The Value Of Free As Analyzed By The Pizza Industry

from the is-there-a-pizzster? dept

When discussing “free” and its use as a promotional marketing tool, we often point to the fact that it’s hardly a new concept at all — and the idea of “buy one, get one free” or “free coupons” has been used successfully in the restaurant business for ages. Yet, it appears that some in the food business are going through the same debates that we find ourselves in around here concerning the use of “free” within a business model for the sake of promotion. I would imagine this has become an even bigger issue as many restaurants and restaurant chains experimented this year with big time “free” promotions.

A few weeks back, reader Josh sent in this analysis from someone in the pizza industry about why “free” makes a lot of sense as a piece of a larger marketing strategy. What struck me is how similar the discussion is to the discussions we have here. There are people who complain that giving away free food “devalues” the food. You have people complaining that the “cost” of free food is too high. But, in the end, the guy makes a good case for why free is a great system, for bringing in new customers, who can turn into loyal paying customers:

Many times I hear, “Giving away free food diminishes the value of my brand.” My response is usually laughter, followed by a question: “Are you kidding me?” The goal with free food is to drive qualified prospective customers into your establishment to try your food, service and experience.

Of course, the economics with food is quite a bit different than with content. With food, each “free sample” has a direct cost in that the same items cannot be sold. With content, the argument in favor of using “free” is even stronger, because you are just giving away copies — and each copy is free to make and distribute, even if the original copy cost money.

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Comments on “The Value Of Free As Analyzed By The Pizza Industry”

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fogbugzd says:

But there is one catch with free

>>The goal with free food is to drive qualified prospective customers into your establishment to try your food, service and experience.

This assumes that you have quality products for people to see. It means they see that you have a product they want at a price they are willing to pay.

Driving customers to your product does no good if they don’t find what they want when they get there.

Anonymous Coward says:

What about those pizza joints that don’t want to offer free samples but then members of Generation Impatient come along and they just take all the pizza that they want?

And they want a lot of pizza. What are those pizza joints supposed to do?

They stop making pizza, that’s what. And what does this have to do with digital content?

Absolutely nothing.

Sheinen says:

Re: Re:

Well what you’d find is that those ‘Generation Impatient’ people would just go to one of the other Pizza Places that listened to their needs and offered free Pizza.

They’d undoubtedly pay premium for drinks and sides, but you don’t care when the Pizza’s free!

Then that reluctant, old fashioned, idiot Pizza joint owner who refused to cater for a rapidly changing market would be looking for a new job.

Plus this is pretty redundant, because you’re assuming that ALL pizza would ALWAYS be offered free, which is not what’s happening, or whats being suggested: You give your basic, normal Pizza’s for free, then offer reasonably priced high quality pizza’s and a good range of attractively priced sides and extras.

It’s pretty easy to carry the metaphor in to digital content if you have an imagination, but unfortunately you seem to suffer from the same problem as the idiots in charge. You don’t have one and are, as such, incapable of thinking your way out of a box. You just keep hitting the sides and yelling at everyone on the outside.

The Anti-Mike (profile) says:

Re: Re: Re:

In the end, there is no reason to give anything away for free at this level. Perhaps a sample or something similar. Consumers are too aware of the market price of side dishes, and are unlikely to pay more.

Food costs are suppose to be about 35% of a restaurant’s take. You can screw with that a bit, and maybe make it 50 or 60%, but in the end, the profit and the other parts of the business suffer.

Further, and just as important, free pizza does little to drive more business, except perhaps business for more free pizza. When the likely results (people expecting Pizza to always be free) don’t support the business model, why do it?

In the end, samples, tastings, discounts are all good, providing it is clear what they are, and providing they don’t undermine your entire business model. Giving pizza away for free not only cuts income, it also cuts the percieved value of the product, doubly so if your upsell is to a better “high quality pizza”.

As for thinking outside of the box, well, let’s just say that some people don’t hit the sides of the box because their business models don’t support the costs of a box. It’s easy to think without limits when you don’t let things like the bottom line get in the way.

