Just prior to heading to NYC for the weekend, I got an email from Mike Sisti with the following New York Times story link as possible blog fodder. I found it to be a pretty interesting example of why price wars, in this case between rival pizza parlors, have a tendency to cause pain for all involved.
A temporary race to the bottom can permanently harm multiple competitors and skew consumer perceptions about quality, service, and other differentiators. Being the low cost leader in any business is not necessarily the best position because customers are often left with the impression that corners must be cut in order to achieve the lowest of the lows.
While walking around the Village south of Washington Square yesterday, I saw evidence of the cutthroat battle between the non-chain pizza purveyors. I did not come across any 75 cent postings. Gray’s Papaya was glad to have a sign in the window advertising 99 cent slices. Then, I turned a corner and saw a remarkable commitment blending branding and pricing strategies. Between raw materials, cost of labor, rent, and other overhead and fluctuating variables, I am not sure I would ever name my business 99 Cent Fresh Pizza, but I’ll bet for the moment, things are working well.
In other restaurant news, the New York City Department of Health and Mental Hygiene (Mental? Why not Dental?), since July 2010, has decided to enter Zagat’s realm and is now requiring food establishments to prominently post letter grades received following most recent spot inspections (A, B, or C). At first glance, I noticed nothing but A’s around the Village and assumed it was not mandatory and only those getting top grades would post (however, all are required by law to post their grades). Soon thereafter I came across a posted B grade (lone cockroach spotted?). This is an unusual blending of carrots and sticks to get restaurants to clean up their kitchens. Most people if given the choice between an A or a B or even a C are not going to want to risk food poisoning and are going to opt for the top grade. Having been a dishwasher in a couple of kitchens early in my working life that were not always pristine, I can see where this regulatory approach has some merits and built in incentives to keep things more toward spotless than spotty.