Dropping Prices

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We’re considered a high-end pizzeria here, and our prices are pretty much the highest in town. We are at 6.99, 12.99 and 14.99 for 10", 14" and 16" respectively. Topping prices are .75, 1.00 and 1.00 respectively.

I was reading some stuff from Big Dave that said he prices out menus where a cheese or 1-2 topping pizza should come in about 20%-23% food cost. Our 14" cheese has a FC of 9.0% and a CM of \$11.81! That sounds great, but I can’t help believing that it is just too expensive.

We have about 2,000 on our database that are more than willing to pay high prices for our pizza. But we often times hear “Your pizza is wonderful, but it is kind of a treat for us… it’s expensive to bring a family of 5 there.” I can’t help but think we could double our customer base by giving up a few dollars per pizza.

Our database stats don’t look great either. Out of our loyal customers that have ordered many, many times they still average less than 1 order per month in most cases. That has to be a cost issue, right?

Any advice would be greatly appreciated!

Anonymous:
We’re considered a high-end pizzeria here, and our prices are pretty much the highest in town. We are at 6.99, 12.99 and 14.99 for 10", 14" and 16" respectively. Topping prices are .75, 1.00 and 1.00 respectively.
Based upon pi*r^2 (area of a circle), using your 16" as the baseline, your 14" pie should be 11.48 and 77 cents per topping. Your 10" pie should be 5.85 and 39 cents per topping.

Let’s do some adjusting with your prices and drop the 14" to 10.99, assuming that’s your best-selling pizza. Keep the topping at \$1 per topping.

According to your 9% FC number, the pie costs you 1.17 to make. At 10.99, it now has 10.65% FC (assuming 9.0000 was the real food percentage to start). Your 16" pie would now run \$14.35 (call it \$13.99).

Put your toppings at .75, 1.00, and 1.25 respectively.

Since you’re making very little change to the toppings, may I suggest COUPONS to get the \$10.99 14" pizza? See how the response works. If business increases, then adjust the menu prices. If it doesn’t, all you’ve done is offered some discounts, rather than priced your whole menu lower. Thus once the coupons expire, you’re not RAISING your prices, whereas if you drop your menu prices only to raise them again due to no change in business, you’re apt to upset some customers.

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snowman:
Anonymous:
We’re considered a high-end pizzeria here, and our prices are pretty much the highest in town. We are at 6.99, 12.99 and 14.99 for 10", 14" and 16" respectively. Topping prices are .75, 1.00 and 1.00 respectively.
Based upon pi*r^2 (area of a circle), using your 16" as the baseline, your 14" pie should be 11.48 and 77 cents per topping. Your 10" pie should be 5.85 and 39 cents per topping.

Let’s do some adjusting with your prices and drop the 14" to 10.99, assuming that’s your best-selling pizza. Keep the topping at \$1 per topping.

According to your 9% FC number, the pie costs you 1.17 to make. At 10.99, it now has 10.65% FC (assuming 9.0000 was the real food percentage to start). Your 16" pie would now run \$14.35 (call it \$13.99).

Put your toppings at .75, 1.00, and 1.25 respectively.

Since you’re making very little change to the toppings, may I suggest COUPONS to get the \$10.99 14" pizza? See how the response works. If business increases, then adjust the menu prices. If it doesn’t, all you’ve done is offered some discounts, rather than priced your whole menu lower. Thus once the coupons expire, you’re not RAISING your prices, whereas if you drop your menu prices only to raise them again due to no change in business, you’re apt to upset some customers.
Snowman,

You must be a mind reader, because you nailed exactly where I was thinking of for the pricing.

When we originally set our prices, we did use the 16" as a baseline and priced out the rest based on area. Then, we increased the 10" and 14" so the 16" would be the best “value”. I really shot myself in the foot by using the same topping price on the 14" and 16". On a high-topping pizza, we have more CM on the 14" than the 16", plus the 16 takes longer to make.

You have a good idea on the coupons, and I appreciate it. We pretty much never discount our pizza, just give away free stuff. But last year I did a saturation drop with a menu and just a \$2.00 off any pizza coupon. It was the BEST puller we’ve ever had. I never used it again because I wanted to stay with giving away free apps and whatnot, and not discounting. Maybe I missed a big clue there.

I think maybe our next database drop will be all discount coupons to get our experimental prices and see what the reponse is. You make a good point though… I’m very afraid of dropping the prices only to have to raise them again. That could really upset people.

Anonymous:

We’re considered a high-end pizzeria here, and our prices are pretty much the highest in town. We are at 6.99, 12.99 and 14.99 for 10", 14" and 16" respectively. Topping prices are .75, 1.00 and 1.00 respectively.

