Why is an LCC needed?
 

‘Airline Pizza’ by imkeww

Here’s the problem.

Our product is fresh-baked pepperoni pizza. It can be found nearly anywhere. In 70% of the stores where our product is sold, our product is marginally profitable or breaking even. In the other 30% of stores, our product is unprofitable. We are losing money hand over fist sending pizzas to those stores, and we can’t just start making fewer pepperoni pizzas… because we’ll become terribly unprofitable for a number of reasons.

• Unlike a typical, modern firm, our pepperoni pizza production is hamstrung by labor contracts that permit only certain workers to place the pepperoni on the pizza, at a wage premium to other pizza companies. We can’t just start making fewer pizzas because each “pepperoner” has to produce X pizzas under contract. Also, our pizza is perishable, unless bought immediately after production. So it cannot be remarketed. Much pepperoni pizza goes to waste.
• A major part of the appeal of our pepperoni pizza product is the fact that a consumer can count on it to be nearly everywhere. The people who buy our pizza most, tend to buy it from many different stores. If we pull our product out of 30% of the stores, our best customers will become disappointed and shop for a pepperoni pizza that can be more available than ours. That means there’s a good chance we would start losing money in the other 70% of stores.
• We also differentiate our product through a costly frequent buyer program. We give those who buy the most pepperoni pizza coupons for each incremental pizza they buy. These coupons can be redeemed for two-for-one certificates, or can simply be used to get a discount on our pizzas, at 100% of the stores where they are sold. People will become angry if they cannot get rewarded at 30% of the stores where our pepperoni pizza is currently sold.

We’ve done much research and have determined that the reason why our fresh-baked pepperoni pizzas are lacking in sales at 30% of the stores is that more and more people want fresh-baked cheese pizza instead. People are tired of the pepperoni and want something simpler. Because the pepperoni adds a lot towards the cost of making a fresh-baked pizza, the firms who make cheese pizza can sell their pizzas for a much lower price. Also, cheese pizza bakers are fairly new and operate without burdensome labor contracts, so they are free to make their pizza however they like. Another big plus for new cheese pizza makers is that they use hip new packaging.

Since cheese pizza is what they want, and it is more affordable, more and more people prefer cheese pizza. And because demand is growing, fresh-baked cheese pizza is becoming almost as widely available as our pepperoni pizza product.

How do we stop losing money in 30% of the stores our pepperoni pizza is sold at while still pleasing our existing customers in the remaining 70%?

[This message has been edited by imkeww (edited 02-20-2003).]

Launch a brand called Domino Express. http://www.flyertalk.com/forum/smile.gif

2.) Appoint a CEO who has never sold a pizza before to run the whole shebang. Someone from the leather lounge suite business or hand crafted Garden Gnome manufacture would be perfect.

3.) Target the 70% of existing customers who actually LIKE your Pizza. And if you did not meddle with the product, they would indeed keep on buying your Pizza. Then tell them their sought after extra topping coupons no longer work on standard $9 pizzas.

You need to buy up to a $18 pizza (same content, different colour box) so as you can use the "free topping" voucher.

4.) Oh ... and 'Free Home Delivery' now incurs a $10 "processing" fee. "Due to customer demand" the press release said.

How would the brand be different? Or would it be essentially the same old sh*t with a different box drawing, stripped down pepperoni, and the same people making em'?

:-)

I'm willing to pay a premium for pizza made with quality toppings, including real cheese. Problem is, majors are currently subbing fake cheese and skimpy toppings, even when I order a First Class Pizza. http://www.flyertalk.com/forum/frown.gif

Don Carty of AA publicly tells those who will listen that AA can probably command a 30% revenue premium over the LCCs, but the fake cheese and skimpy toppings remain. http://www.flyertalk.com/forum/frown.gif

You know I used to really enjoy the simple things in life, like being able to use my coupons on the Wonderful pepperoni pizzas, and the Varied ones, specially when they came out extra Quick, but now I have to eat more expensive Hawaiian, Marinara, Beetroot or Yam flavours, and those gourmet styles are too much for a regular joe to afford. The problem also is that Geoff's fish & chips rules the roost down here and it's becoming harder and harder to find my favourite pizza outlet. Mostly now they want me to find them on the Internet though we still have a local store here with nice staff, but I know many have been shut down in favour of home delivery (don't forget to leave the light on and you must have $100 plus change for the driver). The Lamb Kerbab franchise did kind of well for awhile with cheap and wholesome meals, but they bit off more than they could chew when they took on Reggies's Burgers and drove them in the ground, so not many people like kerbabs anymore. I heard Geoff's fish & chips wants to merge, but I don't think lamb in batter would taste very nice.

So what to do? The pizza smells so good when it wafts in the window, specially when it is fresh and I'm sure, despite the big fish & chips chain and the upcoming Brett's coffe's springing up like Starbucks, the lure of the sweet sweet Pepperoni (insert Homer Simpson drool) is still there... and you know what I called up just earlier and I can't even get a Marinara here unless I want to go all the way to London for it, and I can't come back once I'm there... if I want to come back, they'll only give me a Quiche and I can't use my coupons with it because it's not a pizza!!

However, I'm about to spend some more dough because I like pizza so much and I hope the traditional pepperoni stays, because I love the taste....

------------------
RichardMEL, UA 1K
A Star Alliance Member.