I remember when I first confirmed that not one, but two national pizza chains had just signed leases and were going to open almost across the street from me. For 12 years Big Dave's Pizza & Subs had enjoyed 75 percent market share and life was good. A couple of months after Pizza Today ranked my shop as the 25th busiest in the country, my life changed forever.
I was still flying high on my newfound notoriety. My self-esteem and ego were at an all time high. I knew that I had arrived and all of my hard work was paying off. Then it happened.
I was winning the local pizza wars by default. Out of a pack of six when I opened, there were only two competitors left. They were barely holding on and were neutralized. Things were about to change and I wasn't ready for it. I was about to start competing against Domino's Pizza and Little Caesars; the world's fastest delivery company and the world's best value in pizza. I didn't deliver fast pizza. On a typical Friday night we would tell delivery customers their pizza would be there 'within the hour'. I also didn't do much discounting or couponing. I didn't have to. I was in my comfort zone. I had no motivation to complicate my life.
During my weekly management meetings we discussed best and worst case scenarios. We did a SWOT analysis and concluded we were pretty competition-proof. We had spent years making, baking and taking the best pizza possible. We never cut corners, hired and over trained our crew, had very positive name brand recognition and had developed and executed marketing strategies to eliminate our competitors for years. We decided that quality and service would dominate over speed and price. We put together a 'to do' list and proceeded to wait for the grand openings. We thought we were going to send them packing. In retrospect, I was pretty naive in thinking I was competition-proof. I wasn't and you are not either.
When a major competitor comes to town they have zero customers. They will use any legal means possible to attract your customers to try their product. They will usually spend thousands of dollars to do this. Some choose to go easy at first with a soft opening and some come out of the gate on a full run. All of a sudden they are everywhere. Every other radio spot mentions them. They buy full-page newspaper ads and even may get a free mention in the business section. They go door to door dropping off flyers and possibly knocking and introducing themselves to the home owners. They start to visit businesses and drop off menus and free delivered lunch certificates. They may have a mascot waving at passing cars from their parking lot. Some will rent huge inflatable characters or use wind socks to draw attention. Quite a few will offer free samples or at the least deeply discounted pricing. Then come the coupon flyers, by the tens of thousands. They may even put flyers on cars in your parking lot. Along with the pre-opening word of mouth hype they start to pick up momentum. Then you start to get nervous.
The Big Boys opened with great fanfare. They pulled out all of the stops. It seemed they would never run out of money for promotions and advertising. Everyone in town was trying them and it was starting to show.
For the first time in a while, your weekly sales go down when these guys show up. Way down. You start to lose sleep and don't know where to turn. Your checkbook balance is getting low. You ponder what it would be like to work for someone else. Where do failed pizza makers end up? This becomes your dominant daily thought. Where and why did my regular customers go there? Where did I go wrong? Where do I start, and will I make it?
I knew I couldn't deny them their grand openings. I figured in a few weeks things would return to normal. I was mistaken. Believe it or not, some customers will buy two cheap pizzas over one great pizza. Besides that, some customers prefer 30-minute delivery to 50-60 minute delivery. I was getting concerned and wished I had not squandered the 60 days lead-time I had. Now I would have to be reactive, rather than proactive. I knew I couldn't outspend them so I would have to outthink them. I finally realized that they came to town to put me out of business. This threat was real and I had better take command of the situation or get used to a serious lifestyle change. What I couldn't afford to do was give in to panic. I turned all of my fear emotions into positive thoughts on how I was going to beat them at their own game. I tapped into all of my life's experiences and became a certifiable Pizza Guerilla Marketer.
I would decide what fights to pick, where and how to fight them and win the battle for my customers mind. The first thing I was faced with was perception of value. Little Caesars and Domino's Pizza were perceived as the lowest cost producers of pizza in my town. I was selling a 16" large and they were selling 14-inchers. They had a 23 percent size and price advantage over me. I tried to educate my customers by placing ads in the newspaper. The headlines announced "They say one call does it all…What they mean is one call does it small." Then I went on to explain that all pizzas are not created equal. I reinforced this with a phone script to answer questions on the phones. It's really hard to explain area of a circle (Pi R square) on the phone on a busy night. The only thing this accomplished was certified mail and legal threats from Domino's Pizza and Little Caesars' legal departments. I was getting their attention, but still losing market share. After many sleepless nights, I decided to downsize my large pizza to 14-inches. This would allow me to fight them on a level playing field. It would also allow me to accept their coupons.
My delivery times were improving. We were getting pizzas to our customers faster because we were delivering about half as much. This is Murphy's Law of Pizza Delivery. Customers will gravitate to the fastest provider of the service. How did they consistently deliver 95 percent of their orders in under 30 minutes? I went undercover to figure this one out. The answer was rather simple. They pre-prepped their pizzas in advance. They anticipated the rush and had dozens pre-sauced, cheesed and could top and get them in the oven in seconds. Their menu focused on pizza and they didn't get into the menu entrees that slowed down production times. The answer of how to 'one-up' them was the easy part, the execution would be the hard part.
