SUCCESS STORY: KOTIPIZZA
The Nordic pizza chain Kotipizza relies on Priceff’s dynamic pricing in home deliveries. At its best, dynamic pricing increases revenue and reduces food waste.
Kotipizza, the largest pizza chain in the Nordics, has used Priceff’s dynamic pricing solution to price home deliveries from their online store based on demand for one year now. At the time of writing, more than 60 restaurants in the chain have started using dynamic pricing. The results speak for themselves, as the number of deliveries has increased by 22% and revenue by as much as 31%.
How Priceff has managed to help Kotipizza
Many people tend to pamper themselves in their spare time, so it isn’t surprising that most pizzas are delivered during the weekends. That said, capacity is being wasted, as there would be a lot of room for more pizzas to be delivered during times of low demand. Originally, Kotipizza decided to team up with Priceff mainly to increase sales during times of low demand by dynamically pricing their deliveries. This was done by pricing the deliveries between a minimum price of €2.90 and a maximum price of €5.90, the latter of which used to be the standard delivery fee. At this point, we managed to increase the number of deliveries by 54% and revenue by 19%.
Despite these quite remarkable results, we were not ready yet. As stated above, pizzas are mostly ordered during weekends, often resulting in long queues during peak hours. How could this be taken into account? Well, we increased the maximum price of home delivery to €7.90. This change resulted in more evenly distributed demand, shorter queues and higher profitability during peak hours. Allowing for a higher price in the pricing engine slightly decreased the number of deliveries from the previous stage, but they were still 22% more than originally, and the change further increased revenue to a total of 31% higher than originally.
How did we get here – The process
The process was quick and easy for Kotipizza. The company first linked their website to Priceff’s dynamic pricing engine through Priceff’s API. After a successful initial pilot project was conducted, Kotipizza decided to continue using Priceff’s service, rolling it out step by step to an increasing number of restaurants. As demand may vary from region to region, prices are also updated according to regional demand.
While the price of Kotipizza’s home deliveries used to be €5.90, the fee now ranges between €2.90 and €7.90. The price is updated automatically every 10 minutes based on real-time demand, benefitting both the end customer and Kotipizza.
Priceff’s pricing solution does not only benefit Kotipizza in form of increasing sales volumes and profitability, but also Kotipizza’s customers in terms of lower delivery fees during times of low demand and shorter queues during peak hours.
Customer Experience Director of Kotipizza Group:
“The dynamic pricing for home deliveries supports our strategy, which emphasizes digitality and delivery, and offers an excellent opportunity to support our growth path.”
Priceff’s mathematician Dennis Svartbäck and CRO Anders Ekholm have researched dynamic pricing of restaurant food home deliveries together with Harvard Business School Assistant Professor Alexander MacKay. Link to the study here. In summary, they find that:
- within-week transaction volatility decreased by 10%
- demand shifted from high-demand periods to low-demand periods
- transactions increased by 10 %
- revenues increased by 6 %
Priceff was also featured in QSR Magazine articles that discussed dynamic pricing for restaurants, links below.