Case Study: Domino's PIzza Marketing Strategy

Domino’s Pizza a global pizza company which specialise in delivery, its headquarters are situated in the USA. Founded in 1960, Domino's is the second-largest pizza chain in the United States and has over 9,000 corporate and franchised stores in 60 countries and all 50 U.S. states. Domino's Pizza was sold to Bain Capital in 1998 and went public in 2004. In this article we will discuss the different strategies that Domino's Pizza use and implement into their business. We will also talk about the various competitors of Domino's and how much of the market share they own.

We will look at the market trends of Domino's and the STP process (it stands for Segmentation, Targeting and Positioning). This is a very important concept used in marketing and shows how a company chooses to compete in a market. The main aim of the STP process is to guide the company to the implementation of an appropriate marketing mix.

Finally we will look at the SWOT Analysis of Domino's Pizza and we will look at the different ways Domino's could improve upon their marketing strategy.

Domino’s Pizza is in a very competitive market and there is a lot of competition for Domino’s Pizza including Pizza Hut and Pizza Express. They also have a lot of local competitors as well. At the end of the year 2007 they made $1.4 Billion in revenue and over $190M in operating income. Domino's Pizza have many different competitors, including;

Pizza Hut

Pizza Hut Is a restaurant chain and international franchise based in Addison, Texas, USA (a northern suburb of Dallas) specializing in American-style pizza along with side dishes including (depending on location): buffalo wings. Pizza Hut is the world's largest pizza restaurant chain and is a subsidiary of Yum! Brands, Inc., whose restaurants total approximately 34,000 restaurants, delivery-carry out units, and kiosks in 100 countries.  Pizza Hut currently own 15% of the market share.

Pizza Express

Another competitor for Domino’s Pizza is Pizza Express. However Pizza Express is not similar to Domino’s Pizza as Pizza Express is a chain of restaurants and Domino’s Pizza is a delivery company.

In 1965, Peter Boizot opened a business called Pizza Express, when he opened the first restaurant in Wardour Street, London. The chain expanded, initially as a franchise operation. In 1993 Pizza Express went public and turned into a PLC, this was a smart move for the company as this means they can improve their financial position and have better publicity.

They have a lot of loyal customers and this helps them build and make their brand even stronger. Having loyal customers means that their customers would only go to them and not their competitors. They also have a strong management team and a strong brand image.

Other Non Direct Competitors

Domino’s Pizza has a lot of competitors as the fast food business is very competitive. Domino’s Pizza main two direct competitors are Pizza Express and Pizza Hut but they have a lot of indirect competitors that do not sell pizzas but do sell fast food.

1. o   McDonalds

McDonalds are not direct competitors but because they sell fast food they are competitors in one way. McDonalds are the market leaders of their market and because of this Domino’s would have to be vary of them.

1. o   KFC

KFC is a fast food restaurant that specialises in selling Chicken. In particular it specialises selling Southern Fried Chicken.

1. o   Subway

Subway is one of the fastest growing franchise restaurants. Subway mainly sells submarine sandwiches and salads but now has also moved into selling wraps and snacks. 

1. o   Burger King

Burger King is also a competitor of Domino’s Pizza although it does not directly compete against Domino’s Pizza. Burger king specialises in selling burgers.

Market Trends

In the UK, the number of fast-food and home-delivery restaurants such as McDonald’s, KFC and Domino’s Pizza has been increasing rapidly over the past 5 years. As of April 2008, Domino's held an impressive 19% market share in domestic pizza deliveries. Subway, in particular, has seen an explosion in its number of high-street outlets. This has resulted in a large amount of competition in the market, but has also been a key factor in the increased value sales — more branches means that more consumers have better access to fast food. The fact that the menus at such establishments are generally cheap has also proved popular with the public because of the recession.

There has been a lot of negative publicity about the industry of late; its response has been, in some cases, to start offering healthier alternatives on its menus, such as salads, or to actively work to reduce levels of sugar, salt and fat in the food that is served.

