Pricing hurdle being used to segment pizza buyers based on price sensitivity.

Pickup Special: Pricing Hurdle On Pizza

Aug 04, 2015

 

A real world example of how a pizza place uses walk-in only specials as a hurdle to ensure they only discount to customer serious about saving money.

 

This is a great example of how a hurdle can be used to selectively discount to only the customers that are really serious about saving money.

The pizza place knows it can sell a lot more pizza at a lower price (illustrating price elasticity of demand – as price goes down, demand goes up). They also know that if they discount then they will be making a lot less money on the pizzas they would have sold at full price anyway (cannibalization). Ideally they would only discount to the people that are really serious about saving money – price sensitive customers that would not pay full price.

But how? How do you sell the same product at two different prices?

One example is a hurdle, used here very effectively. They'll give you a discount, but you have to jump over a hurdle to get it. By jumping the hurdle you have effectively proven that you would not have paid full price.

In this case the hurdle is inconvenience – it is only available on walk-in orders. You can't order over the phone. That means that you have to walk in, place you order, and wait 20-30 minutes in a very inhospitable and uncomfortable environment. If you do all that you are rewarded with a pretty serious discount, and you deserve it. You have demonstrated that you are serious about saving money, and that you probably would not have purchased otherwise.

Meanwhile other customers, customers that are less price-sensitive and place a higher value on their time and convenience, happily pay a higher price for the convenience of phoning ahead or, better (and still more expensive) yet, having it delivered. The customers are effectively willing to pay a premium to not have to stand around for half an hour while their pizza is prepared.

This same tactic is used successfully by some florists, most effectively around the big holidays like Mother's Day and Valentine's Day. Price sensitive customers can save money by fighting the crowd and risking limited quantities, while those willing to spend more have the flowers delivered.

 

Shows a special at a pizza place, that uses a pricing hurdle to segment buyers based on price sensitivity.

 



Tags: Hurdles
Category: Examples

Sponsored by FloristWare – Software For Florists

Beyond Cost Plus is sponsored by FloristWare – powerful, affordable and easy-to-use software for florists that saves time and money while increasing sales.

FloristWare – flower shop software/POS system.

Related Material

Discounting, But Only To The People That Really Value Discounts

An example of how one vendor increases sales by selectively discounting to customers most focussed on price and least likely to buy without a discount.

Pricing Attraction Tickets and Bundles

Attractions are a highly perishable product and operators are keen on revenue management – combining bundles and hurdles in an effort to maximize revenue.

Advanced Pricing Strategies From Hollywood

The pricing strategies used by Hollywood often show as much imagination and creativity as the movies themselves, and other vendors can learn from them.

Streaming Buyers With Bad Weather

Bad weather can be used as a hurdle to selectively discount to those that are serious about saving and unlikely to purchase otherwise.

Cheap Tuesdays – A Great Self-Propagating Hurdle

"Cheap Tuesdays" at the movies are a great example of a self-propagating pricing hurdle – one that has the effect of making itself even more effective.

Hurdles & Price Discrimination – New Content

New content explaining the concept of hurdles and their place in a comprehensive differential pricing/price discrimination strategy has been added.

New Customers Through Selective Discounting With Hurdles

Though sometimes discouraged discounting, done selectively using hurdles, can increase sales & profits by motivating new and/or price sensitive buyers.

Cheap Tuesdays – A Self-Propagating Hurdle

Color can be used as a hurdle to identify buyers focussed on price, discount to them exclusively, while not discounting to those less concerned with price.

Using Product Color As A Hurdle To Segment Buyers

Color can be used as a hurdle to identify buyers focussed on price, discount to them exclusively, while not discounting to those less concerned with price.

A More Profitable Way To Quote Weddings and Events

A new way to quote weddings and events that results in more sales and larger profits by self-streaming customers according to how they value your product.

Boxing Day Sales

A new addition to our resources section illustrates some of the sophisticated pricing concepts involved in Boxing Day sales.

Boxing Day Sales

A surprising real world example where identical products are offered for every different prices just feet from each other in the same store.

Hurdles

Part of a larger price discrimination strategy hurdles are used to separate those customers that place a lower value on a product and offer them prices tailored to that valuation.

Category List


Tag List


Tag Cloud



Archive

2018

2017

2016