Sheinen says:

Re: Re: Re:


Good ol’ anti-mike missing the point again.

The pizza one doesn’t work, because you couldn’t afford to give it out for free because of the production costs.

However, if Pizza cost close to £0 to produce and everyone knew that, would they pay £15 for one?

No, they wouldn’t. And the Pizza places would need to find a new way to make money from their Pizza, or stop making it. Except people still want Pizza, so why stop making it just because your existing business model has become obselete?

Trying to tell people ‘yes, now we can make Pizza’s for next to nothing, but you must pay the same, nay MORE for them’ but then refuse to justify it would put you out of business.

The fact is that digital media ALREADY IS devalued by the publics knowledge of its actual cost. Ignoring that and trying to pretend that it’s still worth what it once was is just plain dumb. Find a new way to pay for your box or get out of it entirely.

Jeff says:

Papa Johns rocks in Customer Service

I order Papa Johns pizza online and after the first time I ordered online, I received a call the next day, and they admitted to delivering to me a bit late, even though I didn’t really notice. They ended up giving me a free 2-liter on my next order.

2 months later, when I got my delivery, they handed me a coupon that said “Free side + 2 liter” and the next day, I got a call about them saying they were a little late in delivering, and I thanked them for the coupon.

Now, with Pizza Hut, I have never received any calls about them being late, and being offered anything. This, is why I haven’t ordered from Pizza Hut since I ordered Papa Johns online.

DB (profile) says:

Pizza Marketing

I live in Chicago, so I won’t buy from Pizza Hut or other pizza chains because are many purveyors of real pizza. I’ve seen Papa Johns commercials, too, and I’ve seen Little Caesar’s storefronts. It seems that the tradition among local pizzerias has always been to give coupons — save 12 coupons, get 1 small pizza free. Is that what the chains do?
And — for the commentator who wonders what “free” has to do with online content — isn’t that exactly what has been discussed in the context of bands offering samples “free” in order to get purchaser’s to buy a whole disk?

Anonymous Coward says:

If free is so valuable.. why can’t I find free pizza? Buy one get one free is not free. It’s just a marketing gimmick, instead of saying you get 50% off if you buy 2. It is extremely rare for any restaurant to give away food for free, and when any of those rare promotions come up, they always run out of food and it’s on the news about angry customers wanting their free stuff that they somehow feel they are entitled to, like techdirt bloggers…

AC File Sharererererererererererer says:

Re: Re:

You think it’s bad now? When we do end up getting taxed so your industry can stay alive, how many people do you think will be paying for your product then? Since “IF” we were to buy it we would in fact be paying for it twice. I see exabytes of content you will never be able to police. The fools that do buy your crap won’t be enough to sustain you.

Anonymous Coward says:

how to use a dvdr as a free pizza

hi i encode
i discovered h264 recoding on xvids to be kinda interesting
while you lose about 5% quality you save 40-50% size

create a data dvdr
place 14 movies on it
and sell that for 10$

while i dont do that hollywood could
imagine thats what tech is for no?

and if you want better quality you pay a lil more and get less

see its easy as free pizza

Trerro says:

Customer rewards also fall under this category

When I was in Boston, there were a gazillion pizza places, and there were 3-4 in particular we ordered from. 1 of them decided to recognize us as frequent customers, and would constantly throw in free sodas, sides, small pizzas, etc. with our order as a thank you. It goes without saying we ordered from them far more than the others, and that they therefore made a good return on the investment of giving us free stuff.

It seems like pretty basic business to me – stand out from the competition with exceptional customer service and/or free stuff, get more business from your customers.

Of course, the music industry understands this just fine. The record labels simply realize that the new industry isn’t one they can control with an iron fist like they do now, and they’re doing everything they can to stop the future from happening. The ones that give it up and adapt will be the survivors, the rest will die out and not be missed. Bands will still be quite happy to pay reasonable fees for quality marketing services, as they more than pay for themselves – they just aren’t going to hand an obsolete industry a huge chunk of their income.

