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For a limited time only

Limited-time offers are common in the pizza industry, but not every operator uses them effectively. Several industry experts share the secrets behind boosting business by creating scarcity.

August 3, 2005

Psst!

Wanna sell more pizza?

Here's a secret: Make your customers a limited-time offer — and stick to the limit.

Why will that work?

Because whenever there's less of anything, people always want more of it.

"How many times have you been to the grocery store and done this?" said marketing expert Kamron Karington. "You see a sign that says chocolate chip cookies are on sale today only, and there's a limit of three boxes per family. Just being told you can only have three today makes you want six."

It's a time-honored sales tactic: Creating perceived scarcity spurs sales. Car manufacturers advertise "offer expires June 31," and furniture sellers insist "The tax man's coming. All merchandise must be liquidated before March 15!"

Good pizza marketers do the same, and often with new products. Domino's Pizza's Philly Cheesesteak

What's Important Well-run  limited-time promotions are great for spurring sales. Knowing your target market and matching the deal to its needs is crucial. One key to a limited-time deal is to end it after a few weeks. Creating scarcity often makes customers want your operation's other products even more.

was one of that company's most successful limited-time offers (so successful that many of its franchisees have yet to limit it), andPizza Hut has all but trained Americans to expect a new LTO every Super Bowl Sunday.

LTOs aren't always centered on new products or backed by major marketing campaigns, however. They can be as simple as a buy-one, get-one free deal to drive sales on otherwise slow Tuesdays. What's important about an LTO is that it motivates customers to 1.) come to your pizzeria on occasions other than their usual visits or 2.) buy products they don't normally buy. A solid LTO should make regulars think, "That sounds interesting, I'll get that instead of my usual," while giving "irregulars" a reason revisit you.

Many types of LTOs

According to Domino's chief marketing officer Ken Calwell, the chain uses a variety of LTOs: new product promotions; value promotions; and partnership promotions (such as with sports teams or events). There is no one-size-fits-all campaign, Calwell said, so matching each to its specific target is critical.

"We know that different consumer groups want different things, so we don't want to try to appeal to any one group for too long," Calwell began. "New product news appeals to one segment, value appeals to another and promotional partnerships appeal to others."

With the calendar as its compass, the company maneuvers its campaigns strategically throughout the year to avoid having any of its customer groups say, "'What have you done for me lately?' We also try to guess when a promotion will peak so we can have one ending as another one is starting."

That Pizza Hut looks for popular TV-centered events to promote its products is no accident either, said Linda VanGosen, vice president of brand marketing for the Dallas-based firm.

"We look for great launch platforms throughout the year, like Super Bowl," she said. Televised sporting events tend to draw multiple people to the same tube, which makes for a perfect pizza sales opportunity, she said.

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But just because sales are naturally strong during the days spanning from Labor Day to Easter, that doesn't mean LTOs should be any less carefully planned during that stretch. With the precision of military strategists, both Pizza Hut and Domino's plan promotions one to two years out. They know the customers they're targeting, the "ordnance" they're dropping on them and precisely when the assault begins and ends.

Sometimes the weapons are new, like Pizza Hut's P'Zone, introduced in 2004. In other cases they're a revamped tried-and-true seller like the chain's Cheesy Twisted Crust. The goal is to make the customer say, "That sounds interesting," or "Hey, they've got that again!"

Dealus interruptus

Nothing makes an LTO more memorable than the threat of taking it away, said Brett Witte, marketing director for 75-unit Snappy Tomato Pizza. In a recent promotion, the Florence, Ky.-based company offered a buy one, get one free deal on its steak hoagies. Sales of the sandwich soared 70 percent during the promo's three-week run and remained at plus-25 percent after it ended. The goal of the promotion was simple: Provide a favorable entry-price point to generate product trial, and then deliver a quality product customers will continue buying when the bargain goes away.

"There is validity in leaving them wanting more, so you stop the promotion at a set time," Witte said. "If we changed that to a six-week promotion, at some point we only would have been discounting the product. And when that price becomes known as the standard, the offer loses its luster."

Witte said he has to remind Snappy's franchisees to regulate the length of their LTOs carefully. Running discount deals every day of the week ends up cheapening the product instead of creating a sense of urgency to buy it. He said operators tend to forget the "limit" in limited-time offer.

Karington said a two- to three-week promo window is ideal for motivating customers to act.

"A month is almost forever to a lot of people, but a two- to three-week time frame makes people think, 'I'd better put this coupon on top so I don't forget it," he said. "Most people buy pizza two

People will see a $9.99 deal and think, 'OK, I'll spend 10 bucks.' But that doesn't mean $9.99 is the magic number for everyone. If new product news is what appeals to one group, then I believe you have the license to charge more for it. — Ken Calwell, Chief Marketing Officer, Domino's Pizza

to three times a month anyway, so it's smart to have an expiration date that fits their natural buying cycle."

Pizza Hut's VanGosen said most of its LTOs run four to 12 weeks, depending on the product. The chain's highly successful 4ForALL pie was slated to run eight weeks, but it was extended to 12. Two other pizzas, the Buffalo Chicken and the Twisted Crust, began and ended within their predetermined five-week periods.

While a product's popularity can extend the life of an LTO, most often the promotion ends at the scheduled date at chains' corporate stores. Franchisees, however, often serve them beyond those times until demand fades. Extending the run can be risky, though, Calwell said, because if demand lags, staffers become less focused on producing the product to spec.

"We've found that once you drop below a certain sales mix level on a certain product, you have a hard time making it well for an extended period of time," he said. "When execution starts to drop off, that's a challenge. So if sales drop in certain (markets), we'll cut that product off."

What's the price?

Though Pizza Hut's current LTO, Cheesy Twisted Crust, sells for $10.99, VanGosen said don't mistake that sum as the magic number for LTO pricing.

"What we want to do is make sure we're bringing relevant products and relevant value to our consumers, and that varies by promotion," she said. "We don't have a set price point."

Calwell said much the same about Domino's offers, and pointed to another means of varying the deal: crust size. The Philly Cheesesteak pizza was priced at $9.99 for a medium, and Domino's current hit promo, the 5-5-5, also centers on medium pies. In both cases, he said, the price point must be simple to understand.

"People will see a $9.99 deal and think, 'OK, I'll spend 10 bucks,'" he said. "But that doesn't mean $9.99 is the magic number for everyone. If new product news is what appeals to one group, then I believe you have the license to charge more for it. We've charged a $10.99 price point before."

Whatever the price point, Karington advised operators to steer clear of steep discounts where possible. They could cheapen customers' perception of the product and set a difficult-to-shake low-price expectation. Giving product away, such as in a two-for-one deal, is better, because the regular offering price is what remains in their minds. Good bargains like this benefit both buyer and seller, he said, and operators who remember this stay in business.

"The more somebody feels they are taking advantage of you, the more they want to do business with you," Karington said. "But don't go too far. Too much discounting will kill your business."