The Domino’s Pizza Company

free essayThe Domino’s Pizza Company is an American chain of restaurants that provide international franchise on pizza delivery. The company was started in 1960 and is among the largest pizza distributors in the United States and the world. The company founder borrowed $900 to rent a store and used a Volkswagen beetle as the delivery van for the first orders. Presently, the company has about ten thousand stores worldwide with a massive expansion strategy for growth. It has managed to beat the common competitors such as the Papa John’s Pizza and Yum Brands (Domino’s Corporate 2014).

By 2010, the company had managed to withstand a strong competition and harsh criticism regarding the taste of the pizza and the future looked bright. Though, low level of consumer satisfaction played against the company revenue. The management decided to adopt strategic marketing plan and spent millions to create a new type of pizza from crust up. This strategy resulted to amazing outcomes with advertising the new expanded menu. From the year 2000 to 2013, the customers’ satisfaction index in the American market for Domino’s Pizza rose from 69% to 81% which, in turn significantly improved the company revenue. The main question to the competitors remained how the corporation was able to plan for a strategic turn around in its business operations (Smith 2001).

Situation Analysis

The amazing turn around for Domino’s was attributed to excessive strategic marketing efforts to improve the company performance through introducing new recipes in their menu offerings. These efforts were heightened by the use of mobile technology in their attempt to attract new customers and improve the supply chain management operations. Consequently, the company top line management improved to make it the 4th largest electronic retailer in the United States (Hoffman et al. 2012).

The main competitive advantage of Domino’s has always been its ability to deliver pizzas to customers quickly. In order to deliver effective and fast services, the company had relied on frozen and pre-made ingredients. This strategy has allowed the company employees to assemble the pizza products in a record short time, although, it had an adverse effect on the quality of the products. Due to deterioration of quality, some customers begun to recognize the competitors such as Pizza Hut as having the best-tasting products and only relied on Domino’s for fast delivery (Vlcek & Davidson 2012).

In 2010, the company CEO Patrick Doyle decided to provide a resolution for improving the pizza recipe and had to test several ingredients even from the rivals in order to decide on the right recipe. In the marketing strategy for the new pizza, Domino’s had to implement an honest marketing crusade to apologize to the customers over the old pizzas. The mobile application that allowed the user to design their own pizza was developed to attract new customers (Thompson, Peteraf, Gamble, & Strickland 2012). As a way of protecting this core competence, the management begun revamping the online tracking system in order to reduce delivery time to their customers. The results were surprising and by the end of the first quarter in 2010, there was a 14.3% increase in company’s revenue and the company’s stock price increased by 400%.

TOWS Matrix

Domino’s pizza has utilized the SWOT analysis strategies in its operations for a long time. TOWS matrix has been a useful tool as it has provided the company with effective ways of developing specific strategies in order to address the results of its initial SWOT investigations. The SWOT analysis has helped the company analysts in identifying the negatives and positives of the organization in both the external and internal environment.

From the SWOT analysis, the SO (Strength-Opportunity) strategy enabled the company to use its internal strength to exploit the opportunities available in the environment. For instance, the company sought a creative team that had impressive list of skills in the technical and professional aspect. The company is also versed with the business side of the project with the top management comprising of business consultants and long serving employees. Lastly, the company also have strong financial base that has enabled it to participate in the economic projects such as 12 week’s campaign zodiac and Arena agencies.

The WO (weaknesses-opportunity) strategy has provided the company with an opportunity to reduce the internal weaknesses and apply the external opportunities to maximize on their performance. Domino’s has used its weaknesses and opportunities to gain access to strategic businesses. Some of the weaknesses include human resource being so strained, though this has turned to be an opportunity for the company to expand its services far and beyond.

The ST (strengths and weaknesses) strategy has rarely been used by Domino pizza in its strategic operations. However, the customer delivery services have been a challenge especially due to the distance to potential customers and the stores. This has proved quite a challenge, but the company has resolved to always satisfy the customers regardless of the situation. However, this approach has made the company to lose some revenue despite matching its mission with its activities (Douglas 2012).

The WT (weaknesses and threats) strategy is one the most defensive strategy that the company has least used. This strategy pertains to creating a plan to avoid threats and reduce the weaknesses in the company’s operations.

Domino’s Current Offers

Domino’s strategy has worked due to its focus on building a strong competitive advantage without losing the old competitive advantages such as fast delivery services. This technique has enabled the company to deliver the best value despite the rise in the level of competition. It is important to note that among the world’s largest pizza companies, Papa John’s has tried to capture the market share away from Domino’s and Pizza Hut through differentiation of its product with natural ingredients and providing a diversified top up option (Datamonitor 2008). However, due to the presence of Domino’s in over 80% of the North American location, the company has managed to diversify its presence to increase its growth opportunities that are available in the emerging markets. Domino’s had a lot of growth opportunities and has increased its aggressiveness in growth to allow for expansion.

