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Pizza-by-the-slice: A reaction to the hyper-competitive pizza market

With ludicrous competition in the pizza industry — 73,000-plus unique U.S. pizza stores fight for more than $38 billion in annual sales — operators need to execute on any competitive advantage they can find, and quickly.

September 23, 2015

By Kane Russell, Head of Marketing, Thanx

Talk to any old school local pizza aficionado in New York City, and you’ll hear the same chorus: "delicious slice of pizza" beats "delicious pizza" any day.

Recently though, national momentum for preferring pizza-by-the-slice has started to build. In the last year, Pizza Hut announced new by-the-slice stores, Ellen featured a by-the-slice venture on her show, countless regional brands like Denver’sMarco’s Pizza and D.C.’s Wiseguy are pushing their own by-the-slice concepts, and Kent Hrbek (yes that Kent Hrbek) is evenputting a slice of pizza in a bloody mary.

The reason for the recent by-the-slice push comes from looking at just one graph: the incredible rise of Chipotle. Chipotle’s success ensured all restaurant owners, especially pizza, became very familiar with the term "fast-casual." With ludicrous competition in the pizza industry — 73,000-plus unique U.S. pizza stores fight for more than $38 billion in annual sales — operators need to execute on any competitive advantage they can find, and quickly.

"It happened before in the better-burger category, it happened in the better-sandwich category, [and] the better-coffee category when Starbucks came on the scene. Being in the better-pizza category and being the trailblazer in the better-pizza category is a very appealing proposition." — Matt Andrew, CEO, Uncle Maddio’s Pizza Joint.

Given that any pizza operator in the world would love to become "The Chipotle of Pizza," selling pizza-by-the-slice makes a ton of sense. By-the-slice fits the price point, meal type, speed, and convenience that fast casual consumers seek (not to mention the high profit margins operators love). 

"I think [by-the-slice] will push pizza even further into the QSR category as the public will soon realize that slices are one of the fastest foods to serve in the entire food industry." — Chase Kintz, Franchisee, Marco’s Pizza.

Moreover, by-the-slice provides customers more options for personalization — invaluable for attracting millennials, the country’s most valuable pizza demographic. By mixing and matching slices on a single visit, these modern, mobile-obsessed customers can tailor-make their own pizza eating experience.

As a result, by-the-slice holds incredible potential to become a lucrative revenue stream for those pizza operators who can execute well. But just like we saw with gluten-free pizza, understanding the "why" behind selling pizza-by-the-slice doesn’t get you all the way there. You’ve got to also understand the "how."

Best practices for marketing pizza-by-the-slice to customers

The strategy behind marketing pizza-by-the-slice comes down to grasping one big-picture perspective (true for marketing any item with a low price point and high level of customization): Every tactic used to market pizza-by-the-slice should focus on increasing customer visit frequency.

Big picture, getting a customer to buy just one slice of pizza will not get you anywhere. Sure, aggressive acquisition marketing will drive more foot traffic, but if none of those individuals comes back, you can’t break even — new customer acquisition is too expensive to cover the cost of a pizza slice. Moreover, a focus on increasing average check size won’t work — by definition, you’re marketing an item attractive because of its low price. 

Instead, focus on increasing visit frequency to find success. Every incremental customer visit you add counts as a huge win. Here are four strong starting points for effective, frequency-focused marketing campaigns:

Incentivize existing customers to visit at different times

Send an incentive to current weekend customers to stop by during off-peak weekday hours (and vice versa for weekday customers coming in during off-peak weekend hours). Inform frequent dinner customers about lunch specials (and again, vice versa). In addition to filling your restaurant during off peak hours, which drives passerby traffic, you’ll also work toward establishing a different (and additional) type of habitual behavior from your loyalists.

Deliver bounce-back promotions to earn immediate repeat business

Oftentimes, pizza operators mistake a single sale as a job well done. In fact, the work has just begun. The day a customer makes a purchase, send them an email or push notification not only thanking them for coming by, but inviting them to come back in the future. Add an incentive to this "bounce-back" promotion if you want to sweeten the deal, as customers who feel appreciated inevitably visit more often.

Use location and time-based marketing to grab spur-of-the-moment traffic

Location and time-aware promotions are ideal for increasing visit frequency. Notify loyal customers via social or mobile (email is not preferred given longer response time), about last-minute or flash deals at their favorite locations. Geo-fencing is no longer the "Big Foot" of marketing (i.e. often-talked about, seldom seen), as beacons have made geo fencing a reality. Simply install beacons in your store and use them to trigger mobile notifications to passersby about daily specials or bring-a-friend promotions.

Launch a VIP program for highest frequency customers

Rather than establish a VIP program for your highest monthly spenders, provide VIP benefits according to frequency. Deliver unique incentives and treatment for your top 15 to 25 percent of customers according to monthly visits. By rewarding frequency as your desired behavior, you align incentives — a hallmark of any effective marketing campaign.
 

Whatever campaign you run, remember that increasing visit frequency is your primary goal. With every incremental visit added to an existing customers’ weekly schedule, you’ll be well on your way toward finding success with pizza-by-the-slice.

Kane Russell is the head of marketing at Thanx, a technology company based in San Francisco that makes customer marketing easier for multi-unit pizza brands.