Those of you old enough to remember the recession of the 1980’s will recall that Chrysler Motors was in serious trouble and attempted to boast their lagging sales with the first automotive rebate. The program was simple, offer a car at regular price, get a consumer to buy it and then give them cash back as a bonus. This strategy drove the company into bankruptcy. However, the real damage was that they trained the American public that the only time to buy a Chrysler was when the company offered a rebate.
If this sounds like the pizza industry, you are paying attention. Many pizzerias have trained shoppers that regardless of quality, service or convenience, unless a rebate (spelled C O U P O N) is part of the offer, do not buy. The crushing blow for Chrysler was that car buyers could simply wait them out. Unless your car was in a wreck, or not running, you could just wait for a few months, another rebate was coming. Chrysler became dependent on rebates to operate. Their charismatic Chairman, Lee Iacocca, ultimately had to beg the U.S. government for the first “too big to fail” bailout.
Pizza buyers can’t wait months for a pizza, but because our industry takes turns destroying our price integrity through coupons and cheap prices, people can shift their buying habits from coupon to coupon and their brand loyalty so you are only as good as your last coupon. The coupon shopper cares not about quality only price, therefore, the addicted coupon pizzeria cares not about quality. So we have trained a generation to buy price first, service second and quality dead last, which creates the next round of chasing the brand-less coupon shopper to cheaper and cheaper pizza prices.
Do you think Mercedes or Ferrari buyers wait for the coupon? No, they have identified that a quality experience, that delivers benefits they care about costs more and they joyfully pay it. Now I know pizza and cars are not a perfect parallel, but people do not change, those producers created loyalty for their brand.
If you want to build a sustainable pizza business, you must build a pizza that loyal buyers will seek. You must make it consistent day-after-day and have the courage to sell it for a price that makes a profit. Notice I did not say you must use expensive ingredients, or only the best or fancy imports. Not every neighborhood will support $20-24 pizza. If your market will only support $13.00 pizza, have the courage to buy consistent ingredients, not what is on sale, and charge $13.00.
Promotions are crucial today, but consistently offering dollars off your core menu price communicates to consumers that your product is just not worth the price. Rather than $2.00 off coupons, offer a FREE salad, or dessert. Give $2.00 away in value, YES, cut your price, only if you can live with it forever.
Certain pizza chains offer a $10 pizza as an everyday low price. What if the block market returns to $2.25, everyday $10 pizza will look suspicious at $12, when the margin squeeze forces them to abandon the bottom feeder price. Chrysler buyers never forgot the rebates, and a new generation of consumers promised a $10 pizza EVERYDAY, will remember as well. The old sales expression to counter price objections is, “I’d rather apologize for my price once, then my quality each time.”
Running a successful business requires that you make promises you can keep. $10 everyday is not a promise anyone can keep and run a sustainable pizza business. Keep your price integrity, offer a consistent product and watch satisfied customers line up night after night to buy the quality they seek.
Wishing you success in pizza – Ed
Ed Zimmerman is a pizza industry veteran and President of Pizza.com, the number 1 web portal that connects consumers to pizzerias. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.
Ed Zimmerman is a pizza industry veteran and President of The Food Connector. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.