The Anti-Mike (profile) says:

when free ain't "FREE!"

(live from China, it’s The Anti Mike!)

I read this story and I have to laugh. What the pizza business (and most other “goods” companies for that matter) are doing has nothing to do with “FREE!”, and has everything to do with sample marketing which has been around since christ was a choir boy.

If they were doing free, they would give the pizza away for free and charge $9 for a 2 litre of pepsi. They aren’t doing that. All the are doing is offering a sample, a tasting, a one timer to get people in the door.

It would be on the level of a band giving away the first 30 seconds of a song, and then selling people the whole album. In fact, the music industry did the sample thing for years, via this amazing thing called radio. You get to hear the whole song in a somewhat compressed format, and you can always buy the full value version if you so desire from your local music store, or now online.

Oh, Mike, I got a sample of dishwashing machine soap in the mail the other day. Are you going to claim that they suddenly discovered “FREE!” as well?

Oh geeze - not again says:

Re: when free ain't "FREE!"

TAM -> “What the pizza business (and most other “goods” companies for that matter) are doing has nothing to do with “FREE!”, and has everything to do with sample marketing which has been around since christ was a choir boy.”

– Hey, dumb ass. Try reading the intro before commenting.

Mike -> “When discussing “free” and its use as a promotional marketing tool, we often point to the fact that it’s hardly a new concept at all — and the idea of “buy one, get one free” or “free coupons” has been used successfully in the restaurant business for ages.”

The Anti-Mike (profile) says:

Re: Re: when free ain't "FREE!"

I read Mike post completely, but I think that he puts this out there as if the Pizza people had just discovered the marketing holy grail or something.

What Mike is trying to suggest is that you can give something away for free and drive customers to premium products, a “see, it works!” attitude.

There are always circumstances where almost any marketing strategy works. Giving away free food to a client once (sample) isn’t the same as giving away your entire product (here is all the music in the world for free). People get hungry again in a few hours and need to eat. It isn’t giving them something they can enjoy over and over again, it’s giving them a tease once.

it is must more of a marketing strategy like playing music on the radio or similar. It isn’t giving lifelong enjoyment, just a sample.

It’s one of the reasons why the “all music is free” business model isn’t really a business model.

As for Mr Tibet, well, we all know that the US makes nothing but absolutely perfect products without defect, right?

Free Tibet says:

Re: Re: Re: when free ain't "FREE!"

TAM -> “As for Mr Tibet, well, we all know that the US makes nothing but absolutely perfect products without defect, right?”

Gee, I guess looking at it from that point of view makes everything ok then.

To all those who have lost a child, a pet, or those who can no longer live in their homes, keep your chins up because according to The Anti-Mike this sort of thing happens all the time and you should just accept it. /s

Sheinen says:

Re: Re: Re: when free ain't "FREE!"

Yeah, and then people started taping songs off the radio and the music industry cried about it.

Now that the interweb gives you a new way of ‘taping’ songs they’re doing the same thing.

Who said all music ever produced across the entire world needs to be free? Did anyone say that?

No – make it easier for people to get the free stuff and guide them to the profit making thinfs!

Anonymous Coward says:

Re: when free ain't "FREE!"

Oh, hey, it’s TAM here again to refute claims that were never made.

I’m positive that all frequent readers of this site automatically assume that your comments exist solely for your personal benefit, because they never seem to have any actual relevance to the articles other than hitting a few similar buzzwords.

Free Tibet says:

Re: when free ain't "FREE!"

(live from China, it’s The Anti Mike!)

Dude – while you’re over there schmoozing with our new overlords, you might mention off the cuff that we would really appreciate a refund for all the poisonous products they send here. You know, the lead painted kids toys, melamine tainted pet food and the sulphur drywall. If you could do that, it would be really great. Have a nice day.

Anonymous Coward says:

An analogy must be analogous for it to be an analogy...

