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**MSE Lawrence** · 13-03-2009, 9:12 AM

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's "Why so many Pizza 2for1s?" Blog.

Click reply to discuss below.

aris · 13-03-2009, 9:36 AM

I think you got it all right - pizza is cheap to make, and they do not want to de-value their products.

To be honest, i'd say pizza is very close to a "Rip Off" when bought from pizza restaurants - along with Pasta. I'll make an exception for the pizza's made by hand from an experienced pizzaiolo in a wood burning oven - that is just a delight and worth the cost (within reason).

clareybabble · 13-03-2009, 10:18 AM

Never thought of it like that! I can see what you mean though. Our local brand name pizza takeaway is far more expensive (and not as nice) than our local non brand name takeaway where the pizzas are delicious (and bigger)! They've been going for years even with cheaper prices.

smu95rp · 13-03-2009, 12:55 PM

Of course this is how nightclubs work.

Door price of £20 implies an upmarket experience (in a provincial town) but ubiquitous vouchers and text messages giving £5 entry means that very few actually pay the £20.

I suspect the £20 price only exists to keep the perception of quality. The fact that a few poor saps may actually pay it is just a bonus.

RabbitMad · 13-03-2009, 1:39 PM

the concorde thing is true. A survey asked the flyers to state what they think the ticket cost (and as most people flying concorde don't buy their own tickets) they put the cost as a lot more than we really paid so BA put up their prices to meet expectations.

I also know of a webbing photographer who kept getting "!!!!!" weddings (his words not mine) where it was straight from the church to the local pub and he found it difficult to get decent photos. then he upped his prices and all of a sudden he was getting weddings at country houses with lots of ground and found it easy to get good photos.

the big grog · 13-03-2009, 2:27 PM

As a chef proprietor of a small town coffee shop cafe I can absolutely agree with the analysis. Pizza is very cheap to produce, labour intensive preparation is done by suppliers, invariably even the salad is bought in ready prepared. Our nearest Pizza Hut is usually staffed by no more than 3 or 4 staff on a quiet evening so even staff costs are very low. From my perspective the snobbery factor is very obvious, people will travel 5 miles to go to "fastbucks" and are happy to get robbed for what they're having. I try to provide value for money food and drinks but i wonder if I'm in the wrong game sometimes! The president of starbucks said recently he thought his chain was recession proof, arrogance. My hope is that the current financial woes will make more people want to shop on their local high street.

nomoneytoday · 13-03-2009, 3:11 PM

IMHO a 2 for 1 means you sell double the pizzas, whereas with a half price deal you only get half the turnover. The marginal restaurant cost of making another pizza is going to be pence. After all the staff are already there.

The garlic bread, dough balls and coca-colas are a bonus

It's a cheap marketing tool

Norma Desmond · 13-03-2009, 3:28 PM

We took advantage of a '2 for 1' pizza offer at Domino's when we visited friends recently - just as well, because if we'd paid full price we would have felt distinctly ripped-off.
I'd never tried this firm before as we don't have a branch anywhere near us (thank goodness!) and it makes us appreciate our local pizza/kebab house - giant 14" pizza with fresh toppings and home made base for only £7.50!

hander · 18-03-2009, 11:34 AM

Granted, pizzas are cheap to make and hence cheaper to discount but 2-for-1s on pizzas (for example) also happen as these offers prevent customers from buying one pizza to share - pizzas are often larger than anyone really needs - largely due to restaurants aiming to present value from ... um ... bread and melted cheese. If they made them half-price, profitability would be reduced further for restaurants.

ps I've never understood why people eat dough balls with pizza. Would you like some bread with your, er, bread, sir?
pps Tedious but ...I reckon the Concorde example (if it's true) is more an example of a Veblen Good than Giffen Good - it involves consumption to display wealth.