Other than the physical location, Domino’s has highly increased its presence in the online market. In 2012, Domino’s worked in collaboration with a video production company Arena and Zodiac to run a 12 week campaign. The two teams created a series of webinars to educate the users on the need to participate on the campaign. The strategy was meant to consume about 3% of the company budget to create a football simulation content for social snackers. This content had an entertainment and topical service that provoked engagement, share ability and conversation between participants. The customer analysis research indicated that the youth were the target audience for this market because the company had realized that they spend more time that usual while watching and sharing the digital contents with friends especially around the pastime activities related to football (Vlcek & Davidson 2012).

The challenge revolved around the football personalities and a small love story revolving around banters. The Domino’s co-partner in this game Sitcom flagged the football order services which were particularly created to bolster the ordering campaigns. All the above were promoted through the use of emails, the company database, the social media and on the conformation page for the order. After the twelve weeks, the company had generated about a million views and on the eighth week, the sales that were directly generated by the campaign had all been covered. The audience purchased the pizzas more frequently than ever and the final analysis revealed that the rates of click were five times higher than those of the competitors. In addition, this campaign had also attracted the editorial partners at no cost when the company content was selected among many others and put on the website of Loaded and The Sun magazines (Sands & Price 2013).

Keys to success for Domino’s

Despite the rise in the level of competition, Domino’s long term plan and focus to build a competitive advantage has always enabled it to develop the best economic moat. The Company has continuously offered an interesting proposition value and plenty of growth opportunities that are available for its customers in the local and international markets. In addition, proper satisfaction of the company’s human resource has greatly increased the level of motivation of the employees to make more sales and present quality services to the customers (Oster 1994).

Competitor Analysis

According to Mergent Online (2013), the main competitors for Domino’s Pizza include McDonald’s, KFC, Pizza Hut, McDonald’s, Subway, Burger King, Smokin Joes, TacoBell, Papa John’s Pizza and Papa John’s. From these companies, Domino’s Pizza has encountered little competition from the possible new entrants in the industry due to its mature state that has possibly reached the saturation point in domestic and foreign markets.

Figure 1: Sales comparison for Dominos and the competitors

Company Sales (2011) Sales (2012) Sales (2013)
1.Domino’s Pizza $ 94.7 million $ 169.7 million $ 190.7 million
2.Pizza Hut $ 37.0 million $ 47.9 million $ 57.0 million
3.McDonald’s $ 87.0 million $ 93.0 million $ 97.0 million
8. KFC $ 97.7 million $ 127.0 million $ 148.0 million

Source: IBIS World (2013)

According to the sales report for the four major restaurants for the three consecutive years provided, the Domino’s appears to have doubled its sales focus after introducing the online advertising and order making. Its efficiency in delivery has also increased its ability to deliver pizzas immediately to the customer while still hot.

Strategies

Corporate Mission and Vision Statement
Domino’s pizza vision and mission statements were designed focusing on delivering quality services to customers effectively for the sake of company’s growth.

The vision and mission statement states that:

The company’s goal was to maintain high standards in the international supply chain for pizza delivery and provide the experience of excellent products in excellent customer service. The company termed itself as having exceptional people to serves the best pizzas in the world for more fun. The vision of the company was to be the best operator a in pizza delivery and hire the most skilled professionals (Datamonitor 2008).

The company’s values had a great focus on people and offered to provide satisfaction all aspects of stakeholder’s analysis. Producing the best with less resources and treating everyone the best has helped the company to measure, manage and share with every stakeholder.

Marketing Objectives

Social Objectives

The marketing objective of Domino’s Pizza Company is to be the company with the widest reach in the world in the pizza market. This marketing strategy could only be achieved through applying aggressive strategies and technological advancement in order to cope with market dynamics. The company has successfully competed in the fast food industries through the help of the 4P’s of marketing. Firstly, the company offers its customers 35 million different combinations of pizza creation with respect to the product. With pizza being the primary product, the company has been implementing new appetizers and other additives on their menu to provide a diversified product from the main menu. Some of the new variety of products includes wings, cinnamon sticks and sandwiches.

Financial Objectives

Domino’s Pizza major focus on the market is their operation to provide enough marketing and advertising strategies for the franchisee at the same time keeping communication constant. This helps the franchisee to account for the company top management. The franchisee operated stores are run differently from the management and team members to provide value addition in the stores operations. The company provides value addition services including training, marketing techniques, store operation services and development and financial analysis.

Target Market

The future market growth for the company has been optimized with the management making smart marketing decisions. The company has used various marketing strategies in its attempt to reach different market segmentations for the last one decade. A number of marketing campaigns have been initiated in the process of getting the attention of particular market segment. The company became the market leader with a strong network of company operated and franchise stores in the US and the foreign market (United States Securities and Exchange Commission, 2012).

Digital Advertising

In order to reach the market segment that is comprised of students and young people, the company has for a long time used Facebook to identify the target audience for the young people. The company goal was to win the loyalty of the young people who are price-driven to promote offers on pizza to the students. Previously, the company advertised their franchise on the web address and provided a link that redirected the user to a Facebook group which displayed other likes for the youth (Smith 2001).