“With content, the argument in favor of using “free” is even stronger…”

That’s absurd. Your anaalogy only works if you ignore all the relevant differences. Like the fact that free pizza can’t be duplicated and redistributed. That pizza has a shelf life. You eat a pizza, tomorrow you need another. The first one is gone. There is so much wrong with you baseless association of these two very different things.

Seriously. At least pretend to put some thought into your words. What you’ve written here is just plain stupid.


Andrew D. Todd (user link) says:

Ingredients, Tips.

I would like to correct “Anti-Mike” (Jan 16th, 2010 @ 6:59pm) on one point. The figure of 35% food cost, which he cites, is for rather more upscale eateries.

Pizza doesn’t have any premium ingredients. It’s not like steak, or seafood, or a salad. The cost of ingredients at supermarket prices would be about ten percent of the selling price, and of course the restaurant buys wholesale from a distributor at still lower prices. The dominant costs are fixed costs, the most important probably being the rent. The rent has to be paid, whether the pizza shop sells anything or not. The same analysis would apply to the major fast-food restaurants. Arby’s and Subway might be boundary cases, because they sell sandwiches built around sliced meat. They can’t go quite as far in cutting ingredient costs as McDonalds can.

If you want to talk about restaurant economics, the interesting thing to discuss is the tip. The tip is paid after the fact, and at the pleasure of the customer, and, often enough, with no realistic expectation of ever meeting a given waitress again. I saw some statistics some years ago, to the effect that men regularly tip twice as much as women. I don’t know if that is still current. Street minstrels are paid in much the same way that waitresses are, only more so.

Of course, rock musicians all seem to be power fantasists. They aren’t really interested in the actual prospects of making a modest living playing music. They want to be worshiped as gods. They are such little men.

The Anti-Mike (profile) says:

Re: Ingredients, Tips.

Hi there. first up, remember there is a “reply to this commnet” link at the bottom of each post, it is easier to follow the threads.

The 35% number is pretty much the food service industry standard for a normal establishment. Some pizza places do it for much lower levels, mostly because they use crap ingredients. You can do it very cheaply is you have no interest in the end product.

Even the fast food industry mostly controls their food costs via huge discounts on nationwide bulk buying and supply agreements. It is one of the many reasons that major chains can outprice local burger stands.

Tipping is always an interesting science. I saw one test a few years back (TV show) that showed, example, that women servers made more tips than men, in general, and when serving male customers, a little more subtle flirting or a little more exposed skin could shift the tip signficantly.

your customer says:

Re: Re: Ingredients, Tips.

TAM -> Food costs are suppose to be about 35% of a restaurant’s take. You can screw with that a bit, and maybe make it 50 or 60%, but in the end, the profit and the other parts of the business suffer.

Andrew D. Todd -> The figure of 35% food cost, which he cites, is for rather more upscale eateries.

TAM -> The 35% number is pretty much the food service industry standard for a normal establishment. Some pizza places do it for much lower levels, mostly because they use crap ingredients

– The Anti-Mike wants to use an average figure which includes all restaurants. Andrew states that the 35% figure is found at only one segment of the industry. In this case, I think Andrew has the stronger argument. I get a lot of snail mail spam offering bogo pizza and all of them are from the lower end of the restaurant spectrum. I don’t recall ever receiving an offer from an upscale pizza joint. Up scale restaurants typicaly do not need to offer such incentives because their product speaks for itself. If you are looking for a deal on pizza, you are probably not interested in a sit down classy dinner. btw, some of the best pizza I have ever had was in Chicago at an up scale pizza joint.

Anonymous Coward says:

New Techdirt-themed pizza shirts! LOOOOOTS of pizza shirts!

Congratulations on your ultramodern success of once again associating the value of free to the pizza business. I am once again beside myself with your incredible and overshadowing brilliance. Who knew that baked bread, pureed tomatoes, and lots of cheese could be a metaphor to something as complex as 200 years of copyright law? This amazing metaphor is a true bona-fide discovery; analogous of unearthing the long-lost Rosetta Stone, with as much, if not more, significance.

To celebrate an upcoming event, which I am sure you’ve booked, I’ve worked hard with my overseas Chinese labor to have a set of T-Shirts available to you.