SueC · 18-03-2009, 1:47 PM

... but be warned about the price of 'extras'. I've recently fallen for the Pizza Express 2 for 1 offer. Made the mistake of ordering a glass of wine with mineral water to go with it - got stung almost £7 for the drink! Where's the bargain in that?????

harryhound · 18-03-2009, 2:29 PM

I don't think Martin quite understands what a Giffen good is.
It is an inferior good on which financially stressed people have to depend.
Giffen noticed the effect with potatoes in Ireland.
As the blight took hold the price of potatoes went up, but that meant no money left in the family budget for (say) meat so the Irish continued to try to eat MORE potatoes the more expensive they got.
Fortunately we don't have many totally desperate people in the UK, but the credit crunch may well cause a similar effect in some of the third world countries.

In the potato example it was actually the potato causing the problem. A similar effect can be seen as people down shift. Train to coach. Hotel to Travelinn etc but these are not the true Giffen effect, that would require a rice or corn shortage.

**MSE Martin** · 18-03-2009, 3:18 PM

Quote:

Originally Posted by harryhound

I don't think Martin quite understands what a Giffen good is.
It is an inferior good on which financially stressed people have to depend.
Giffen noticed the effect with potatoes in Ireland.
As the blight took hold the price of potatoes went up, but that meant no money left in the family budget for (say) meat so the Irish continued to try to eat MORE potatoes the more expensive they got.
Fortunately we don't have many totally desperate people in the UK, but the credit crunch may well cause a similar effect in some of the third world countries.

In the potato example it was actually the potato causing the problem. A similar effect can be seen as people down shift. Train to coach. Hotel to Travelinn etc but these are not the true Giffen effect, that would require a rice or corn shortage.

Thanks that's really interesting

As I say my economics was a long time ago - now i thought the phenomena you describe had a different name (something like, but not, an inferior good). If that's wrong, what would you call the concorde example if not a giffen good? Is there aother name

lulaloo · 18-03-2009, 3:45 PM

I took my 2 for 1 voucher to my local strada last night. When we got there, we decided we wanted starters, and strada do a set menu (2 courses for £10.50).
My starter and main were on this special menu and my partners werent.
It actually worked out cheaper for me to get 2 course special and my partner to just pay normal prices for his rather than use the voucher for a free main and buy two starters.
I do think they're worth it if you can be controlled (not like me) and ONLY get your main and your free one.

the big grog · 18-03-2009, 9:39 PM

[quote=harryhound;19857531]"Fortunately we don't have many totally desperate people in the UK, but the credit crunch may well cause a similar effect in some of the third world countries."

One thing is for sure third world countries don't have a credit crunch! the credit crunch is about the unavailability of credit, ie a new loan for a house or car. The situation the US and UK are in is to do with the lack of credit (new money), it means the respective Govt's are printing money (so called Quantitative Easing). They increase the amount of money in the system by buying back Treasury Bonds, for cash. In terms of international economics this may mean the 3rd World might be better off. In real terms prices for goods produced in the West may fall. 3rd world countries buy goods and technologies in Dollars, so exchange rate changes are much more important. Also, these countries rely on Aid and donations, quite often the transaction is not in cash but goods. Further, if imported goods become more expensive, then the likelihood is that the country will rely on locally produced staple goods. Most 3rd world countries had higher rises in GDP than the West in 2008, so if their output is rising they are more likely to demand more imports. If this is the case western manufacturers will sell more at a lower price in order to keep their factories open. However, I suspect most economists don't actually have a clue how it's all going to turn out.

BTW I did my economics studying a long time ago too!!!

harryhound · 19-03-2009, 3:30 AM

I suspect most economists don't actually have a clue how it's all going to turn out.

I think we can all agree on that statement.

