Bad economy has elevated the PRICE WARS! (Updated 6/13/08)
Have you seen the commercials on TV where major businesses are fighting the PRICE WARS to keep the business that they already have?
Four of the biggest fast food businesses in the U.S. are already feeling the pinch of the tough economy so someone in sales thought to combat the slow sales they will GIVE AWAY their products in hopes it will get the buyer to continue to patronize their business.
It started with Domino’s pizza selling one topping pizzas for five dollars each if you buy three or more at a time. The next thing you know Pizza Hut jumped on the band wagon and started also selling their pizzas for five dollars but with a twist. They use the term “At any time, all the time” and suggesting that with domino's you have to buy before certain hours and curtain days.
To rebel against the not 100% accurate misinformation Domino's then LOWERED the rate to only Four dollars per single topping pizza.
Now if you were to take the costs of the ingredients to make the pizza, the salaries of the employees, the rent and utilities of the location, the gas used to deliver the pizza and the extremely high expense of the TV advertising, domino's is actually losing money at that low, low rate.
The PRICE WARS has also affected the fast food sandwich business. It started with SUBWAY offering foot long sandwiches for only five dollars. This saves a customer anywhere form one dollar to approximately a dollar and a half over their regular priced sandwich. It didn’t take long before Quizno’s then offered their sandwiches for five dollars. Since they don’t have “Foot Long” they offset this by claiming that they have “More Meat” in their sandwiches.
The real problem with these cheap incentives for food restaurants is that it doesn’t work. They are loosing money in order to try and hang onto customers that they already have. Case in point: I don’t care how cheap Pizza Hut or Quizno’s offer their food; I don’t like their menu and do not eat there. I am a loyal customer to SUBWAY (I bring a sandwich or two to every event I perform and eat it while I’m setting up) When I’m at home I prefer the taste of Domino’s over Pizza Hut and will always purchase one over the other. This is how most people are, loyal to a brand or flavor that pleases them.
Giving away their food as a way to tempt a person over to their business for the most part just won’t work. Instead they are losing money and not bringing in enough new business to offset the profit loss.
I see now that Disc Jockeys are also feeling the PRICE WARS and dropping their rates in order to bring in business. Is this a good idea? For some yes, for others it could mean bankruptcy.
Where’s the difference? If you’re already charging only a few hundred dollars (under $700) for an event like a wedding and then you drop your rates even more, this could lead to major cash flow problems down the road. But if you’re charging over a grand for a wedding and lower it a little then this could be a smart business plan.
Typically I am one to promote the “Getting What Your Worth” idea and charging a respectable rate but the times are getting tough and will continue to be rough for some time in the future so if you’re like myself and charging two to three times the “average” rate in your area and business is really slowing down then the only solution is to try and bring in a few more events by lowing your rates just enough to bring in the customers.
Do what it takes to keep your business running, just don't GIVE IT AWAY and lose money in the deal.
Jeff Richards: Party Time Productions
http://www.PartyTimeProductions.biz
UPDATE 6/13/08
If you haven't seen this yet, Dominos is now also offering HOT SUB sandwiches as part of their business.
They have decided to get into the sandwich business and take a portion of the money by offering their sandwich at only $4.99 and the best thing, they deliver!
Watch out Subway, Quiznos and Jimmy Johns!
In a struggling economy businesses like Dominos are trying to diversify in order to bring in more money. This can work if the product is superior to the competition but the majority of the time this endeavor seldom works. (Remember: Chocolate Fudge Brownie? The New Coke? The Edsel?)
In the last few years DJs who are struggling have also decided to diversify by offering other options like Video Screens, Video Taping, Up Lighting and Limousine Services.
For some this has added more money and a lot more work but with the sudden increases in gasoline, those whom offered a Limousine Service are feeling an even bigger pinch.