Click to Enlarge | Domino’s Pizza (NYSE: DPZ) Share Price vs. S&P 500, Dow, and Pizza Sector (PZZA) August 21, 2009 – April 13, 2010 (Red line denotes launch of new crust)
(This is a guest post by Andrew Kent of the Sales Executive Council, our sister program for sales leaders.)
Domino’s Pizza’s new crust has been making the company a lot of dough. The pizza delivery chain announced a new and improved crust on December 16, and has been blitzing the airwaves with ads ever since—ads which you’ve no doubt seen many times by now. Over that time, the firm’s share price has leapt by 84%, trouncing the S&P 500, Dow, and pizza sector.
That’s a meteoric improvement—and no doubt a relief to Dominos’ marketers, who spent “tons of time — about 18 months — and millions of dollars” experimenting with various recipes and testing them with customers, according to CMO Russell Weiner.
Those marketing dollars certainly translated into a mouthwatering share price, but what about the pizza? Did the crust really improve by that much?
Well, I’ve tasted it. Several times. The verdict? It’s a welcome improvement, but not a nearly-double-your-market-cap-in-three-months kind of improvement. Essentially, it tastes like they took the old crust and rubbed some garlic butter on it.
So here’s the question: How did a firm spend millions of marketing dollars improving a product, settle on some pretty incremental changes, and translate that into an 84% leap in stock price?
Simple: it’s not what you sell—it’s how you sell.
Now, my point is not that Dominos’ marketing dollars didn’t result in an improved product—they almost certainly did. But an improved product wasn’t the whole point. The real reason the company spent millions of marketing dollars was… to say that it had spent millions of marketing dollars. Why? Because the message those marketing dollars convey is not only that Domino’s had perfected (or at least improved) its pizza, but also “we listened to you.”
It’s a perfect example of not selling on product features and benefits alone. Weiner explains:
“I spent a lot of time thinking about how to change the perception of people who didn’t buy Domino’s. We talked to them, and read their blogs, and this is what they were saying. And I knew that, other than my mom, no one would care about “new and improved.” So if we just said, “Hey, this is a new and improved pizza,” we would not have gotten the doubters to try it.”
In other words, Domino’s isn’t saying, “buy our pizza because it has a garlic crust that intoxicates taste buds and stimulates serotonin production.” Rather, they’re creating an experience around doing business with the company: “you told us our pizza tasted like cardboard, we took time to listen and made changes, so give us a try again!”
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on 16 April 10
Respond
While I completely agree with the point you ended with about not selling (or marketing) on product features and benefits alone, I do want to comment in terms of the opening of your post that implies a direct outcome or focus of the marketing campaign was shareholder return. The reason that many company’s have gotten in trouble over the last decade was TOO much of a focus on “shareholder value” and not keeping balance with all the stakeholders in a company (customers, employees, shareholders and suppliers). Through this forum and many others, we are often talking about measuring ROI on marketing investments. I would really hope that shareholder return isn’t a primary performance indicator for a marketing campaign. Perhaps that was the case at Domino’s – I do not directly know. Hopefully a well-planned and well-executed marketing campaign would create customer value, which in turn can obviously impact shareholder return, but I think it’s a dangerous trap to start tying a marketing campaign that let’s less than 6 months old with stock returns in that time frame.
I I know that your main point is in regards to how marketing/sales can show customers that we are listening to them. But as the economy starts to turn around, and as the stock markets surge, Marketers need to make sure we don’t fall into traps from the last decade.
on 17 April 10
Respond
Fair comment John–
I totally agree that too much focus on shareholder value has been a primary reason businesses have gotten themselves into trouble over the last decade, and it’s time to re-examine that focus. In fact, there’s evidence that suggests that companies who prioritize shareholder value creation actually do worse at it than companies that put customers first:
http://hbr.org/product/the-age-of-customer-capitalism/an/R1001B-PDF-ENG
The reason I included the stock price information was to draw on observable information from outside of Domino’s, since in this case we aren’t privy to the marketing dashboard at Domino’s. You are of course right that we’d hope Domino’s measures success of marketing efforts with a more balanced scorecard that captures things like long term brand impact and quality of customer experience, all the way through to commercial impact.
on 22 April 10
Respond
This is pure and simple outstanding consumer marketing. They obviously spent the time to get deep into the consumer insights, tested which messeges would resonate best with consumers, and had the courage to go to Executive Management and force them to be real with who they were as a company, and what they are selling. In simple terms, the VP who led this marketing campaign should be #1 on the “Hot Top 10″ list in Ad Age, BrandWeek, BusinessWeek, and the Wall Street Journal in terms of the most sought after CMO-candidate for Fortune 500 companies.