[Do you remember the false dawn for the new millennium - The Irish inspired "make poverty history" campaign to kill the debt?
Jeffrey Sachs (with a little help from Bono) writing the book "The End of Poverty"; without putting a question mark at the end of the title?
Clare Short's self evident problems with the "spin" required of government members?
I don't think third world poverty is on the cabinet agenda at the moment]

Putting up the price of Concorde to make it more "exclusive" is probably this effect:
http://en.wikipedia.org/wiki/Veblen_good

squirrelchops · 19-03-2009, 10:44 AM

It would be interesting to note if people order more than usual when they have a voucher?
By this I mean having a starter and/or pudding too because the oucher makes the main course cheaper so in fact end up ordering more than if they didn't have the voucher in the first place. Hence probably ending up spending nearly as much as if they didn't have the voucher in the first place but 'thinking' they have saved as main course is cheaper.
I thought this was the whole point of money off vouchers......'get em through the door then get em to spend more on extras'. They must get really naffed off when OH and I use a voucher and still only have the main and don't get sucked into buying anything else!!!!!

lordbuckethead · 19-03-2009, 12:01 PM

Noticed prices at pizza express jumped a couple of years ago - pizzas were typically £7-8, now most are near £10. So a 2-for-1 gives you 2 pizzas for a tenner - but then £15.85 for a mediocre bottle of pino grigio!!! eh???

I like their food but even with the 2-for-1 I hardly think thats cheap!

Final point - I went out boozing on Tuesday (St Paddys night) in small provincial town - every pub we tried was dead, girlfriend was in Pizza Express just up the road and she said it was packed - so it works!

MiserlyMartin · 20-03-2009, 11:17 PM

Martin is right about the price it high strategy to increase demand and perception of quality. Pizzas are a good example of this. The answer to this is simple - don't buy these overpriced things. I have started making my own pizzas and they are better pizzas than the likes of Dominos make for a fraction of the cost.

There are rip off prices everywhere, the thing is to shop and around and refuse to pay the silly prices¬! Too many people pay a price that they see without question, thinking thats how much the thing is 'worth'. Well that worth is as little as one can get and shrinking especially in these times.

harryhound · 29-03-2009, 12:09 PM

[quote=the big grog;19873691]

Quote:

Originally Posted by harryhound

"Fortunately we don't have many totally desperate people in the UK, but the credit crunch may well cause a similar effect in some of the third world countries."

One thing is for sure third world countries don't have a credit crunch! the credit crunch is about the unavailability of credit, ie a new loan for a house or car. The situation the US and UK are in is to do with the lack of credit (new money), it means the respective Govt's are printing money (so called Quantitative Easing). They increase the amount of money in the system by buying back Treasury Bonds, for cash. In terms of international economics this may mean the 3rd World might be better off. In real terms prices for goods produced in the West may fall. 3rd world countries buy goods and technologies in Dollars, so exchange rate changes are much more important. Also, these countries rely on Aid and donations, quite often the transaction is not in cash but goods. Further, if imported goods become more expensive, then the likelihood is that the country will rely on locally produced staple goods. Most 3rd world countries had higher rises in GDP than the West in 2008, so if their output is rising they are more likely to demand more imports. If this is the case western manufacturers will sell more at a lower price in order to keep their factories open. However, I suspect most economists don't actually have a clue how it's all going to turn out.

BTW I did my economics studying a long time ago too!!!

I thought I would just pop back now that the run up to G20 is starting to bring out the news of how bad the third world will suffer.

In this crunch the money tends to be sucked back to the original rich centres. as the world economy shrinks.
The major source of funding to the dirt poor third world is NOT aid it is remittances. I think the ratio is about 3 to 1.
Who are the first to lose their jobs in a recession - unskilled agency workers.
What happens to them? If possible they get exported back to their country of origin, there they tend to end up back in the dire conditions they tried to escape.

Meanwhile the outsourcing contracts tend to suffer. For example is it better to work for Renault in Slovenia or in France.

Industrial production in Mexico is down 9% year on year in January 2009.

I think I will stick with my theory that poor third world countries with begging bowl aid economies are going to be hard hit. Just as they were in the 1970's oil crisis.