Check out the sample T-Shirts now available to you and your blog readers!

Of course, you already realize your discovery of “free” will be far-reaching, and will be first commercially realized by the Pizza Delivery Industry.

So I’ve had my overseas inventors working round the clock, and we’ve developed a new hot-glue method to secure your book “A Roach Of Affinity” or whatever it’s called, on the top of pizza boxes across America. We want this to be successful so your book stays on the pizza box while you remain Master of Ceremonies on a special pizza-themed celebrity cruise referred to as “The Cheesy Copyright Assignees Pizza Cruise”!, or so say my insiders. Indeed, you should prepare to host this event with the utmost bravado because your discoveries remains significant in the most absolute fashion.

Attaboy, Sir!

Anonymous Coward says:

Re: New Techdirt-themed pizza shirts! LOOOOOTS of pizza shirts!

as complex as 200 years of copyright law?

For 175 years copyright wasn’t that complicated at all. But then they had to extend it from 56 years to centuries. Who are they? The content owners who lobbied the political class, that’s who.

Certainly not the public.

Bradley Stewart (profile) says:

I Like Buy One And

get one free. Not always but I have found that enough times it really is a pretty good deal. This is especially true for me when ordering pizza. If I feel flush with cash I am more likely to order out from my favorite pizza place. If I feel a little short of cash I have found even though the deal doesn’t deliver the best pizza, two for one makes me feel good about the deal. Sometimes things get a little weird. I once worked for a company that was having trouble selling a product. They came up with this idea of if you buy two of something that was selling pretty well that one needs only one of you get this silly product that no one wants for free.

Anonymous Coward says:

“Cornucopia is a concept design for a personal food factory that brings the versatility of the digital world to the realm of cooking. In essence, it is a three dimensional printer for food, which works by storing, precisely mixing, depositing and cooking layers of ingredients.”

devil says:

allow me to introduce myself ima man of wealth and taste

@28 so thats the reason pop and popcorn at a movie theater is 17.07 cents
prob is the movie still costs too much

what the article really alludes ot is the illusion of free
as in you pay the normal price and get second pizza free

fact is they make so much profit off that sinlge pizza on its own they can still give you another and seem like good guys

and yes they over charge you on pop and such that YOU MUST buy as a package deal this increasing price more

you head doesnt compute that when they done wiht you your paying very close ot what two pizzas on own would normally cost with normal pop costs.

anti antimike says:

listen up fool

@anti mike the troll
ya know guy i tried to understand how giving a customer nothing and overcharging them would bring business in when you claim it doesn’t but hey your right customers are too smart and they know when your fucking them over and price gouging and what if you ( say as the CRIA ) didn’t pay the suppliers for years for the ingredients to make your pizza)
that is what the riaa and cria are doing
and you expect me to pay for the pizza when your effectively stealing form the suppliers

:) says:

Going out!

Is there a chance that people could get together in a closed space for a picknip type of thing?

I can imagine a bar using the Free Beer Project to attract costumers that would produce their own either by themselves or using some rental equipment in the bar an pay for storage and a place to drink with their buddies. The beer is free but the work put on it is not so everyone can do it now and people can still make money offering something that caters to the needs of that group. This could lead to LOCAL manufacturing and services that would generate LOCAL jobs.

More ambitious is the Open Source Drug Discovery
I can see hospitals, pharmacies and even individuals pouring resources to research new drugs that will be free to use and produce for anyone and people will be able to afford medicine again and not be encumbered by patents. I can see LOCAL pharmaceutical industries catering to LOCAL markets and doing something no corporation can do, “quality costumer service” at low prices with quality products.

Something that can happen now, peer energy production that will turn the cost of energy to almost zero for most people through the use of hydrogen energy generators that can be made from methane or hydrolysis + solar cells, honda and panasonic sell those in Japan already, and this could lead to a robust power grid that is robust and reliable no single infra-structure for failure will cripple any neighborhood with LOCAL benefits.

