• Michigan pizza outlets in price war

    Tags: Marketing

WOODHAVEN, Mich. — Little Caesars, Marco's, Cottage Inn, Dominos and other pizza outlets are offering pizzas ready to go for as little as $4 -- and Downriver Michigan is eating it up, literally.

Barb Roll of Southgate dashed into Little Caesars with her daughter to take advantage of the store's recent $5 Hot-N-Ready large pepperoni pizza promotion.

"It's both convenience and price," Roll said. "I've been at school all day, so I thought I would stop by and pick up dinner for the kids. I think its better than fast food. Pizza is a little bit healthier for them than french fries."

Marque Cryderman of Centerline also took a break from his job in Downriver to drop into a Little Caesars' restaurant last week to pick up a $5 Hot-N-Ready pizza and a large soft drink with his credit card. Still, he was out the door in about two minutes.

"I've bought these $5 pizzas before," Cryderman said. "They're pretty good, well, for $5 anyway. I'm glad I don't have to wait for it."

Jessica Reaves, manager of the Little Caesars' restaurant in Brownstown, said sales -- and the number of employees -- at her store have tripled since the $5 Hot-N-Ready promotion kicked off this summer, according to a report in the Southgate (Mich.) News-Herald.

"They've told us that this isn't a temporary promotion or a special, this is the new price for our large pizza," Reaves said. "Since the beginning of August, we've been up 129 percent or more over last year's sales each week."

The typical price for a large, 14-inch, pepperoni pizza at Little Caesars is $9.99.

"The way I look at it is that we're not in competition with other pizza places now," Reaves said. "We're in competition with McDonald's and Taco Bell to get the customer in and out the door as fast as possible."

Reaves' store keeps as many as 15 pizzas ready for purchase during the lunch hour and from 25 to 30 pizzas ready during dinner time. Boxes are marked and placed in a warmer and if they haven't been sold in 30 minutes, they are thrown away, she said.

Another side benefit of the promotion at Little Caesars has been fewer phone calls, according to Reaves.

"Our phones seldom ring now, only when somebody wants something special like ham or more than one topping," she said. "They just walk in and get their pizza. We're doing our job right if our phone only rings 10 times during the course of the day."

Other pizza franchises have been forced to follow Little Caesars' pricing promotion.

Cathy Toporowski, shift manager of Cottage Inn Gourmet Pizza, said her store just started offering a large, one-item pizza for $5 Mondays through Thursdays as a way to keep up with the competition.

"It's been a big hit," she said. "It's really going over big. We're just trying to match the other pizza places that are running the same deal."

Unlike Marco's and Little Caesars, Cottage Inn is still selling its $5 pizzas made to order, Toporowski said. Typically, a large, one-item pizza at Cottage Inn costs $11 including tax.

"We really can't go any lower than $5 because we won't be making any money off it," Toporowski said.

Rico Ialacci, co-owner of Marco's Pizza, said his store's $4 Pepperoni Pizza-To-Go promotion for a 12-inch pie has been a "tremendous success."

"It's been going really well," Ialacci said. "This is obviously to bring new customers in the door and to protect our current customer base, especially with the way the economy is. It hasn't had much effect on our profit margin because of the higher volume we're doing."

Company officials couldn't agree more as the dough keeps rolling in during what is typically a slow sales period for pizza.

"It started as a summer promotion for us in the Detroit area," said Lisa Cosnowski, director of corporate communications for Detroit-based Little Caesars Inc.

"We did this last summer as well as a $5.55 promotion. We tend to do such a promotion in the summer months to spur sales a little since summer is typically a little less active for pizza sales.

"(Hot-N-Ready) has been great. Normally, we don't talk about percentages or profits, but in the last three or four months our sales increases have just been phenomenal. It's been reported that our sales increases have been as much as 15 percent. This promotion is certainly part of that," Cosnowski said.

Cosnowski isn't worried that the pizza pricing wars will erode profits the way value menus have at other fast-food chains such as McDonald's and Wendy's.

"This (promotion) is to get customers into our restaurants that may have not had Little Caesars before," she said. "For a $5 pizza, people might think it's not very good. But when they get in the door and taste the product they realize it is a very, very good product and they're surprised by that.

"So we have the best of both worlds in terms of retaining our loyal customers and gaining new customers as well."

Others predict that the current price wars are just another marketing tool that will have a short life span.

"When you consider we have 7,300 stores in 60 countries around the world, there are probably times when this kind of promotion works, and times when it doesn't work, and places where it works, and other places where it doesn't work," said Dave Brandon, chairman and chief executive officer of Domino's Pizza.

"All this activity tends to be fairly short term and is typically designed to generate interest in the brand and try to keep loyal customers loyal as well as get new people to come in and try your product."

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