The sandwich sector has particularly benefited from the Government’s campaign, as it is often regarded as a healthier option than other types of fast food, such as burgers.

The value of the fast-food sector has increased by 16.4% over the past 5 years, rising from £8.33bn in 2006 to £9.7bn in 2010. Further increases are predicted for the future, with Key Note projecting that value sales of fast food will top the £10bn mark for the first time in 2011, reaching £10.08bn. In the long term, Key Note has predicted that the fast-food and home-delivery sector will have grown to £11.86bn by 2015, up by 17.7% from 2011 and up by 42.3% from 2006.

Food price inflation has generally risen above the rate of general inflation in the past year, meaning that the prices of some foods have increased exponentially. Rising wheat prices, for example, have pushed up the price of bread and bread products quite rapidly; given its position as a staple ingredient

An advertisement for Domino's Pizza

Segmentation

Segmentation is the process of splitting (segmenting) the entire market (everyone) into smaller groups that share similar traits.

Domino's Pizza is located in more than 60 countries. The rights to own operate and franchise branches of the chain in Australia, New Zealand, France, Belgium, the Netherlands and the Principality of Monaco are currently owned by Domino's Pizza Enterprises, having been sold off by the parent company between 1993 and 2007. The master franchises for the UK and Ireland were purchased by Domino's Pizza Group, now publicly traded as Domino's Pizza UK & IRL, in 1993.

Domino’s Pizza has a large customer base but mainly target the working class and lower- middle class. The socio-economic group they would target would be C1-C2 and below. These are people with jobs such as electricians, plumbers, shop floor supervisors and casual labourers.  These groups have less income and they would buy from Domino’s Pizza, whereas people in the group A and B would maybe go to a high end restaurant. 

Domino’s Pizza target bachelors, students and professionals who have no time to prepare food and want food as fast as possible. They targeted both genders, but according to a Mintel report they target males more. Market research had revealed that Domino’s market demographic was culturally diverse.

The company targets students a lot and often use promotions to get students to purchase from them. Students are a good target market for them because takeaway food requires no effort from the person and they deliver really quickly.

A quarter of consumers have cut back on takeaways/ home delivery to save money.

Young men are ordering takeaways/ home deliveries because they felt like staying in and procrastinate. In contrast, women order takeaways/ home deliveries because home deliveries and takeaways make a nice change from what these women would normally eat.

Domino’s Pizza has over 9,000 outlets in over 60 countries allowing people to buy all over the world and making Domino’s Pizza a global company.

Targeting

Domino’s Pizza should target the Muslim community by offering Halal food and Halal pizzas.  This would be a successful venture for the company because they would make a lot more revenue from the sale of halal food as the Muslim community is growing.

Another target group Domino’s Pizza should target is healthy food aimed at healthy people that want to stay fit and healthy while still eating their favourite foods. They could introduce salads and wraps or an alternative pizza.

A group they could also target is different nationalities such as polish or Dutch. They could use their food and make special pizzas according to their culture and nationality.

Positioning

By targeting the Muslim community Domino’ Pizza would gain a lot of popularity In the UK alone there are 2.869 million Muslims according to the PEW research center, (http://features.pewforum.org/muslim/number-of-muslims-in-western-europe.html) and target this many Muslims would mean that the profit and revenue of their business would rise up.

There is a growing target in people trying to get fit and people being healthy therefore people want to eat healthy food. Domino’s Pizza is classed as fattening food and so if they introduced healthy food such as low fat pizzas and sides not cooked in oil they would appeal to a lot more people. Statistics show people live longer by eating healthy and this should mean Domino’s Pizza should sell healthier food.

If they made a pizza that targeted different people and cultures this would prove a success. This is because a lot of people miss their own culture and miss their own food and if Domino’s Pizza introduced a new range of food and pizza’s, this would appeal to a lot more foreign people. Statistics show that one in nine people living in the UK are foreign, (http://www.telegraph.co.uk/news/uknews/4797916/One-in-nine-people-living-in-Britain-is-foreign-figures-show.html) so if they entered this segment it benefit Domino’s Pizza and would have more profit.

