Case Study

Pals I put up in Gurgaon and I have my meals at a small catering service provider (lets call it Good Meals). I have been having my meals at Good Meals for around 2 years now. The USP (unique selling preposition) of meals provided by Good Meals is that the food is homelike, but this delicacy comes at a high price. Good Meals provides a meal containing:

a. dal
b. chapati
c. rice
d. curd
e. subzi

The total cost of the meal is Rs. 40. My inquisitive self once provoked me to enquire about the margin per thali Good Meals has, and I found out that after removing the cost of vegetables, cereals and pulses, and that of labor, Good Meals was making somewhere around Rs 20 per thali. This was an exorbitant amount of margin, for a total volume of around 100 customers per day. Good Meals has been able to maintain this high margin because of people in gurgaon can dispense this much cash for decent homelike food. The popularity of Good Meals was growing by leaps and bounds, but one could see that Good Meals was becoming complacent about its services. The quality and the taste of food started becoming mundane, but Good Meals was still in the seventh heaven of its success.

The real problem for Good Meals arose when Mr. Anoop of Cheap Meals realized the potential of the cash cow. Cheap Meals copies the business model of Good Meals and opens a catering service just opposite to that of Good Meals. Cheap Meals was serious about the competition and succeeded developed a better pricing strategy than Good Meals. Cheap Meals introduced the same thali that was introduced by Good Meals for Rs. 30. In addition, Cheap Meals also introduced other variants of a thali that had special addons like a sweet dish, vegetable rice, and the like. By this strategy Cheap Meals has been able to not only capture the existing customers of Good Meals, but also pull other people to buy food. Good Meals on the other hand, has identified this competition a bit later than expected. They have also increased the variety of subzi's provided by them but still pursue the same thali system at the same prices. A very interesting feature of their new strategy is that they:

a. have started caring about their existing customers
b. assume that their existing customers would find their food more homelike than they would find at Cheap Meals. As a result they have not changed their prices.

The question that is left unanswered is that how effective is their strategy in comparison to the pricing strategy being played by Cheap Meals. Good Meals is approaching the competition in a totally different manner in comparison to Cheap Meals. I wrote this case in order to know the opinion of people not on the situation but on the strategy being followed by Good Meals and Cheap Meals, and would like to know who according to you would be the likely winner in the near term.