I went back to my kitchen and bought several wire stacking racks. I timed my pizza makers and as it turned out I could answer the call, process the order to the kitchen and get the pizza baking in less than 90 seconds. Slow delivery is usually a symptom of slow kitchen systems. The drivers don't stand a chance of fast delivery if they are leaving the store 25 minutes after the call was placed. We were now turning delivery orders in less than 12 minutes. After we proved the new system, we hammered the media with our new message. Big Dave's Delivers in 29 Minutes or Free. Who's got the fastest delivery in town, Big Dave's? Our pizzas are delivered so fast they have stretch marks. We also raised the bar on ourselves again.
I bought a delivery truck at Pizza Expo. You know the kind; propane holding ovens, cooled areas for salads and beverages. We called it the Pizza Express Truck. It got a fantastic sign job and we installed a 2-way radio back to the driver dispatch area. We stocked three of the most popular pizzas, all 14-inches and guaranteed delivery of these pies in 20 minutes or the next one was half off. This truck was preloaded with pies prior to busy times and was able to be radio dispatched to homes and businesses in a flash. Our fastest delivery was 90 seconds. Some really savvy customers ganged up on us. They concluded that if three or four people call at exactly five o'clock and ordered Pizza Express somebody was going to get half off certificates. We caught on to this scam real fast. Since we had already cross-trained our entire crew to make it, bake it and take it, we simply had a cook grab the right express pie from the heated rack in the kitchen and still deliver it under the deadline. People started talking and delivery counts were returning back to normal. We were able to deliver 94 percent of all deliveries within the time limit and discounted or comped the rest. Once delivery issues were stabilized we were ready to focus our attention to perceived value of price and coupons.
For the first time in years I standardized how every pizza was made and what it really cost in dollars to make. I weighed out every ingredient and gave my pizza makers the tools to do the job. I bought rubber cups to portion control the exact amount of cheese we put on every pizza. I bought two digital electronic portion control scales and recessed them on my make line. I created a cheat sheet that displayed how much of every ingredient went on every pizza. We could no longer free-throw ingredients and remain profitable (read Big Dave's Portion Control article from the Fall 2001 issue of PMQ at www.pmq.com/mag/2001fall/ big_dave_ostrander.shtml) . A cool thing happened when I started to get serious about portion control. Without reducing the amounts of toppings and just controlling them, my weekly cheese usage went down 200 pounds a week. I should have done this years ago. After I collected the data from invoices and did the math I transferred this information to a spreadsheet program. Now I could answer, "What if?" questions pertaining to pizza pricing.
We determined that we could accept any coupon the competition printed and still make money. Since we were perceived as expensive this would neutralize my competitors Unique Selling Proposition (USP). If price was the only issue keeping customers from buying my pizza, we could change that by accepting all competitors' coupons (read Big Dave's Controlling the Coupon Monster article from the Winter 2001 issue of PMQ at www.pmq.com/bigdavewinter_2001.shtml and the Ultimate Guarantee article from the Winter 1999 issue of PMQ at www.pmq.com/bigdavewinter_1999.shtml). I launched this counter attack by advertising it everywhere. We allowed our competition to become our printing factory. We allowed them to distribute them to my town. All of this would cost me nothing. All I had to do was honor their coupons and not blink. Our sales surged. We were selling 50 percent of our pizzas at regular price and the remaining pizzas at coupon price. I was saving around $3000 a month. I no longer printed flyers on a regular basis. Once in a great while we mailed one out, always reminding the customer that we accept any coupon. We even raised the bar one more time.
Since we were fielding so many calls asking if we still accepted competitors' coupons we decided to accept any coupon in the world that could be translated into English and converted to dollars. We ran the Worldwide Pizza Coupon Search every August for years. The customer that presented a coupon that was furthest from Oscoda, Michigan got a $100 bill. Winners came from as far away as Australia and New Zealand.
We were finally controlling the war for the customers mind. The Big Boys are very predictable. Know thyself and know thy enemy is good advice. Most new openings are scripted from the same book. They follow a predictable sequence of events. Once you discover what they are you can develop your counter strategies. Independents have the luxury of coming out with any counter attack they want to. They don't need to get corporate approval to start or end a promotion. You must work up a war chest of tactics that are cost effective and deliver measurable results. Try lots of things. Some won't work. Some will work and a few will be brilliant. If you always do what you've always done, you'll always get what you've always gotten. This allows you to set the tone and the outcomes of the battles will be more predictable.
I was one of the survivors. I regrouped and capitalized on my strengths before I lost my business. Looking back I would have been cultivating customer loyalty much earlier in my career. Satisfied customers will dump you and move on to the competition. After this wake up call the remaining 13 years of my career were devoted to creating 'Raving Fans' who would fight rather than switch. They would tell everyone who would listen how great my pizza and service was. I'd make them feel like family. I would never take them for granted again. I would befriend them and go out of my way to make sure they were always happy. People like to do business with their friends.
This was my wake up call. It was the best thing that ever happened to me. Competition is great. It forces you to rethink your business and become a Lethal Weapon. The next chapter in my life was to become a resource to other operators, sharing my experiences with them and helping them.
In the pizza business: The Big don't eat the Small…. The Fast eat the Slow.
If this article hasn't answered all of you questions and you want to discuss it further please visit my website at www.bigdaveostrander.com and post a question or call me at (888) BIG-DAVE.