 One of Domino's Pizzas' classic commercials from 1985

SWOT Analysis

(1)Strengths

o   Starting in 1973, an advertising campaign run by Domino’s Pizza claimed to guarantee to have their customers pizzas delivered to them in ’30 minutes or less’, if not the pizza is free. This campaign was doing great and bought a lot of attention towards the company however market momentum was quickly lost when a woman in St. Louis was involved an automobile accident with a Domino’s Pizza delivery driver. News turned into bad publicity and in 1993 the 30-minute guarantee was discontinued. The 30-minute guarantee still runs in stores in India.

o   Domino’s strength, the ‘S’ in a SWOT analysis, was their ability to produce and deliver a product faster and more efficiently than their competition. Not promoting the 30-minute guarantee created a level playing field allowing the focus to shift toward product and price

o   Domino’s Pizza is a global corporation and operates in over 60 countries. This makes them known worldwide and they have an excellent reputation throughout the world. 

o   They are the market leader in what they do and have more than 5,000 stores in the US. They are a global franchise so they are continually growing. They have a continually strong brand image and are always improving it.

o   Their marketing and advertising campaign is very strong and helps them draw in millions of customers. Another thing that makes Domino’s Pizza a market leader is the supply chain and distribution network. It has also enabled to keep pace with the technology by offering menus.

o   They are also opening branches in Tesco stores across the country. They stuck a partnership with them and this deal will see them tap into a new market and make a higher profit margin.

o   Domino’s Pizza can open a lot of stores through franchises

o   They have a lot of capital and are in a strong financial position because of their continuous success.

(2)Weakness

o   The sales are starting to slow and declining same-store sales. This is because of the economic situation and people not being able to afford takeaway food as it is not counted as a necessity

o   The sales are very slow growing and some of the same-store sales are declining. Its ambiance is not up to its competitors.

o   Menu is not elaborated and modified as compare to other chains.

o   Another big point for them is that more and more people are going towards healthy food and as Domino’s Pizza is seen as an unhealthy option Domino’s Pizza would either have to introduce a different more healthy range and they would have to change their brand image.

(3)Opportunities

o   Britain's biggest pizza delivery firm also said that it expected two-thirds of its sales to come from online in five years' time. Online sales currently account for £128m of total sales of £485m, roughly a quarter.

o   There is a growing presence in emerging markets, particularly in India and China and Domino’s Pizza should target these markets as they are continually growing and would be beneficial for the company as a whole.

o   Leverage supply chain & distribution system to introduce new products

o   Domino’s Pizza was planning to launch an Android and iPad app to accompany its iPhone app, which generated £1m of sales in its first three months of operation.

o   Domino's also had a three-year deal to sponsor the ITV programme Britans Got Talent, which launched the career of Susan Boyle. This proved a success for Domino’s Pizza as they gained more popularity.

(4)Threats

o   Changing consumer habits towards healthier food choices and their continuous lifestyle change could mean less popularity for Domino’s Pizza.

o   Intensive competition from a fragmented number of small competitors

o   There is a big threat towards changing consumer habits towards healthier food choices. As more people are trying to go towards a healthier lifestyle, to change they would have to change their brand image and start to introduce healthier products in their product line.

o   Another threat is that franchise operations are being affected by currency exchange fluctuations. This is a major problem for them as it means they would not be able to open any more stores.

o   There is also intensive competition from a fragmented number of small competitors. This includes local competitors as they can afford to sell their products cheaper.

Domino's Pizza is a very large organisation and if you implement some of the techniques and strategies they use within their business, your business could grow a lot. We hope you have enjoyed this article and would like to thank you for reading this very long post. We would appreciate it if you would consider leaving a comment or leaving your opinion.