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Raising Prices While Increasing Sales

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How would you go about raising prices while increasing sales at the same time?

I would think raising prices would lose current customers and stop new customers from coming.

For example, there is a $5 medium pizza going on right now, with regular price at $8. The $5 deal has been around for a while, so customers are used to getting it. Without completely changing the ingredients around, how can we raise the cost of the pizza and not lose customers?

This was suggested in another thread by bodegahwy : “How do you get from where you are to “there”? Tough one. Not over night that is for sure. First: make your product better. Second, tell the story of why it is better. Third switch from absolute price/discount promotions to value added promotions. Fourth, charge what you need to.”

What suggestions do you have to make the product better without changing the ingredients that customers are used to? What value added promotions do you suggest? We are most likely going to invest in a Point of Sale system which should help, online ordering, Facebook, email marketing, etc. What else should we do? Is improving the dining room a good idea? We’re looking for a low cost investment to start, and when sales increase can start investing more.

I’m open to all suggestions at this point. This is going to be a challenge to get everything more profitable. I know with a $5 medium there needs to be super high volume, and that volume is not here at this time.

Thank you!
 
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Since most $5 pizzas are mostly dough, with not much on them, this occurred to me: (Of course you have to promote it). Double the amount of cheese, double the amount of pepperoni, etc., but DON’T double the price. Make the new price something like $7.50. Same ingredients, higher price, and perceived better deal. Yeah, your food costs are higher, but your labor, overhead, etc, doesn’t change.
 
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smeagol8 said:
Since most $5 pizzas are mostly dough, with not much on them, this occurred to me: (Of course you have to promote it). Double the amount of cheese, double the amount of pepperoni, etc., but DON’T double the price. Make the new price something like $7.50. Same ingredients, higher price, and perceived better deal. Yeah, your food costs are higher, but your labor, overhead, etc, doesn’t change.
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Thank you for your reply

The pizza already has a good amount of cheese on it. By putting more, wouldn’t that be considered extra cheese? Do you suggest that it goes up to from $5 to $7.50 and include 1 topping (which could be extra cheese, pepperoni, etc)? What about those that want it the way it is and don’t want to pay more even if it includes a topping?

It seems like a challenge to make such major changes to the pricing. It would really help if prices could increase though.

Thank you for the feedback. If you have any more ideas please let me know.
 
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I did what you want, but at the same time I started an aggresive marketing campaign with great image, and slogan selling the brand and producf as the best option, fresh ingredients, fine cheese, exclusive specialities, details like that, and you know what? It works!!, but be carefull, you should be really good, not just say you are good or fail on the product!
 
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I think it’s going to be hard for you to move away from the $5.00 pizza offer right away. If you want to increase sales without changing your product you can start by focusing on up selling. Making it a requirement from your employees and not an option. You could also pick the next top selling menu item and raise the price of that item a few cents (this would be a lot easier to track once you get your pos system). Once you get your ticket averages up a little you can start limiting the $5.00 pizza. Start by offering it only Sunday through Thursday. If you don’t notice any change in sales it means your making it up on Friday and Saturday and from the up selling. Then go from there. That is just something I would try in your situation. I am not currently open yet, I will hopefully be open the 1st of June but I’ve been in this business 13 years and managing for about 8 years.
 
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Sales are not only about price. Not every customer will leave you if you raise prices and surprisingly enough there are some people that won’t try you because you are playing the cheap pizza game. Price absolutely gives a perception of quality so regardless of the ingredients you use, if you price yourself to match the cheap pizzas, many will assume you’re no better than the cheap places. If you want to set yourself up for longtime success and profit, price your pizza reasonably and give a very good product with out of this world customer service. Our company started the cheap pizza wars in my town 20 some years ago(before I was involved). While it put us on the map and led to huge sales, it’s a game I’m glad is behind us. There’s plenty of $5 pizzas in this town but I don’t think any of the places selling at that price is selling more pizzas than I am. You’ve gotten some good advice above. You probably can’t transform it overnight, with a price increase to $5.59 or $5.99 probably won’t chase away many customers. Limiting the nights that $5.99 offer is valid is also a good idea. Why discount on the days that are already hard enough to keep up with. Getting a POS will make your customer service better. Oven times and delivery times will be better just for the sake that they are tracked. Online ordering in today’s day and age is a must. Finally the marketing info a POS will give you is invaluable if you use it.
 
