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Product cover image for Steak ’n Shake: Long-Term Consequences of Price Discounting

Steak ’n Shake: Long-Term Consequences of Price Discounting

Fabrizio Di Muro

Product #:W27004
Supplier:Ivey
Discipline:Marketing
Setting:United States, 2021
Details:Case (PDF) • 12 pages • 2022-04-26

Subjects:

Sales and marketingMarketing

Industries:

Food and beverage sector

Geography:

North AmericaUnited States
Your Price:$9.71

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Steak ’n Shake, one of America’s oldest and most iconic fast-food chains, was founded in Normal, Illinois, in 1934. When Biglari Holdings assumed control of Steak ’n Shake in August 2008, the company was struggling and incurring losses of approximately US$100,000 per day. To turn the company around, the new owner implemented an aggressive pricing-discount strategy marketed as “4 under $4” that offered any of four different meals for under $4. The strategy worked. Steak ’n Shake went on to post seven consecutive years of same-store sales increases. However, in 2016, sales began to drop, and the company posted five consecutive years of declining store sales. The price-discounting strategy may have been critical in reversing the company’s fortunes, but had it also led to Steak ’n Shake’s current issues? Should Biglari Holdings consider raising prices of menu items? Would customers accept paying higher prices after being accustomed to Steak ’n Shake’s traditionally low pricing strategy?

Learning Objectives

This case is suitable for undergraduate- and graduate-level courses on marketing or pricing strategy. It focuses on the price element of the marketing mix. After working through the case and assignment questions, students will be able to do the following:
  • Understand how consumers perceive price.
  • Understand the long-term consequences of price discounting.
  • Evaluate whether price discounting can work over the long term.
  • Determine if a company should make significant changes to its pricing strategy.
  • Evaluate how a company can get consumers to accept price increases.
  • Evaluate the importance of price to consumers.
  • Understand the relationship between price and the other three elements of the marketing mix (product, place, and promotion).
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Case Study: Steak ’n Shake: Long-Term Consequences of Price Discounting (English version) | Ivey Publishing