Pricing Propheteer: How to value 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 extent, the same principles can be applied in consumer markets. Consumers might save money by shopping at Aldi. Education might improve a person’s income-earning potential, and risk might 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 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 are more than 800 of them) were 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 and 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 30 minutes or less. And getting their pizza on time is the number-one reason why [by a British country mile] 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’s column? Well, you can watch it here. It may be a parody, it may (quite literally) be pie-in-the-sky, or it may show how pizzas will be delivered in the not-too-distant future.