I. Executive Summary
Domino’s Pizza’s strong financial performance during 2006 and into 2007 has given the company a significant amount of flexibility and freedom given the increased revenues and earnings in defining its strategies for the future. For continued growth however Dominos has to reduce customer churn, drive up same-store sales, continually reinforce and strengthen their brand, capitalize on the sociocultural shifts occurring in the United States and elsewhere, and finally continually redefine its in-store dining strategies relative to the growing rise of online sales. What is remarkable about Domino’s approach to marketing is the 14.6% same-store growth the company has achieved from 2001 – 2005 according to JP Morgan (2006). This is nothing short of phenomenonal. Lesser competitors have higher in-store and same-store sales than Domino’s, and also have a broader mix of lunch and dinner alternatives. In addition, according to Roper (2005) 58% of American households are willing to try a new dinner alternative relative to cooking or ordering out. Compounding this is the fact that 73% or 3 out of every four households by 4:30pm have not decided what will be served for dinner according to JP Morgan (2006). These two insightful figures provide a glimpse into how volatile the quick-service restaurants (QSR) marketplace is. Clearly the use of up-sell, cross-sell and incentives to drive up same-store sales is critical in this market, as is the continual growth and focus on the brand globally, finally with a focus on innovation. These are the three most critical marketing strategies for Domino’s today. II. Situation Analysis
Today Domino’s is the leader in the delivery segment of pizza sales in the U.S., second only to Pizza Hut in total pizza sales, as this competitor has 4,000 Red Roof restaurants with over 100-person seating capacity. Domino’s strength in delivery is evidenced by the fact that the company delivers an average of one million pizzas a day and has the greatest market share of the delivery business at 19.4% at the close of 2005 according to JP Morgan (2006). As of the close of 2006, the company is selling nearly 1 million pizzas a day between domestic and international operations according to JP Morgan (2006). This delivery-only approach allows Domino’s to focus its marketing and operations strategies on delivery only, without the distractions and potential struggles of a dine-in business, as is the case for Pizza Hut. According to many industry analysts and experts and also by reviewing Domino’s financials and low asset investments and exposure to long-term debt through ration analysis (see Appendix I for ratio analysis) the delivery-only business is the best area in which to operate within the $33 billion pizza market. Approximately $12 billion of the pizza category’s sales are through delivery, and according to Roper (2005) delivery will continue to gain share in the category as lifestyle trends continually place more and more of an emphasis on time and convenience, and using pizza delivery to overcome the highly hectic times from 4:30pm to 6pm on weeknights. This has also been validated through research completed by Domino’s Market Research (2005).
Figure 2 illustrates how the change in families and lifestyles in general provide a favorable backdrop for the pizza delivery business.
Figure 2: The shifting mix of pizza sales favor delivery
With the growing amount of last-minute dinner decisions, pizza delivery is a timely and convenient option that gives families a viable meal replacement option for an affordable price. As daily lives become more hectic and people are less inclined to cook, shop, and clean, we would expect this occasion to increase and provide continued demand for pizza delivery
III. Product Market Structure
The quick-service restaurant (QSR) pizza category is the second-largest category within the $187 billion QSR sector, with...