Papa John's CEO reveals how the company is working to win over customers who think the chain is too expensive

Hollis Johnson

Papa John's is trying some new strategies to win over customers.

• Papa John's is working to win over customers who think that the chain's pizza is too expensive.
• The pizza chain is launching new $12 specialty pizzas and doubling down on its "Better Ingredients, Better Pizza" motto.
• Papa John's is also testing new deals, including selling two medium pizzas for $6 each - half the price of the specialty pizzas.

Papa John's has a reputation problem - and it's not related to its disgraced founder, John Schnatter.

Instead, CEO Steve Ritchie said on a call with investors on Tuesday, customers believe that sometimes "Papa John's has been priced too high in the past relative to the overall experience that they receive."

As a result, Papa John's has been struggling to grow sales and traffic, in addition to facing issues related to margins. In the most recent quarter, comparable sales dropped 8.1% in North America.

In an interview with Business Insider on Wednesday, Ritchie said that the company is attempting to push forward a "high-low strategy," with new $12 specialty pizzas selling alongside $6 deals.

"We know we're not a brand that can be matching those ... low price points across the board," Ritchie said.

Here are three ways Ritchie says that Papa John's hopes to win over customers who feel like they're paying too much for their pizza.

More expensive, higher-quality pizzas

Papa John's

Papa John's Hot Honey Chicken and Waffle Pizza.

In March, Papa John's is adding six new specialty pizzas to the menu as permanent menu items, including Meatball Pepperoni, Zesty Italian Trio, and Super Hawaiian. These pizzas, as well as all specialty pizzas at Papa John's, will be priced at $12.

The new pies follow the February roll-out of the Philly Cheese Steak Pizza - which is one of the six new permanent specialty pizzas - and the announcement that the Hot Honey Chicken and Waffles Pizza will be added to menus later this year.

Read more: Papa John's is adding a chicken-and-waffle pizza to the menu

"The $12 price point seems to resonate well," Mike Nettles, Papa John's chief operating and growth officer, told analysts on Tuesday.

"Customers see it as not only accessible, but as you can imagine, it actually drives a nice check for us as well," Nettles continued. "So we're happy with that as a starting point, but we're going to continue innovating on both of those things to really make sure that it's not just a better pizza, it's an overall better pizza experience."

Doubling down on 'Better Ingredients'

In addition to the new pizzas, Ritchie says, the company is rolling out a new advertising campaign intended to emphasize Papa John's "Better Ingredients, Better Pizza" tagline.

"I think if you look at what is important with millennials and Gen Z ... quality is very much still at the top of the list," Ritchie said.

Papa John's "Better Ingredients" slogan has long been a major part of the chain's marketing. However, Ritchie says that the advertising accompanying the message hasn't always been relevant and exciting. Further, he says that Papa John's has focused too much on price-centric deals and sports in advertising in recent years.

Now, Ritchie says, Papa John's aims to address its ingredients "more romantically," hiring new advertising and PR agencies in 2018. The company is also planning to once again work with influencers, after cutting ties to focus on reputation management when reports surfaced last summer of founder John Schnatter using the n-word during a conference call.

New $6 deals

Papa John's Connersville

Papa John's sandwiches hit certain menus in 2018.

Alongside the $12 specialty pies, Papa John's is also pushing a deal that offers pizza for half the price. In December, the chain launched a promotion in which customers can buy two medium, one-topping pizzas for $6 each.

These cheaper deals are intended to work alongside more expensive pizzas, winning over customers whose No. 1 priority is getting a good deal.

"While they have not yet decided on a specific value proposition, they did hint at a tiered structure with $6 value price points and $12 specialty pies," BTIG analyst Peter Saleh wrote in a note on Wednesday. "In our view, a consistent value proposition is essential to better compete against Pizza Hut's ... new $5 line-up and Domino's ... long-established $5.99 Mix and Match platform."

Executives also hinted that the new deals could include options beyond pizza, with Ritchie mentioning sides as part of the value equation when speaking with Business Insider. On Tuesday, the CEO also mentioned sandwiches as a potential part of future Papa John's deals.

"I think everyone is well aware that we have been testing sandwiches out in various markets across the country, continuing to test and read and learn to understand how that may play within our value proposition," Ritchie said.