Tuesday, June 25, 2013

Where's the value in a pizza?

This week, while watching an online video, I was reminded of some of the subtle differences between value-based in consumer markets, compared to business markets.

In a previous post, I’ve described how products and services in business markets can be priced on the basis of the revenue they generate for clients, the costs they save them, and the risk they minimise. Quantify one or more of these sources of value, and use it as the basis of your pricing.

To a certain extend, the same principles can be applied in consumer markets. Consumers can save money by shopping at Aldi. Education can improve a person income-earning potential, and risk can be minimised by driving a Volvo.

But consumer products can provide value in other ways.

At the end of a three day value-based pricing workshop in Manchester a couple of years ago, one of the delegates approached me saying “I’d like to show you how we at Domino’s Pizza put value at the centre of everything we do”.

The Operations Director opened her laptop and logged on to a site where numbers were constantly changing. Every Domino’s store in the UK (today there is over 800 of them) wer listed down the left hand side. She went on to explain what all the numbers indicated.

One column showed the time a pizza order was received. The next, the time the toppings were put on the base, then the time the pizza went into the oven, and so on, until the pizza went out the door on its way to the hungry customer.

“Do you know why we do this?” asked the Ops Director. “The value we provide to our clients is giving them their pizza in thirty minutes or less. And getting their pizza on time is the number one reason [by a British country mile] why customers order from us next time they want a pizza”.

That’s why Domino’s put time at the centre of everything they do: it is the source of value they provide to their customers.

And what video prompted the topic for this week column? Well you can watch it above. It may be parody; it may be pie-in-the-sky, or it maybe how first class pizzas are delivered in the not-too-distant future.

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