CASE_Pizza Hut

 

Restaurants of all kinds have scrambled to keep customers coming in during recent difficult economic times. Pizza Hut is in unusual spot. It isn’t exactly fast food, but it isn’t quite full-service fare either. Pizza Hut has never been perceived as being on the low end of pizza prices. As the economy sagged all these factors cooled down the business for the red-roofed purveyor of pies.

So Pizza Hut did what many companies did –it cut prices. At first, it shocked the pizza category with its “10 Euros any” promotion  - any pizza, any size, any crust, any toppings just for “10 Euros”. Customer responded enthusiastically to the limited time offer. But as soon as the price deal ended, Pizza Hut’s incremental promotional revenues disappeared.

 So the company has made more permanent adjustments to the new frugality reality. To increase customer loyalty, it has introduced every day low prices. Most medium pizzas cost 8 Euro, most large  pizzas cost 10 Euro, and most specialty pizzas cost 12 Euros. These price cuts represent up to 50% reduction from previous pricing. Under this new pricing   Pizza Hut expects that revenues will increase significantly. But the new pricing mechanism will require some time before it proves itself.

Answer the questions:

 

• What are the implications of Pizza Hut’s big price cuts for its brand image?
• Can customer loyalty be generated through low prices?
• Can Pizza Hut sustain such dramatically lower prices and still remain profitable?