Learning Business Strategy from the Streets: A Real-World Lesson in Pricing

Relearning in life comes from practical observation and learning. Take the case in point: Chinese food, which is tremendously popular in Hyderabad. In our colony, a single plate of Veg Manchuria costs around Rs 60–70 at roadside shacks, and even in small roadside restaurants it costs around  Rs 80–100. Along with a normal roti or rumali roti, a plate should be Rs 150 - 180, and it will go up to  Rs 200 with mineral water and tax.

No surprise that most eaters throng roadside shacks and not the restaurants. To learn how business is run, one needs to go to the KPHB shops near the KPHB metro station in Hyderabad. This area is a popular hangout for students, employees, and has heavy footfall.

Here, the prices are jaw-dropping. A single plate of Manchuria is sold at  Rs 30 and a double at  Rs 40. Manchuria with rumali roti is sold at  Rs 50. Chicken Manchuria with rumali roti is  priced Rs 80 and at the same place another stall sells it at  Rs 74! Chicken Manchuria is either  Rs 60 or  Rs 55. Chicken Pakodi is Rs 45 only.

This is penetration pricing at its best, high volumes, low margins, but they earn decent income per day. And all the joints are side by side, yet they remain amicable. I don’t find anyone fighting with anyone else. They all seem to have loyal customers who come for the taste not necessarily for the slightly lower cost that the next shack is offering. 

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