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If you raise prices you don’t necessarily need to increase sales to increase your profit. Here is an example of what I mean.

Let us assume you can sell 20 pizzas at $5 which cost you $2.50 to make. Your sales would be $100 and that would have cost you $50 to make for a profit of $50
Now let us assume you charged $8 for that same pizza. You are only able to sell 15 at that price. Your sales would be $120 for pizzas that cost you $37.50 to make for a profit of $82.50
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I don’t know about you but I would rather do 75% of the work to make 165% of the profit.
 
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Thank you all for your replies.
Daddio said:
If you raise prices you don’t necessarily need to increase sales to increase your profit. Here is an example of what I mean.

Let us assume you can sell 20 pizzas at $5 which cost you $2.50 to make. Your sales would be $100 and that would have cost you $50 to make for a profit of $50
Now let us assume you charged $8 for that same pizza. You are only able to sell 15 at that price. Your sales would be $120 for pizzas that cost you $37.50 to make for a profit of $82.50
​
I don’t know about you but I would rather do 75% of the work to make 165% of the profit.
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That is a good point. I should have asked how to raise prices and not lose profits. Even if a few customers choose to go elsewhere, the increased price will make up for it. I’m worried that too many customers will be lost.

I read somewhere that if an offer is a coupon a lot of people will use it even if it is at a higher price. Is that true? Do you think enough people would use a $7 medium pizza coupon to make it worth it? The customer would still be getting a discount.
 
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If your pizza is really good, good customers will stay, enough to make that 165 percent ;-), and some new clients will come to see, why this one is a bit expensive? 😉
 
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I think it’s going to be hard for you to move away from the $5.00 pizza offer right away. If you want to increase sales without changing your product you can start by focusing on up selling. Making it a requirement from your employees and not an option. You could also pick the next top selling menu item and raise the price of that item a few cents (this would be a lot easier to track once you get your pos system). Once you get your ticket averages up a little you can start limiting the $5.00 pizza. Start by offering it only Sunday through Thursday. If you don’t notice any change in sales it means your making it up on Friday and Saturday and from the up selling. Then go from there. That is just something I would try in your situation. I am not currently open yet, I will hopefully be open the 1st of June but I’ve been in this business 13 years and managing for about 8 years.
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paul7979 said:
Sales are not only about price. Not every customer will leave you if you raise prices and surprisingly enough there are some people that won’t try you because you are playing the cheap pizza game. Price absolutely gives a perception of quality so regardless of the ingredients you use, if you price yourself to match the cheap pizzas, many will assume you’re no better than the cheap places. If you want to set yourself up for longtime success and profit, price your pizza reasonably and give a very good product with out of this world customer service. Our company started the cheap pizza wars in my town 20 some years ago(before I was involved). While it put us on the map and led to huge sales, it’s a game I’m glad is behind us. There’s plenty of $5 pizzas in this town but I don’t think any of the places selling at that price is selling more pizzas than I am. You’ve gotten some good advice above. You probably can’t transform it overnight, with a price increase to $5.59 or $5.99 probably won’t chase away many customers. Limiting the nights that $5.99 offer is valid is also a good idea. Why discount on the days that are already hard enough to keep up with. Getting a POS will make your customer service better. Oven times and delivery times will be better just for the sake that they are tracked. Online ordering in today’s day and age is a must. Finally the marketing info a POS will give you is invaluable if you use it.
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What do you think about this plan?
  1. Raise the cost of the medium pizza to $5.99, and advertise it as a “limited time” offer.
  2. After 1 - 3 months, starting limiting it to Sunday - Thursday.
  3. After another 1 - 3 months make the $5.99 pizza a one day a week special, and offer it at the full $8 price other days.
In the meantime, make sure we are up selling, make sure customer service is outstanding, start sending direct mail to existing customers, send emails related to the customers buying patterns, Facebook, SMS marketing, and possibly the loyalty program with Point of Success.

