Domino’s is one of the most incredible companies of the 21st century. While most of us know Domino’s only because of its 30 minutes of free delivery policy. Very few of us know that from 2010 to 2017 Domino’s stock has performed so well that its stock price has gone up by 2000%.
It has outperformed even giant companies like Amazon, Apple, and Netflix. And the best part is…. this meteoric stock rise was neither a bubble nor a billionaire tweet about it. Instead, it was a result of one of the most strategic, calculative, and perhaps the boldest moves made in corporate history.
The question is What exactly was this strategy and more importantly how can entrepreneurs like you and me apply this to our company?
Story of Domino’s Pizza
This is a story that dates back to 2009 when the brand image of Domino’s was completely down the drain. The stock was selling at a rock bottom price of just $6 per share, the store sales were going down drastically and Domino’s ranked last in the consumer brand preference survey. All of these things made it very very clear that Domino’s was failing real bad.
This is when the CEO of the company back then, “Patrick Doyle” decided to take a closer look at the situation and soon enough they found out that there were multiple blog posts saying how bad their pizzas were. Some of them said that the crust of the pizza tasted like cardboard while others said that the sauce tasted like ketchup. And this was followed by a series of social media posts that consistently appeared online. Now, if you take a step back and try to understand the situation.
The situation is very very delicate. The stock price of Domino’s was already hitting a rock bottom. The American economy was still recovering from the 2008 crisis And during this time Domino’s, as a publicly listed company was already walking on a very very tightrope.
Now in this case, what any normal company would do is they would engage in great PR they would make sure that all the bad reviews are overshadowed, and then, in the background they would make a few changes and maybe even give out free pizzas, just to get positive reviews.
Or worst case, they would just ignore this altogether thinking that after all in 2009 what could a blog do to a billion-dollar company? But you know what?
What Domino did to rise from the downfall
Domino’s opted for the most lethal weapon in advertising that nobody ever dares to use, especially when the company is failing. And this weapon was brutal honesty. Patric Doyle, CEO of the company took full responsibility for what was happening and they publically admitted that they were not doing a good job. In fact, they called upon actually disappointed customers and got them to taste the pizzas to give them feedback.
It was perhaps the most difficult day at work because every person who walked in just put out some brutal phrases and told them how pathetic their pizzas were. But the team Domino’s listened to them very very patiently and took notes diligently.
How Domino’s Changed their Pizza Top to Bottom
For the next 18 months, every single chef of Domino’s worked day in and day out without taking a weekend off. Just to try every possible combination of ingredients to make the best pizzas they possibly can. They changed their pizzas from top to bottom. And in the process of experimentation, they also realized the fact that in the race to actually provide customers with 30 minutes of delivery the company’s supply chain itself was compromised. The majority of its ingredients were frozen, canned, and even pre-made just so that they could cut down on cost and make it easier to assemble a pizza in record time.
Supply Chain of Domino’s Pizza to achieve Delivery in 30 Minute
The chefs and the management got together and changed the entire supply chain of the company. Now, this was an extraordinary move because we are looking at a complete revamp of processing, inventory, storage, and transportation that is going to be executed to a chain of more than 4200 stores which are spread across 9.93 million square kilometers which is practically 3 times the size of India. But to everyone’s surprise, they managed to pull it off within just 18 months.
‘Oh yes we did’ campaign
They launched a campaign called the ‘Oh yes we did campaign. Wherein they documented their entire journey of how they went from making terrible pizzas to making the best pizzas in the United States. In fact, there is also a very sweet video online wherein the head chefs of Domino’s personally go to the houses of their harshest critics and surprised them with their new pizza.
Wherein they had incorporated all of their feedback and each one of these critics was mind blown that the head chef of Domino’s himself had come down to deliver pizzas. They tasted the pizzas, they loved it and they were smiling and most of them couldn’t even believe that such a huge company would actually take their feedback so seriously.
Apart from this they also included a special section on the website wherein they posted Facebook posts and tweets of the customers who expressed their delight after having the new pizzas.
This is how Domino’s reinvented itself and did everything in its capacity to get back to making the best pizzas in the United States.
Result of Domino’s After this Great Achievement
While the pizza delivery business itself saw a decline of 3% the same-store sales of Domino’s increased by 14.3%. Which is the largest quarterly increase in fast food history.
Domino’s stock rose by 44% in just one month following the campaign.
By the end of the quarter, the stock had reached a 75% increase. The campaign has earned 2 billion free media impressions to date and the stock price just kept going and going for 7 years and rose by 2000%, outperforming Apple, Amazon, and Netflix.
This is how Domino’s set a benchmark for other brands to learn how to embrace criticism and how to turn it into a business opportunity.
Two things Domino’s Analyze before opening any outlet
1. Disposable Income
Wherever Domino wants to open the Outlet they check the disposable income of the people around the 3 to 5 km Area. They check if people around the outlet are able to pay for pizza or not. Because if people are not able to pay for pizza then there is no meaning to open an outlet there.
2. Route Load
They check usually how much traffic is there on the route. If they found there is heavy traffic then they find out shortcut route to escape the traffic. So that Domino’s can deliver the pizza within 30 Minutes.
Only after analyzing critically these two points, Domino’s Open any store in that particular area
Cost Leadership of Domino’s Pizza
While other companies like McDonald’s, KFC, and PizzaHut open expensive outlets and hire many staffs, 95% of Domino’s outlets are in small spaces and hire few staff. That is because Domino focuses on online business. This is How Domino saves the expense on rent and staff. And they are able to offer pizza at a very good price. When people get Pizza at the best price they prefer to buy Pizzas from Domino’s.
Business lessons from Domino’s Case Study
1. Customer criticism is a part of the Business
Customer criticism is a part of the business although sometimes there might be meaningless hate, as a business owner it is your responsibility to filter through the chaos and identify the weakness before it paralyzes your business.
In this case, the CEO could have easily ignored the blogs but because he decided to fix it, Domino’s still existing.
2. Don’t hesitate to invest more in your business
The cost of rectifying a mistake is always far less than paying the price for it when it’s already too late.
In this case, if Domino’s had considered revamping the supply chain to be a million-dollar expense it would have cost them their entire business but because they saw it as a million-dollar investment it gave them the opportunity to rise from their ashes.
3. Connect with customers
Every brand needs to realize that the future of marketing is not about discounts and fancy packaging. Although they are important, at the end of the day the brand needs to connect with its customers at a personal level and thanks to social media it has become more easier now than ever.
The moment the customers realize that they are a part of your journey and the fact that their contribution actually matters. You will go on to achieve an extraordinary level of brand loyalty, which is by far the most powerful asset that you could possess as a brand. And the best way to actually establish this connection would be to tell a beautiful story.
In this case, it was the ‘Oh yes we did campaign.
4. Systems and Processes Before Marketing
Always look carefully that the system and processes in your business are on point. Because businesses are built over systems and processes. So after making sure that the system and process are on point focus on marketing.
5. Create a Greedy Proposition
Look in your business, can you create a greedy proposition in your business? Like Domino’s Created “30 Minutes of Free Pizza”. This is much greedy proposition that it can compel customers to order. So look in your business can you create it.
That’s all from my side for today guys. If you learned something valuable please do comment
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