Chuck Hammers is the owner of Pizza My Heart, a chain of pizza restaurants in the San Francisco Bay Area. We partnered with Chuck and Phizzle to create the Stanford Kickoff Challenge, a challenge that gives Stanford football fans a chance to win a free pizza if they correctly guess the kickoff outcome. Here is what Chuck has to say about Yiftee, and how he integrates Yiftees into his current business practices.
$20 Yiftees rewarded fans who guessed the correct yard-line or touchdown.
Why does giving out a $20 Yiftee make sense? For me in the pizza business, a customer can use the $20 Yiftee to buy a pizza and be done. But this is not the case.
In every single $20 Yiftee studied, customers chose to buy more than just the $20 pizza. They typically bought salads and/or drinks, resulting in an average sale of $29.50. This resulted in receiving back $9.50 in revenue or around 33% of the total sale value.
Let’s compare this to the Groupon model. In Groupon, the merchant receives 25% back. Receiving back 25% will usually cover most of the merchant’s food costs, but 33% will cover food costs in almost every restaurant. The Groupon theory is that the restaurant will break even on that transaction, and that future repeat customers will make up for the lack of profit.
The flaw that most merchants found in the Groupon model was that the customer would not return. There is a simple psychological reason for this – the customer is judging his or her experience based on paying only half price. Even if the customer loves the product, he or she has to make the leap to pay double in the future.Ultimately, the Groupon model de-values the experience by giving a 50% discount. In this case, if I used Groupon, I would be telling my customer that a $20 pizza was really only worth $10.
The Yiftee model reinforces the value of full price. The customer is so happy to receive a $20 pizza for free that he does not mind spending a bit more. The psychology of winning a superior product is so much more powerful than getting something potentially inferior for half price.
For me, the real kicker was that I could not find a single transaction in which the customer used one of my discount coupons along with their Yiftee. Paying full price was cemented, and if the customer enjoyed their experience, our achievements are twofold: we’ve ensured repeat customers, while also maintaining the value of our product.
$4 Yiftees rewarded fans who guessed touchback correctly.
I have traditionally given away free slice coupons to Stanford students. I typically will put one in a publication where I am relatively sure each student will only receive once per year. This encourages students to try Pizza My Heart once for free. This is why I like giving away $4 Yiftees. In studying these transactions, about half of the $4 Yiftees came in for a free slice and did not upsell. Again, I expected this and welcome it. These transactions typically occur at night, and are students coming in for a late night slice after being out on the town. There are not many late night choices in Palo Alto, and by giving away a slice, I can further reinforce Pizza my Heart as an after-hours option for students.
The other half of the transactions was a complete surprise. These had an average total sale of over $21! Essentially, students were using these Yiftees as a $4 off coupon. Most were coming in groups and buying multiple slices, salads and drinks. Others would purchase a single slice (their win) and up-sell themselves into an additional whole pizza, which again suggests a group sale. This makes sense–people typically don’t go to football games alone. They attend in a group, and will use their win in a group. In addition, this $4 giveaway is exposing most likely 3 additional customers to the product.
Average upsell on Chuck’s $20 Yiftees is nearly 50%, and exceeds 200% on his $4.00 slices! Furthermore, to date, the redemption rates on the Kick-Off challenge exceed 21%, and the gifts still have months before they expire. Coupons typically see a redemption rate of 2-3% and an unkown upsell, as they are not easily tracked. On the other hand, Yiftee gifts are proving to be the best-performing promotional tools for Chuck’s Pizza My Heart business.