Latest / Pricing Power Podcast with Fexingo: How Businesses Set Prices, Raise Margins, and Win Customers / How Wawa Prices the Hoagie and Keeps a Cult Following
Transcript
- Lucas: So, Luna, you know the Wawa hoagie, right? The classic Italian, the Shorti, the gobbler every November. Luna: I mean, I grew up on those. My dad would stop at Wawa on every road trip – it was a non-negotiable. Lucas: Right, and that's exactly the kind of devotion we're talking about today. Because Wawa has never really been a discount chain, but it's always been a value chain. And the hoagie is the centerpiece of that value perception. Luna: So what's the pricing angle? I feel like the hoagie has always been a few bucks, kind of a reliable cheap lunch. Lucas: Exactly, and that's the thing – the hoagie's price has this almost sacred status. And back in 2018, Wawa decided to test market-based pricing on hoagies. So the price of a hoagie would vary depending on the store's location, the local competition, even the time of day. Luna: Wait, so like surge pricing for a hoagie? That seems risky. Lucas: It was a test, and they were pretty careful about it. They rolled it out in a few dozen stores in Virginia and Florida. But the moment customers caught wind of it, the backlash was immediate. People were furious. Luna: I bet. The hoagie is almost like a ritual – you expect the same experience, the same price, at any Wawa. Lucas: And that's exactly why it failed. Wawa pulled the test within weeks and went back to a single, consistent price across all stores. The lesson there is that some products are so tied to customer identity that dynamic pricing can destroy trust faster than it can boost margins. Luna: So is it just about the price being low, or is it about the price being the same everywhere? Lucas: That's the crux. It's not just that the hoagie is cheap – it's that it's predictably cheap. You know exactly what you're going to pay at a Wawa in Philadelphia or a Wawa in Orlando. That consistency is a form of pricing power that most brands would kill for. Luna: And I guess that's why they call it 'everyday low pricing.' It's not the lowest price, but it's a fair price that never changes. Lucas: Precisely. And Wawa has leaned into that for decades. They don't run big sales on hoagies – they don't need to. The price itself is the message: we're on your side, we're not trying to game you. Luna: So how does Wawa actually make money on a hoagie that costs a few bucks? I assume the margins aren't huge. Lucas: You're right, the margins per hoagie are probably thinner than you'd think, but the key is the basket. People come in for a hoagie and end up grabbing chips, a drink, maybe a side of mac and cheese. That's where the profit really is. Luna: So the hoagie is almost a loss leader, but they don't want to call it that because it's not losing money – it's just a really strong traffic driver. Lucas: Exactly, and they're careful about that positioning. They don't advertise it as a loss leader, because that would cheapen the perception. The hoagie is the hero item – it brings you in, and the rest of the store does the work. Luna: That makes me think about other places that use a hero product to anchor the whole experience. Like Costco and the hot dog – which we did an episode on. Lucas: Right, and that's a perfect parallel. Costco's hot dog and soda combo at one fifty is a legendary example of a price that's so stable it becomes part of the brand story. Wawa is doing something similar, but with a much bigger menu and a much bigger store footprint. Luna: So what's the bigger lesson for a business that's thinking about pricing? Is it just 'don't mess with your hero product'? Lucas: Partially, but I think there's a deeper insight. Wawa isn't just avoiding price changes – they're actively investing in the perception of fairness. They publish their hoagie prices online, they keep them consistent across thousands of locations. That transparency is a huge trust signal. Luna: And trust is worth something. I mean, you can't put a dollar figure on it, but it's the reason people will drive past a Subway to get to a Wawa. Lucas: Exactly. And here's the interesting part – they've actually had to raise hoagie prices over the years, just like everyone else. But because they do it rarely and in small increments, it doesn't trigger the same backlash. It's a studied approach to price increases. Luna: So they're not rigid about it – they're just very deliberate. They know the price is a promise, and they don't break it casually. Lucas: Right. And that's the kind of pricing discipline that builds a moat. If you're a competitor, you can't just match the price – you'd have to match the entire ecosystem of trust, consistency, and loyalty. That's really hard to replicate. Luna: Speaking of trust and loyalty, this kind of episode is exactly why people keep tuning in. If today's conversation gave you something useful, the way we keep this show ad-free is through listener support. If you're ever inclined, you can buy me a coffee at buy me a coffee dot com slash fexingo. It genuinely helps us keep doing these deep dives. Lucas: Yeah, and it's a small gesture that goes a long way for us. No pressure ever, but we appreciate everyone who's contributed so far. Luna: So, back to Wawa – you mentioned they've had to raise prices. How do they decide when and how much? Lucas: Well, they're not public, so they don't have to disclose a lot. But from what we know, they monitor commodity costs and local wages, and they try to make adjustments before they become desperate. It's a proactive approach rather than a reactive one. Luna: So they're thinking about labor costs too. That's something a lot of pricing discussions ignore. Lucas: Absolutely. If you're making a hoagie to order, labor is a huge component. You've got employees slicing meats, assembling the sandwich, checking out the customer. And it's not just the wage – it's the training, the turnover, the speed of service. Luna: And Wawa is known for having really good service – those employees are fast and friendly. That's part of the experience. Lucas: Right, and they invest heavily in that. They pay a bit above minimum wage, offer benefits, and they get a more stable workforce. That stability affects the quality of the hoagie and the consistency of the experience – which, again, justifies the price. Luna: So the pricing strategy is really the intersection of psychology, operations, and brand. It's not just 'what can we charge?' Lucas: Exactly. And I think that's the takeaway for any business. Your price is a signal. It tells the customer what you think of them and what they should expect from you. If you change it carelessly, you change the relationship. Luna: So next time I'm at Wawa and I see the hoagie price hasn't moved in a year, I'll know it's not an accident. Lucas: Exactly – it's a deliberate choice, and it's part of why Wawa has this almost cult-like following. It's a masterclass in using pricing as a long-term asset, not a short-term lever. Luna: Well, now I'm hungry. Let's go get a hoagie. Lucas: I'm in. But luckily for us, the price is predictable.