Tuesday, March 18, 2014

Why Pizza Should be Square

By Kirsten Snyder - Director, Integrated Insight

The announcement of Sbarro’s bankruptcy filing this week got me thinking about Pizza. And although Sbarro’s problems are much bigger than just the price of their pizza, I wonder if traditional pizza chains couldn’t benefit from abandoning their traditional round pies.

Have you ever ordered a pizza and asked how many pieces are in a medium vs. a large?  Chances are that you have been told 8 in one and 10 in other.  However, in the world of round pizza not all slices are created equal. So, how much pizza do you really get?

Pizza companies try to answer this question by using the diameter or with large and overlapping ranges of the number of people it feeds. Both of these methods still leave much interpretation to the customers.

Think back to your high school geometry class. When you calculate the area of a 12” circle versus a 14” circle, although there is only a 2” difference in diameter the difference in area is about a third.

So, the more difficult it is to understand the difference in size, the more difficult it is to see the value in the buy up structure. This makes it challenging for pizza companies to ideally stratify pricing by the size of the pie.
For example, at my local Domino’s a small 10” cheese pizza is $5.99, a medium 12” is $7.99 and a large 14” is $9.99.

As customers contemplate what size pizza they actually need, the buy up structure easily draws them into the largest pie without a second thought.  But it might not be optimal for the customer or for the pizza company.

That leads me to my point:  square pizzas are better. I will admit that square pizzas create the undesirable middle pieces with no crust. And in Naples, Italy the mention of square pizza would probably cause a riot, but financially it gives companies more pricing leverage through a clearer buy up structure. It is easier to communicate that a small square pizza gives you nine 3-inch pieces while a large pizza gives you 25 3-inch pieces – more than double that of a small pizza. So, now pizza companies can optimize their pricing structure, allowing them to take more pricing, while still providing the strong value proposition on the largest size pizzas.

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