Restructuring Pizza Prices $2 at a Time

Pizza Hut will debut $8, $10, and $12 prices that reduce the cost of all pizzas by at least $3 each. The new prices will be permanent on the menu following the chain’s recent, but limited-time deal of $10 for any pizza. Pizza Hut will begin advertising the new prices right away and all 7,500 stores of the nation’s largest pizza chain should have them in effect by the end of August.

Medium cheese pizzas will now cost $8 and large cheese pizzas will cost $10. Specialty pizzas or the addition of up to two toppings will cost an extra $2 per pie. The price cuts could put profits at risk, but Pizza Hut is banking on an increase in traffic and overall sales volume to offset the reduced prices. Pizza Hut believes round-number pricing will make ordering easier for customers and plans to extend the program to cover side orders like chicken wings, breadsticks and pasta dishes as well.

Pizza Hut's menu restructuring is an attempt to remedy unsustainably high prices and aggressive price increases that reached across the entire pizza industry in last decade. In a sluggish economy where consumers demand value, high prices have caused pizzerias to lose market share to competing fast-food chains as well as to frozen pizzas at grocery stores. New pricing and a new recipe worked wonders for the Domino’s, the No. 2 pizza brand, where same-store sales rose 8.8% in the second quarter. Now all that remains is to see if the new pricing strategy will pay off for Pizza Hut too.