I was reading some stuff from Big Dave that said he prices out menus where a cheese or 1-2 topping pizza should come in about 20%-23% food cost. Our 14" cheese has a FC of 9.0% and a CM of \$11.81! That sounds great, but I can’t help believing that it is just too expensive.

We have about 2,000 on our database that are more than willing to pay high prices for our pizza. But we often times hear “Your pizza is wonderful, but it is kind of a treat for us… it’s expensive to bring a family of 5 there.” I can’t help but think we could double our customer base by giving up a few dollars per pizza.

Our database stats don’t look great either. Out of our loyal customers that have ordered many, many times they still average less than 1 order per month in most cases. That has to be a cost issue, right?

Any advice would be greatly appreciated!
It is NOT a cost issue- it’s a VALUE issue. A family of 5 needs more than a 16" pizza to feed itself? A 16" pizza 1 topping 14.99, 5 drinks (5@ 1.59) 7.95, app stix for 2.99 sounds right, 14.99+7.95+2.99=25.93. Split that up 5 ways and it costs \$5.19 a person to eat at your place. You’re in papa johns price area. You’re not expensive, you’re not any better value than Papa Johns or the other guys. Or you customer perception is that you’re expensive and you’re not distinguishing your product enough from the cheaper pies around to be seen as a PREMIUM pizza.

Do you want Pappa Johns customers, or do you want Pizza Huts customers? Who is most profitable per store, and who has the most volume per store? If you are makeing it with HIGH prices, I say stick with it. You just need to figure out how to attract NEW/MORE customers.

Russ

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russ cox:
Do you want Pappa Johns customers, or do you want Pizza Huts customers? Who is most profitable per store, and who has the most volume per store? If you are makeing it with HIGH prices, I say stick with it. You just need to figure out how to attract NEW/MORE customers.

Russ
I agree 100% - also, instead of reducing prices, sometimes clients want to get something “else” if they are willing to pay extra. I kid you not - try giving away a keychain, a little set of cards, something as a gift/incentive and you will be surprised how much these little things are appreciated.

Angel

russ cox:
Do you want Pappa Johns customers, or do you want Pizza Huts customers? Who is most profitable per store, and who has the most volume per store? If you are makeing it with HIGH prices, I say stick with it. You just need to figure out how to attract NEW/MORE customers.

Russ
I was under the impression that we (y’all) want EVERY customer. Let’s profile Joe for a second. Joe orders once a month from Expensive Pizza. 3 times a month, he orders from Cheaper Pizza. If giving up a couple bucks gets Joe’s 4 orders a month, have you not made more profit? Of course, the issue here is to profile Joe and KNOW if he’s ordering 4 times a month or just 1 pizza a month.

Two pizza joints sit next door to each other, one packed, one not. The packed one sells “value” pizza, the empty one sells gourmet pizzas at a higher price. If the gourmet shop could cut the profit margins some and compete with value pizza (not even in price, but not exceptionally more expensive), wouldn’t that be the way to go?

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Thanks for all of your replies everybody.

I should mention that I am in NO WAY trying to compete on price with PJ’s or PH. When I say that we’re the most expensive, I’m talking versus the other independant “gourmet” shops.

Our prices may not seem too high to a lot of you, but we’re in an area where cost of living and prices are generally low. The PJ near us is constantly advertising a 3-topping large for \$9.99. There’s no way we want that market.

Snowman is thinknig what I’m thinking. Our customers aren’t even ordering once per month on average. What if dropping prices by \$2.00 gave us an extra 1 order per month from each customer?

Why not focus your efforts on your existing customers, giving them loyalty coupons. Forget everyone else. My town is full of rednecks that love a \$5 pizza with 2 oz of cheese on it, but there are those that pay for quality.

I say dont drop your prices It cost you more money to get a new customer then to get a regular customer to order more often coupons are a good way to get them to come back but dont do \$ off do something that says FREE bread sticks, or 2l coke or some thing like that. And have an expiery date to create some urgency say 14 days Have a loyalty card where the 10th order is free, make them want to come back! Also would you rather sell 100 pizzas at 10.00 or 50 at 20.00? keep your prices where they are otherwise people way think you have started cutting corners!

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How about catering type things? Are there doctor’s offices, hospitals, clinics in your area? Contact the big pharmaceutical companies and find out who their reps are in the area (or, call the medical offices, ask them—tell them you want to start getting them free lunches from your place!) Schools, churches, corporate/retail buildings/offices…go after them. Believe me, retail folks don’t want the same thing all the time just because it’s close and they can get there and back in 10 minutes without the boss realizing they’re gone. Offer a short-term “business courtesy” coupon.

