"Buy one, get one!" - trend

[steven.fisher]

Hi I notice this trend for quit long time(PizzaHut & small restaurants [pizza is not the only food they make here]). I'm used to worked in pizzeria and I must say that this strategy wasn't successful. Anyone notice significant profit with this strategy?(in longterm) Thanks.

[TXCraig1]

In other types of retail (grocery for example) BOGO (Buy One Get One [free]) is typically a strategy to get trial of your product and build volume over the long term. Like anything else, it sets expectations. If you do it enough that people get conditioned to buying your product that way, often they won't buy when not on BOGO. If you let that happen, you better have enough margin in your product that BOGO can effectively become EDLP (Every Day Low Price).   Retail grocery may be a little more sensitive to this as folks can stand in one spot and compare all the prices and choose a different option with zero additional effort. Still, I do think you need to think through these strategies carefully before putting them into place.

I was never a big BOGO fan. It can generate a lot of volume, but it is not always a profit optimizer. Discounting offers a lot more flexibility. With discounting, you can analyze your price-volume relationship and pick price points that optimize profit as opposed to maximizing volume. The two are not necessarily linked. Things are different for take-out and retail as compared to dine-in. With dine-in, cranking up the volume as additional benefits you don't necessarily realize in take out - namely you have a greater opportunity to sell the customer all sorts of other high margin items to go with the BOGO.

[steven.fisher]

 

I'm not fan of BOGO either! BTW here should be like button 

[waltertore]

For me BOGOF shows your place has no class.  A real pizzeria turns out quality pies and has no need to do this stuff.  Walter

[mkevenson]

Frequently, I have found BOGOF deals are more expensive per item, not for pizza , but other grocery items. Find the lowest price at a competitor and it is generally better than the BOGOF price.

[TXCraig1]

Frequently, I have found BOGOF deals are more expensive per item, not for pizza , but other grocery items. Find the lowest price at a competitor and it is generally better than the BOGOF price.

I think you must live in an unusual grocery market. Sometimes you see retailers raise above the normal retail price for a BOGO, but it is far from common, and you almost never see it in grocery. In almost all cases, the BOGO price is the regular full retail price of an items, so the effective price is 50% of the regular retail price.  Unless they run at a VERY high mark-up every day, 50% off retail will be well under the stores that go to market with an EDLP strategy.

It should also be noted that BOGOs and other deals are not typically funded per-se by the retailer (in the grocery world anyway). They are funded by the manufacturer. The retailer will usually agree to work at a lower margin for the deal period, and they may or may not charge you for ad space to promote the deal (often retailers will give no-charge ad space for BOGOs because the deal is so expensive for the manufacturer), but that's the extent of their contribution. This is why retailers love their "customer loyalty" cards. They may make a few bucks off selling your demographics and shopping habits, but the real money comes from deals. In most cases, they get the deal price from the manufacturer regardless of whether or not they pass it along to the consumer. No loyalty card, no BOGO for you and big profit $$$ for them.

[La Sera]

It's popular in America, but not seen much or successful outside the U.S. It's a good way to go out of business in many parts of the world. It's like the American concept of Costcoing - filling your kitchen and house with stuff you don't need, then throwing half away. That's an American thing, along with stuffing yourself until you're the size of a bus and consuming staggering amounts of corn-sweetened drinks.

There was an American guy here who tried to market pizza like just like he was in Ohio or Texas -  Super size drink combos, BOGO, He even used an American flag on his marketing! Haha!

Naturally, he went out of business. He resurfaced as the country manager for an American chain that opened about five stores in a year. He put the entire chain out of business by the next year. I think he's a pizza consultant now -- putting others out of business for a fee.

[TXCraig1]

Any particular reason why you called out Ohio and Texas?

[thezaman]

 i cannot and do not fight for pizza hut or dominos delivery business. their 6.00 pies are impossible for me to make unless i give up stanislaus tomatoes, wisconsin cheese, add filler to my meats. i will close up first!! nothing is free if you want to or have to buy using price as your only buying decision then their is not much that can be done to sway that customer. that is why the independent operators generally are a little more generous with toppings. if the customer is thinking i can get this under topped pie from one of the above for half the price you loose.

[La Sera]

Customers who buy on price only are not loyal customers who care about quality or taste. They'll buy from whatever shop has the lowest price this week.

I do discount by having a special pizza every month that is lower cost because they are simpler and have less toppings, but I put a limit of one special per order. It's more like a side order or an add on for families.

Two for one or second one free is suicide for an independent shop. The owner needs to make a living. A chain doesn't care, since no one is making a decent living from one shop. If a small chain nets only $2,000 a month per shop, but they have 10 shops, that's $20,000 for the owner, but the staff and managers are working poor.

[steven.fisher]

It's popular in America, but not seen much or successful outside the U.S. It's a good way to go out of business in many parts of the world.

I've seen this in the UK...and I have to agree, pizzerias that use BOGO are empty.

[TXCraig1]

I've seen this in the UK...and I have to agree, pizzerias that use BOGO are empty.

