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Pizza Hut: Tossing-up a raw deal

By , agencyfaqs! | In Advertising | January 05, 2001
Mid-way through its latest promotional exercise, Pizza Hut increases prices, leaving customers in the lurch and raising questions of business ethics

Samrat Bose
agencyfaqs!
NEW DELHI

'Yum' is the experience that Tricon Restaurants Inc., the parent company of the Pizza Hut chain of restaurants, strives for while serving customers around the world. This though, might not be too true for its Indian affiliate, especially if customers were to question Pizza Hut's pricing policy.

Pizza Hut, through a direct marketing firm, Granton Advertising, started a discount coupon scheme in October last year for its North Indian franchisee, Speciality Restaurants. Under the scheme, discount coupons worth a notional value of Rs 3,500 could be purchased for Rs 300, and later redeemed for buy-one-get-one pizza deals at specified Pizza Hut outlets. The discount coupons were apparently valid till the end of January 2001.

In the meantime, Pizza Hut revamped its menu, whereby it raised the prices of its 'Lovers Line' pizza by 13 to 22 per cent. Simultaneously, it slashed the prices of its top-end 'Supreme' line by 2 to 10 per cent. The menu also added new Indian flavours, while cutting down the previous menu.

The change in prices implies that consumers saddled with discount coupons have to shell out more for their pizzas. Of course, Tricon managers defend the increase in prices by saying that the consumer is now getting "a more expensive pizza free". True, but the consumer didn't ask for a more expensive free pizza at the time of entering into the deal. Tricon also points out that the top line of pizzas is now cheaper. But, at the end of the day, the consumer has to pay more for her pizza, so as to recover her money, paid up-front for a future discount.

What made Pizza Hut increase its prices in the middle of its promotion? A senior executive at Tricon claims that the increase in prices was necessitated by the hike in the prices of "imported ingredients". Intelligent speculation, however, suggests that the popularity of the scheme - with a conservative estimate of 15 per cent increase in sales - might have prompted Pizza Hut to up the rates.

Admittedly, the fine print in the privilege cards says that the company has the right to change prices and menu without prior notice. And although this disclaimer does, in a way, absolve the company of responsibility, the price hike raises ethical issues of promising consumers deals and then backtracking on the promise.

© 2001 agencyfaqs!