The SMS marketing was used to direct the youth to visit the company website and Facebook group so as to make an order to be served with pizza during sports. The SMS text was customized in such a way that the recipient could prompt the student t order for a free pizza upon receiving the message. According to Hopkins and Turner (2012), the result of this SMS marketing was that, there was at least 20% of the target market for student who joined the group. According to the company’s strategic marketing manager, the SMS was much more effective in driving the conversation than a simple display of the URL.

Sports Marketing

This is the major market segmentation that the company has resolved to capitalize on. Domino’s has sports fans as the soft target market segment that is comprised of consumers who seek inexpensive pizza quickly. The customers are very sensitive to price and it has historically resulted to a decrease in its sales. In the sports set-up, the company does not provide for dine-in areas, but focus on providing the pizza to carryout consumers (Hopkins & Turner 2012). Demographically, Domino has been liked to have secured the largest specific target market with the highest number of people. This strategic target market appears to take the company to be the target market leader for online pizza order delivery as a way of reaching the maximum number of pizza consumers, while also increasing the ability to meet the demands of the customers (New Strategist Publications Inc 2010).

Strategic Positioning and Marketing Mix

According to Mergent Online (2013), Domino’s Pizza has managed to position itself well in order to reach their customers who value fast delivery pizza. The company has used geographic information software in its operation to locate its stores in the most optimal locations. Most of the domestic stores in the United States are located in highly populated areas in mid-sized cities and around colleges. In 2009, Domino’s posted a 93% rate of on-time delivery with an average of 12-15 minutes taken between order taking, production and delivery. Previously, it took 30 minutes to provide a delivery guarantee with a HeatWave insulated delivery bag to keep the product hot. Currently, Domino’s has achieved significant internet marketing through its website and has successfully managed to reach the major growing market segments.

The Domino’s revamped pizza has turned to be very successful in the market and has projected a remarkable sales growth since its introduction. In addition, the survey data provided shows that the poor taste in the previous products were the major reasons why the customers avoided the Domino’s products. In order to address this weakness, Domino’s has developed its taste and preferences, but kept the prices at most constant. Given these positive results, Domino’s was perceived to be in a position to generate significant purchases from the customers who had previously excluded Domino’s from their dining options (Estefan 2010).

Opportunities for Growth

The sales and purchase trends are overwhelming for Domino’s both in the domestic and foreign market. In order to secure significant growth for business in this sector, the company has been recommended to focus on both market categories. This can enable the company to pay its long term debts and raise its market share and value for the shareholders as illustrated below (Haig 2004).

Developing a Loyalty Program

From the Barclays (2011) report, an average customer for Domino’s product orders about five times in a year while the average quick service customer orders about 17-18 times in a year. This data shows that Domino’s has been underperforming in driving repeated purchases. Introducing a loyalty program could specifically address this underperformance trend and increase sales for the future.

From the survey, about 221 adults proposed three diverse hypothetical loyalty programs. Most of them favored a status program that will offer different benefits that can increase with repeated purchases. A status program has the ability to increase the average frequency of pizza ordering by over two orders per customer. This data suggests that the program can be effective to convert casual Domino’s consumers to loyal consumers. The loyalty program will be coordinated with the Domino’s current marketing efforts to promote the sales of the new pizza.

Increase of Domino’s Expansion in China

Within the last five years, Domino’s has added 32% of its international franchise. The company has generally been expanding to the international market through a master franchisee program with the largest from M?xico, Australia and United Kingdom. The home for the fourth largest master franchise is India with over 300 stores. The absence of Domino’s largest master franchise in China and with only 30 stores present an unexploited opportunity that can result to massive growth of the company sales. In comparison, Pizza Hut has more than 400 stores in China and the sales in the region comprise of about 30% of the total company sales.

Domino’s should, therefore, seek a strong master franchise in order to counter the high presence of its competitors in Chinese market. The company can only rely on franchise because of the market knowledge and investment capital. This market expansion strategy can help Domino’s to grow and expand without exhausting its reserved capital resources which might be required elsewhere. However, the company faces potential challenge in penetrating the Chinese market. For example, the Chinese prefer dine-in restaurants against the delivery based options. Nonetheless, the Domino’s has continuously evolved in other foreign markets to meet the unique customer preferences and the management believes that the company is able to deliver what is necessary to meet the needs of the Chinese market (Welland 2011).

Conclusion

According to analysis of the strategic options for Domino’s, the future of the company appears to have a greater potential to generate revenue to ease the high leverage ratio the company holds. Strategic marketing and positioning has been the best strategic tool that the company can use to maximize its potential of becoming the market leader. The proposal to introduce a loyalty program with the customers can boost the sales and customer loyalty to a great extent. Having a strong customer base is the basis for effective sales that any company strives to achieve. In addition, the less saturated Chinese market provides a very high sales potential to the company regarding its expansion strategy.