What the Restaurant Industry Can Learn from Skechers’ Value-Based Pricing: The Underdog Strategy Disrupting India’s Footwear Giants

Introduction

Can a footwear brand pricing strategy provide the roadmap for restaurants to thrive in a competitive market? In India, where the market is crowded with global giants like Nike, Adidas, and Puma, Skechers has emerged as an unlikely contender. Using a carefully crafted value-based pricing strategy, this “underdog” brand has captured significant market share and won over a price-sensitive audience. Interestingly, the principles driving Skechers’ success offer valuable insights for the restaurant industry, where pricing and value perception are critical to standing out and building loyalty.

The Rise of Skechers in India’s Competitive Market

Skechers entered India as a relatively unknown brand compared to the high-profile competitors dominating the footwear scene. Yet it found success by positioning its products as high-quality yet affordable alternatives. Unlike premium brands that appeal to elite consumers, Skechers saw an opportunity to attract everyday buyers looking for comfort, style, and value without the premium price tag. This approach has allowed Skechers to position itself as a go-to choice for a broad demographic—a lesson in brand positioning that restaurants can learn f

Key Pricing Strategies and Restaurant Industry Examples

In competitive markets like the restaurant industry, pricing isn’t just about setting a number; it’s a strategic tool that can attract specific customer segments, build loyalty, and support sustainable growth. Different pricing strategies serve different goals, from broadening market reach to establishing a unique value proposition. Here are some common pricing strategies, with examples of how they’re applied in the restaurant industry.

Value-Based Pricing: Delivering What Matters Most

Definition: Value-Based Pricing sets prices based on customer perception of value rather than production costs. Example: Restaurants often use value-based pricing by setting higher prices for items made with premium ingredients or unique, local specialties. For instance, a farm-to-table restaurant may charge more because diners perceive added value in the fresh, local ingredients.

Penetration Pricing: Winning Market Share

Definition: Penetration Pricing involves setting low prices to quickly gain market share, particularly for new entrants. Example: A new restaurant might introduce special discounts or “Happy Hour” deals to attract initial customers. This lower pricing helps them build a customer base in the early stages, with plans to adjust prices once they’ve established a loyal clientele.

Market Segmentation Pricing: Targeting Diverse Consumers

Definition: Market Segmentation Pricing sets different prices for distinct customer groups, allowing the brand to appeal to various segments. Example: Many restaurants have weekday lunch specials, offering discounted meals to appeal to the working crowd. High-end restaurants may also have separate pricing for lunch and dinner menus to cater to different customer budgets and preferences.

Everyday Low Pricing (EDLP): Building Consistency and Loyalty

Definition: Everyday Low Pricing (EDLP) keeps prices consistently low rather than relying on frequent promotions, creating a stable price perception. Example: Fast-food chains like McDonald’s use EDLP to ensure that staple items remain affordable and attract regular customers. Their pricing on popular items, like combo meals, remains steady, which appeals to customers who value predictability.

Economy Pricing: Streamlining Costs for Affordable Offerings

Definition: Economy Pricing reduces costs in areas like marketing and production to keep prices low for customers. Example: Many budget-friendly, fast-casual restaurants implement economy pricing by simplifying their menus and using efficient ordering systems. This allows them to pass the cost savings on to customers through lower prices without compromising on quality.

Good-Better-Best Pricing: Appealing to a Wider Audience

Definition: Good-Better-Best Pricing offers a range of options to cater to different budgets, often with economy, mid-range, and premium tiers. Example: Coffee shops often use this model, offering “regular,” “premium,” and “extra premium” coffee options. A basic coffee may be affordable, while more elaborate lattes or specialty brews are priced higher, appealing to different customer preferences.

Psychological Pricing: Enhancing Price Perception

Definition: Psychological Pricing uses price points like $9.99 instead of $10 to make items appear more affordable. Example: Many restaurants use psychological pricing on their menus. A dish priced at $19.99 instead of $20 creates the perception of a slightly better deal, even if the difference is minimal. This tactic is especially common with high-margin items like beverages or desserts.

Lessons for the Restaurant Industry

Restaurants can draw significant lessons from Skechers’ strategy. Here’s how:

Leveraging the “Underdog” Advantage

Like Skechers, restaurants can embrace the role of the underdog by focusing on a unique value proposition. Emphasizing quality, accessibility, and customer experience can help smaller or lesser-known restaurants compete with industry giants.

Adopting Value-Based Pricing Models

Skechers’ success shows the power of value-based pricing. For restaurants, this translates to pricing that reflects what customers truly value—from quality ingredients to portion sizes. A value-focused approach can make a brand attractive to a broad demographic.

Scaling with Consistent Quality

One of Skechers’ strongest qualities is its ability to scale while maintaining quality. Restaurants aiming to expand can learn from Skechers’ consistency and its commitment to value.

Real-Life Examples and Personal Insights

Restaurant Success Stories with Value-Based Pricing

In the restaurant world, brands like Taco Bell have embraced value-based pricing, offering affordable menu items that satisfy customers’ cravings without breaking the bank. Similarly, QSR brands in India have found success with combo deals and budget-friendly menus tailored to local preferences.

Personal Insight

In my experience in the restaurant industry and through my work with ProsPertise, I’ve seen firsthand how an unwavering focus on value and quality resonates with customers. Just as Skechers understands its consumer base and adapts to meet their needs, restaurants that prioritize customer preferences and maintain a consistent value proposition can thrive in highly competitive markets. At ProsPertise, we work with brands to develop strategies that build customer loyalty and sustainable growth, focusing on value-based approaches tailored to unique market needs.

Key Takeaways for Restaurant Entrepreneurs

Skechers’ approach proves that any brand can succeed with the right pricing strategy. Here’s what the restaurant industry can take away from its journey:

• Value-Based Pricing is a Game-Changer: Understand what your customers value most, whether it's price, quality, or experience, and set prices accordingly.
• Consistency Builds Loyalty: Delivering consistent value in every interaction—from pricing to product quality—is the foundation for building a loyal customer base.
• Think Like an Underdog: By embracing an “underdog” mindset, restaurants can turn perceived disadvantages into unique strengths that distinguish them from larger, more established brands.

With companies like ProsPertise guiding brands through these complex strategic decisions, there’s ample opportunity to leverage value-based pricing to gain a foothold in competitive markets.

What do you think? Have you seen similar pricing strategies succeed in other industries? Share your thoughts in the comments, and let’s explore the impact of value-based pricing across different markets!