It's a vicious cycle. You business is down, so you discount. This drives your margin down, so you cut quality. This drives your business down so you discount deeper. This drives margins even farther down, so you cut quality again. This drives business down...

[Chicago Bob]

Until there is finally no business left to drive down. I can not even imagine trying this at an independent shop.
I would put an "out of business" sign on the door and sweep the floor one last time before I would embarrass me and my family with going down that dead end road.

[Fire-n-smoke]

If you are in it "JUST" for the money then (atleast to me) BOGO is the death rattle.  If you do it because you enjoy it, want to showcase a great product, and earn a living, then you need a better marketing strategy.  There is a Fudge Kitchen in Cape May, NJ that makes a decent fudge, but when things are a little slow, they have an employee stand outside with a sample tray.  People who stop and try will usually go into the shop and buy.  I have done this with my smoked meats.  I have gone to a farmers market, put out some small cups of my product for people to taste and when asked about larger purchases, I hand them a business card/flyer and will usually get about a third to half of them calling.  Guy next to me did the same with pizza.  He has a small "pie only" shop (and it is in the boondocks) with quality ingredients, decent prices, and only is open a few days a week, but it seems to work for him too.  (only thing, first time I ever saw a pizza cut into 32 pieces!)

[steven.fisher]

There is a Fudge Kitchen in Cape May, NJ that makes a decent fudge, but when things are a little slow, they have an employee stand outside with a sample tray.  People who stop and try will usually go into the shop and buy.  I have done this with my smoked meats.  I have gone to a farmers market, put out some small cups of my product for people to taste and when asked about larger purchases, I hand them a business card/flyer and will usually get about a third to half of them calling. 

How many of them became "loyal customers"? (have you got any raw data?)

[TXCraig1]

How many of them became "loyal customers"? (have you got any raw data?)

Consumers are presented with an overwhelming amount of choices and information about products. This makes buying decisions difficult. To compensate, we look (consciously and subconsciously) look for things that make our buying decisions easier; things that reduce the risk that we will make a bad buying decision. Discounting can have this effect, but other strategies such as sampling and quality guarantees are also effective, and they tend to have the effect of INCREASING market price.

I don't have hard data how sampling translates to loyal customers - I suspect it can vary wildly based on any number of factors, but I'm confident in saying that you will build a more loyal customer base on demonstrating a quality product than you will on sending a message to the market that your product isn't worth full price.

[Chicago Bob]

2 fers make me stop and think....now just exactly how cheaply are they able to make this darn stuff?

[TXCraig1]

2 fers make me stop and think....now just exactly how cheaply are they able to make this darn stuff?

Yep. Price is a cue for quality.

[dhorst]

We don't offer any deals where I currently work.  The focus is on quality ingredients and running a unique special every week.  Lately the consistency of the handmade mozzarella has been off and I haven't been happy with the dough they've been producing, but there's been a change in staff and I think it's negatively affecting the quality of our pizza.  It's a relatively new business, so they're working out the bugs.  We don't offer slices or take out because we want to serve our dine in customers as well as we can.  They have a beer and wine license with a focus on offering different craft beers that are always changing.
They've been talking about doing some "themed nights," vintage bike night, chicken pizza night (buffalo, bbq, bacon ranch) and a few others.  I can see vintage bike night being good to draw attention to the restaurant.  Not thrilled about the chicken night.

I believe that they are missing out on using social media to help draw in customers. 

BOGO deals are best off generally for college students who want to spend their money on beer and have cheap pizza.  My oldest son is a freshman at SUNY Oswego, a party school and does eat some cheap pizza, but he's not happy about it.  Sometimes I make a run up there with my homemade pizza much to his delight.  It's an hour and a half, round trip, but hey my delivery tip is a hug and a kiss on the cheek.

[Chicago Bob]

We don't offer any deals where I currently work.  The focus is on quality ingredients and running a unique special every week.  Lately the consistency of the handmade mozzarella has been off and I haven't been happy with the dough they've been producing, but there's been a change in staff and I think it's negatively affecting the quality of our pizza.  It's a relatively new business, so they're working out the bugs.  We don't offer slices or take out because we want to serve our dine in customers as well as we can.  They have a beer and wine license with a focus on offering different craft beers that are always changing.
They've been talking about doing some "themed nights," vintage bike night, chicken pizza night (buffalo, bbq, bacon ranch) and a few others.  I can see vintage bike night being good to draw attention to the restaurant.  Not thrilled about the chicken night.

I believe that they are missing out on using social media to help draw in customers. 

BOGO deals are best off generally for college students who want to spend their money on beer and have cheap pizza.  My oldest son is a freshman at SUNY Oswego, a party school and does eat some cheap pizza, but he's not happy about it.  Sometimes I make a run up there with my homemade pizza much to his delight.  It's an hour and a half, round trip, but hey my delivery tip is a hug and a kiss on the cheek.

No take out dhorst? Doesn't seem like that should be a big detractor of time spent on the dine in guests...