Can you expand your menu without jacking up COST too much? If you have italian sausage as a topping, do you offer an italian sausage sandwich? Canadian bacon/ham and pepperoni lead to a sub/hoagie/grinder type thing. Chicken or steak meat? Philly sandwich.

maybe offering some oddball toppings could help. Again, make sure you can double use them…meatballs for a topping AND a meatball sub. Turkey? That steak meat could be used for a barbecue sandwich, maybe. Feta cheese? How about a chicken gyro sandwich? (ok, it’s fake, but just get some cucumber dressing–there’s another salad dressing option–and put it in a small pizza crust, rolled thin and folded over with lettuce onion tomato.)

We have 7 tap beers, 65 or so bottled, soon to be 14 tapped. That’s one thing that has gotten some attention!!! Wine also, no other alcohol.

But, IMO, one important thing is to not try to be all things to everyone. Fried chicken is a PITA, and while it worked for Shakey’s and lots of other places, it may not be right. But, maybe it is. Ice cream maybe. Pastas, maybe. But, to all those, maybe not. If it will add to your bottom line, sure. If it detracts in any way, be it food costs, labor cost, equipment, space, don’t do it.

But, you don’t necessarily have to drop prices. Make it more interesting for that once-a-month customer to come in. It’s hard to feed a family at home for \$5.19 each!

my thoughts…worth the price you paid…

eupher:
How about catering type things? Are there doctor’s offices, hospitals, clinics in your area? Contact the big pharmaceutical companies and find out who their reps are in the area (or, call the medical offices, ask them—tell them you want to start getting them free lunches from your place!) Schools, churches, corporate/retail buildings/offices…go after them. Believe me, retail folks don’t want the same thing all the time just because it’s close and they can get there and back in 10 minutes without the boss realizing they’re gone. Offer a short-term “business courtesy” coupon.

Can you expand your menu without jacking up COST too much? If you have italian sausage as a topping, do you offer an italian sausage sandwich? Canadian bacon/ham and pepperoni lead to a sub/hoagie/grinder type thing. Chicken or steak meat? Philly sandwich.

maybe offering some oddball toppings could help. Again, make sure you can double use them…meatballs for a topping AND a meatball sub. Turkey? That steak meat could be used for a barbecue sandwich, maybe. Feta cheese? How about a chicken gyro sandwich? (ok, it’s fake, but just get some cucumber dressing–there’s another salad dressing option–and put it in a small pizza crust, rolled thin and folded over with lettuce onion tomato.)

We have 7 tap beers, 65 or so bottled, soon to be 14 tapped. That’s one thing that has gotten some attention!!! Wine also, no other alcohol.

But, IMO, one important thing is to not try to be all things to everyone. Fried chicken is a PITA, and while it worked for Shakey’s and lots of other places, it may not be right. But, maybe it is. Ice cream maybe. Pastas, maybe. But, to all those, maybe not. If it will add to your bottom line, sure. If it detracts in any way, be it food costs, labor cost, equipment, space, don’t do it.

But, you don’t necessarily have to drop prices. Make it more interesting for that once-a-month customer to come in. It’s hard to feed a family at home for \$5.19 each!

my thoughts…worth the price you paid…
Hi Eupher,

Thanks for your reply. We do a lot of the things you mentioned. We make our own sausage on-site and also stuff it for sandwiches. We make our own meatballs for sandwiches, and just launched a meatball pizza this week.

And, we just ordered a burner set and are going to begin offering pasta next week or the week after. I think pasta will be a great addition to our menu, either as a meal, a side dish or an add-on to our AYCE lunch buffet. The equipment cost me about \$300, so it’s tough to beat that for launching a whole new line.

I think I see what you are saying… instead of building frequency and volume through dropping prices, we should be trying to do it by giving new reasons to come in. Maybe our customers just don’t want pizza once every two weeks.

You’re right about the hospitals. We have a huge one near us, and it has so far been untapped.

I don’t want to make it sound like we’re in dire straits or anything. We’re doing really well for a 23 month old business. We’ve been running just about break-even every month, and that’s with having a GM on board, all other shifts covered by assistant managers and me taking a full paycheck. I know a lot of new pizzerias would love that.

So we’re doing OK, but now I’m looking to take it to the next level. We have 100,000 people in a 5 mile radius, and it just seems like a database of 2,000 active customers is a little low. We have about 5,000 on the DB total, but we purge them after 6 months of not ordering. Perhaps a wider menu selection would get some of those people back in.

Thanks again for your response. It was very enlightning!