Same with music or anything really people fail to recognize where the real value is and in doing so fail to capitalize on it.

Would those things for free work?
They already do, it just people who are blind that can see the light.

The great thing I see about open source initiatives is that they focuses in the “LOCAL” part of things it may even not be that much difference or even start a bit higher but the advantages to LOCAL economies is appealing to say the least and the greater improvement in “costumer service” may even offset the price, wouldn’t you like a doctor that was not being paid by big pharma to diagnose you?

In music we already can see the alternatives growing in numbers and quality an example can be Shannon Hurley in the CCMixter project that uses the GPL license and give the source music to rebuild her songs.

Maybe the pizza guys should make the open pizza project and attract costumers by letting them build their own pizzas and selling in conjunction with them to their parents and friends the incentive is double in that greatly improves costumer retention at you gain from free LOCAL advertisement, one could do LOCAL competitions for the best pizza recipes and people would be proud of LOCAL participants.

I think the era of the “I” is being substituted by the era of “we”. No partnerships equals no costumer loyalty, no sales, no respect.

Look at the music industry at you see what that means. The public is no longer passive, they want to engage and be part of the process not just spectators and that is what where the old models all fail. Even government will have to adjust in one form or another, more people are being engaged in politics and being empowered by the internet.

Maybe this is the Borg collective that will take over and it doesn’t seems that bad for me at all but some are afraid to death and I kind of feel sorry for them because they could probably end up being the new destitute’s of the world while others gain all power and control, they don’t know how to play the game and are afraid of the changes that could mean abject poverty to them or at least their concept of it for most people is called “medium class”.

:) says:

The Copyright Wars!

People should engage copyright making use of copyleft licenses.

Those licenses give the people the legal power to do what they want and by a legal stand nobody can take that away from you unless they are willing to gut or start adding more exceptions to copyright.

I’m compiling my own list of resources that will enable me to enjoy life without having to see my rights trumped by IP laws and I will share it with you guys in hopes people start using those alternatives to get the freedom their deserve.

Music Alternatives

Free Music (license unknown)

Music Sheets
∘ TheMutopia Project: Free sheet music for everyone
∘ Choral Public Domain Library

Music Databases



U.S. Government free photos(public domain)

Public Domain Calculator

Public Domain Database(search europe)

:) says:

Interest Reading a World Without an Employer.

Not really, but a world without the benefits of a steady job.

I like the part of unions where the unions will be responsible for insurance, medical and other things and it will go back to their original roots where they offered those things and didn’t do much bargaining but people got together to accomplish things and invested their own resources to make it happen and thus were really free to do as they please inside their own constraints without having to really be begging for anything from others.

Bhushan says:

Free ?

Knowledge being free makes sense. Even that is often pricy if you get it from top school/college.

The concept of price is essentially ability to exchange your efforts with efforts of others in terms of paper money. It forces everyone to contribute to get something in return.

Free pizza or free software, both can be a business strategy. However, it is not inherently right or wrong strategy. Depends on the scenario. For example, try offering free pizza in economically not so well to do places. You would have hoardes of people you would be feeding for free forever. However, in many scenarios, free strategy might be excellent. For example, free gmail accounts in return for relevant textual ads being placed on webpage. This business strategy is good or bad depending on situation.

JB says:


I got a free ebook from Scott Westerfeld that I wouldn’t have never considered purchasing. I got the book with out knowing who he was since it was free and looking at the discription I wouldn’t have purchased it based solely on it. Since then I bought two others in the series. So he sold two books he would have never sold by giving me that book for free.

vastrightwing (profile) says:

DIY almost free

Once I suggested in jest that farmers start suing people who grow their own vegetables on the grounds that growing our own food would eventually destroy the farm industry. Then of course, the joke was on me when several people sent me links to articles that stated this very scenario was already happening. Big farm has already patented seeds and other forms of plants and they are suing farmers now for using them without paying for them and of course it’s just a matter of time before they sue individuals for the same thing. Of course when you can make money suing people instead of providing value… why not?

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