Pizza restaurants seem to form the largest single group in the restaurant vouchers guide; so I started mulling why this happens. Here’s my theory – I’d love your thoughts.
- Pizza is dirt cheap to make. It’s mainly dough, then small amounts of cheeses, tomato, and bits of meat or vegetables. All in all the goods cost is unlikely to be much more than 75p – and even if you factor in brand building, advertising, staff costs and rent; the unit cost on pizza is low compared to say steak and chips.
- Pizza is all about brand. It’s the perceived value that counts with Pizza. Some of the higher end chains have sold themselves successfully as… well…. higher end chains. As well as presentation, another way to do this is by increasing the price; as then our instinct for retail snobbery makes us believe we’re getting something better.
It’s similar to what I remember is called a Giffin good in economics, where increase the cost and the demand increases. It apparently happened on Concorde when it was launched; it wasn’t selling well so they put the price up and the snob value meant more people booked (I’ve never checked out if that is true or not, it may be apocryphal.)
- Lots of ancillary products. From my own view, I’m more tempted to order a starter with pizza than at other places; the garlic bread or dough balls for example. Therefore, even with a 2for1 offer they still get full price sales on these, also low cost items, and of course drinks.
So if you add up these three factors, Pizza chains are perfect 2for1 fodder. They don’t want to drop actual prices, even though on a cost basis they can afford to, as that diminishes the perceived brand value; so instead they launch 2for1s where we perceive the product cost to be the same, just that this time we’re getting a bargain.