Do you think this will help?

Thank you.
 
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Think about bundling. Sell 2 for $12.99 or one for $6.99 (input your own price.) The idea is if you want a better price, you need to spend more. Just be sure that the coupon reads something like “2 Med 1 top…$5.99 ea.” The price point will grab attention in bigger font but they are required to purchase 2.
The other thought is to make that pizza (or any one) a BOGO. You can also restrict the time it is priced aggressively. Maybe have lunch time only or as TMP says, early week special.
 
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bodegahwy said:
What size is your “medium” pizza?
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14", six slices.
Bubba said:
Think about bundling. Sell 2 for $12.99 or one for $6.99 (input your own price.) The idea is if you want a better price, you need to spend more. Just be sure that the coupon reads something like “2 Med 1 top…$5.99 ea.” The price point will grab attention in bigger font but they are required to purchase 2.
The other thought is to make that pizza (or any one) a BOGO. You can also restrict the time it is priced aggressively. Maybe have lunch time only or as TMP says, early week special.
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Thank you for your feedback. I think the Point of Sale system will help a lot with this since we can program in different offers and different times for them.

Thank you all for your help so far.
 
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This price thing is a survival issue. With the price change in cheese in the last year your cost on a 14" pizza went up 35 cents on that alone. Daddio pointed out above that your cost on a 14" pie is probably $2.50. At current cheese prices I get about $2.10 for a 14" cheese on the food and box alone so that $2.50 might be slightly on the high side but is about right when you take in supplies, waste, spoilage & mistakes. I think most of us would tell you that based on cost of goods of $2.50 we would be looking for a net selling price (net of offers and coupons etc) of at least $8.50. That would be based on average rent, labor costs etc etc. When you don’t have that margin you either need to do staggering volume, have zero rent or just quit. Nothing about your comments so far would indicate that the store you are describing is doing high volume. Do you have very low rent? (less than 5% of sales)

One of the best ways to raise your average ticket is to sell higher price pizzas and the easiest way to do that (besides just having higher prices) is to sell pizzas with a lot of toppings. Customers have poor imaginations when it comes to creating pizzas. It helps a lot to offer interesting sounding combos that are already decided that they can just choose. Here is how you do that:
  1. Create a bunch of combinations using 4-8 toppings. (It helps to have some double or even triple priced unique toppings) (We have about 20)
  2. NAME the combos. Unique, funny, weird or otherwise memorable names help. i.e. not just “Deluxe”, “Combo” and “Veggie”.
  3. Put the combos on the menu, talk about them in advertising, train your staff to suggest them.
Now when you offer $3 off a pizza it is $3 off a pizza that starts at $12 or $13 or more. If you can get your base price up to $10 with $1.25 per topping a 4 topping combo would be $15.

We have been doing this for 15 years. More than half our pizza sales come from our menu of combos. The least expensive 14" combo on our menu comes in at $19 before offers.

The next way to raise average ticket is with sides: Salad, wings, bread sticks, etc etc. Find some good sides and SELL them. Do not offer deals on your sides if you are discounting your pizza.

Remember, when all you talk about in advertising is price, you are telling your customer that price is the only reason to buy from you. You need to give the customer different reasons to buy or you will be stuck in the price trap for good. Tried and true reasons might include: 1. Quality. 2. Service. 3. Uniqueness. 4. Local business. 5. Convenience.

Every business has a personality. Make sure yours is out there in front. Participate in your community. Donate to schools and kids teams. Join the Lions, Elks, Rotary or some other service club and give back. Make sure your place is clean and friendly.

I can’t say it enough: $5 pizza is not survivable unless you have very high volume and it is not profitable unless you have very high volume and the cost leverage of the nationals. Even the big players want out of that niche and are finding ways to do it with differentiated product.

This is “last call”.
 
