professional), make sure it still does everything the user needs to a degree. You don’t need to include every bell and whistle, but make sure it is usable and doesn’t reflect badly on you and therefore dissuade them from upgrading to the professional version. Also make sure the two versions are clearly marked and the user is aware that there is a professional version that comes with additional functions. Otherwise they might just think that this is the product and the one offered by your competitor for a little more cost has more features.

One thought on “The Economics of Pizza

  1. Donald Todd

    031709

    Andy,

    I liked your take on Pizza. I am more fortunate that you in that we have some fairly good pizza places here (NY, Harrys, Chicago) and taste is more important the money.

    However that is not why I am writing. I purchased a CD at a PotBelly when I was in Reston VA to be trained for Siemens in December 2004. I accidently ran into the CD about a week ago, removed the cellophane, and played every song (jumping out of those which did not catch my fancy).

    Yours is the last item on the CD and it is entitled In My Mind. It is one of the most enjoyable tracks I have heard in ages. We played it at least three times that night, and today – during a trip to and from Atlanta – played it twice more. You have become part of our traveling music, and I’ll introduce others to you as I have the opportunity.

    I’ll do a bit of digging and see if I can find you on CD baby or iTunes.

    If you are still playing, you might introduce a Music section to your .net site and let people know where they can hear you.

    There is also an ____.fm site that takes music and puts it out there for people to listen to. (Sorry, I don’t remember what the ___ part is but a search might clear that up.)

    In any case, thank you for making my ride more enjoyable.

    Cordially,
    Donald Todd