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I coupon may help to introduce the new price for sure, or some short time offer, free soda, something simple like that, I’m a marketing designer, so, i know what i say 😉
 
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Thank you all for your replies.
bodegahwy said:
This price thing is a survival issue. With the price change in cheese in the last year your cost on a 14" pizza went up 35 cents on that alone. Daddio pointed out above that your cost on a 14" pie is probably $2.50. At current cheese prices I get about $2.10 for a 14" cheese on the food and box alone so that $2.50 might be slightly on the high side but is about right when you take in supplies, waste, spoilage & mistakes. I think most of us would tell you that based on cost of goods of $2.50 we would be looking for a net selling price (net of offers and coupons etc) of at least $8.50. That would be based on average rent, labor costs etc etc. When you don’t have that margin you either need to do staggering volume, have zero rent or just quit. Nothing about your comments so far would indicate that the store you are describing is doing high volume. Do you have very low rent? (less than 5% of sales)

One of the best ways to raise your average ticket is to sell higher price pizzas and the easiest way to do that (besides just having higher prices) is to sell pizzas with a lot of toppings. Customers have poor imaginations when it comes to creating pizzas. It helps a lot to offer interesting sounding combos that are already decided that they can just choose. Here is how you do that:
  1. Create a bunch of combinations using 4-8 toppings. (It helps to have some double or even triple priced unique toppings) (We have about 20)
  2. NAME the combos. Unique, funny, weird or otherwise memorable names help. i.e. not just “Deluxe”, “Combo” and “Veggie”.
  3. Put the combos on the menu, talk about them in advertising, train your staff to suggest them.
Now when you offer $3 off a pizza it is $3 off a pizza that starts at $12 or $13 or more. If you can get your base price up to $10 with $1.25 per topping a 4 topping combo would be $15.

We have been doing this for 15 years. More than half our pizza sales come from our menu of combos. The least expensive 14" combo on our menu comes in at $19 before offers.

The next way to raise average ticket is with sides: Salad, wings, bread sticks, etc etc. Find some good sides and SELL them. Do not offer deals on your sides if you are discounting your pizza.

Remember, when all you talk about in advertising is price, you are telling your customer that price is the only reason to buy from you. You need to give the customer different reasons to buy or you will be stuck in the price trap for good. Tried and true reasons might include: 1. Quality. 2. Service. 3. Uniqueness. 4. Local business. 5. Convenience.

Every business has a personality. Make sure yours is out there in front. Participate in your community. Donate to schools and kids teams. Join the Lions, Elks, Rotary or some other service club and give back. Make sure your place is clean and friendly.

I can’t say it enough: $5 pizza is not survivable unless you have very high volume and it is not profitable unless you have very high volume and the cost leverage of the nationals. Even the big players want out of that niche and are finding ways to do it with differentiated product.

This is “last call”.
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bodegahwy, thank you!

You gave a lot of excellent suggestions, and it is a lot to think about.

I like the idea of offering pizzas with various toppings on it. I will try to think of some attractive combinations. Do you have any suggestions?

Thank you for all of your help!
 
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What is your staff’s favorite crew pie? Give it a name, put it on the menu and market the fact that the pizza insiders love it.
 
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It’s hard to go wrong with gourmet sauces (BBQ, Alfredo, etc…) paired with Chicken and combined with other toppings to create a theme.
 
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Lots of good ideas here.

In my opinion, honesty is the best policy. Raise the price to where you need it to be. If a customer complains, offer him/her an explanation and then hand them a one-time coupon to reduce the cost to the old price (just this one time) in order to help alleviate their frustration. Combining the honesty with the gesture will usually appease most customers.

If the only reason the customer was coming to your establishment was for the price, and the price is unsustainable, better to regretfully lose the customer and focus your efforts on building a customer base based on value, not price.

A good loyalty system can help augment that value, and the better ones can even drive new sales and new customers, but even the tried and true “punch cards” can help to mitigate any customer attrition, so that you’re not losing customers while you focus on gaining new customers.

Hope that helps!
 
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