Menu Innovations | August 2010 | By Sam Oches

The Many Acts of Domino’s Pizza

Two years of reinvention, capped by the release of the chain’s new pizza recipe, has Domino’s at the fore of the segment—and sales are booming.

Wow.”

Russell Weiner, chief marketing officer for Domino’s Pizza, does not mince words when asked to describe the last two years at the pizza chain.

“There you go,” he says. “One word.”

Of course, Weiner, who arrived in September 2008 from Pepsi Co. because the “company had to transform” after two and a half years of negative sales, has reason to be dramatic, if not downright giddy. Same-store sales for the first quarter of 2010 had, at the time of the interview, recently been released, and Domino’s was reporting a bump over

Q1 of 2009—to the tune of 14.3 percent.

“We’ve looked back as far as we can look at major chains, and the closest we found to the 14.3 was years ago, McDonald’s had done it, but it was a 14.2,” Weiner says. “That’s why, for me, it’s a wow.”

The phenomenal growth at Domino’s in the first quarter of 2010 is the goal the company set out for in 2009 with its “New and Inspired” pizza recipe, and is, in many ways, the validation of several changes the company implemented in the last two years.

Patrick Doyle is the CEO of Ann Arbor, Michigan–based Domino’s Pizza who took over from David Brandon in January. He uses a few extra words to describe the transitive nature of the time period that began with the company’s introduction of its Oven Baked Sandwiches in August of 2008.

“It has clearly been a pivotal time for this brand and this system,” Doyle says.

Systemwide sales in 2009 weren’t off the charts; the company recorded domestic sales of $3.03 billion in 2009, a hair less than the $3.037 billion it accounted for in 2008. In fact, Domino’s tumbled a spot on the QSR 50 list, surpassed by Chick-fil-A as it fell from No. 13 to No. 14.

But the Q1 numbers in 2010 are not an anomaly and represent the return of something much bigger than the systemwide sales of 2009 could ever define, Doyle says.

“The success we had in the first quarter of 2010 is really a function of the groundwork that we laid in 2009,” he says.

Weiner likes to compare the process of rolling out Domino’s new pizza to a play with multiple acts. In Act I, the company listened to its critics and rolled out a new pizza recipe. Acts II, III, and IV represented the steps Domino’s took to advertise the new pizza.

The new pizza recipe, though, was not the only performance Domino’s used to reinvent itself. In fact, by the time the new recipe launched, the company was already putting on a show.

Act I: A New Aspiration

Coming out of 2008, Domino’s Pizza was positioned where it had been positioned for many years: It was the leader in pizza delivery, but its menu was struggling to stay relevant along with category leaders Pizza Hut and Papa John’s.

In fact, a consumer study from loyalty research firm Brand Keys in 2009 had the chain at No. 1 in price and convenience amongst major pizza chains, but tied for last in taste.

“We’ve always been the best at delivery and been given credit for it by consumers,” says Doyle, who was the president of Domino’s USA before taking over as chief exec when Brandon left to become the director of athletics at the University of Michigan. “We’ve always been viewed as providing good value to the consumer. We were not given credit for great-quality food.”

“We aspired to be higher, we aspired to grow faster,” Weiner says.

By April of 2009, the chain was head first into its reinvention. In August of the previous year, the Oven Baked Sandwiches line launched, featuring sandwiches like the Italian Sausage and Peppers, the Mediterranean Veggie, and the Chicken Bacon Ranch.

The new sandwiches positioned Domino’s against a new quick-serve foe: Subway. They were competitively priced at $4.99—challenging Subway’s $5 Footlongs—and generated buzz when Domino’s claimed to beat Subway in a national taste test of sandwiches, earning Domino’s a cease-and-desist letter from the sub giant.

In January of 2009, the new line of American Legends specialty pizzas launched, including combinations of ingredients like the Philly Cheese Steak Pizza, the Memphis BBQ Chicken Pizza, and the Honolulu Hawaiian Pizza. And April brought the launch of Domino’s Breadbowl Pastas, with pastas like Chicken Alfredo, Pasta Primavera, and Three Cheese Mac-N-Cheese baked into bread bowls.

The disastrous April 2009 YouTube incident, in which two Domino’s employees posted videos online of themselves doing crude things to the pizza, was barely a blip in the radar to the company. The new menu items already had it firing on all cylinders.

Doyle says there was only one way a chain of Domino’s size, with more than 5,000 units in the U.S., could pull off so many drastic changes in such a short time span.

“There was significant support from our franchisees for launching the lines that we launched last year, and moving very quickly on getting sandwiches out and American Legends out, and all of those new platforms that we launched,” Doyle says. “They supported and they supported the pace that we were moving on those.”

Dave Melton, a Domino’s franchisee with four stores in Manhattan and two in Connecticut, says that despite the many changes to the Domino’s system, the transition was “great.”

“First of all, [when we] started to expand our menu with the other stuff that we rolled out, with the pasta and the sandwiches and all that … inventory and operations got a little more complex, but nothing we couldn’t handle,” Melton says.

“It opened up a lot more places for us to do business. In 2009 and before, a lot of things seemed to sort of come together to help set us up for 2010.”

The biggest change, though, was still yet to come.

Act II: A Path With No Return

Doyle has a theory on how companies react to the kind of uncertainty Domino’s experienced in 2008 and 2009, a period that certainly wasn’t helped by the economy’s troubles.

“They look at tough times as an opportunity to drive change and to position themselves in a materially better way,” he says. “Weak companies just kind of hunker down in the bad times and hope that the bad times will pass. As we saw results getting tough, we got very aggressive about making changes to this business that we thought were going to set us up for great long-term success.”

Weiner says that the change most companies need to make in order to revitalize their brand is the one right under their nose—but which nobody wants to face up to.

“We knew that certainly we were known for our strength of delivery and service but that our pizza could be improved,” he says. “I knew that when I was interviewed [at Domino’s]. You didn’t have to do the research.”

But Domino’s did do the research—a lot of it. Weiner says that even though a move like changing the recipe of a signature item is risky, every step Domino’s made was “quantitatively proven” by consumer insight. Consumers, the chain would later say in advertisements, had resoundingly told Domino’s that its pizza tasted like cardboard.

Domino’s also gauged franchisees’ opinions before rolling out the new pizza, and the company made sure all were on board with the change.

“We made the new pizza, made the original pizza, put them side by side in boxes, ate them, and scored them, and it was well over 90 percent of franchisees … that chose the new pizza as the better one,” says franchisee Melton, who is also a member of the Franchise Leadership Council at Domino’s.

Finally, after two years in development, the New and Inspired pizza from Domino’s launched in the last week of 2009. The new recipe, which upgraded the crust, sauce, and cheese on the chain’s signature pies, served as the icing on the cake of Domino’s reinvention.

It was also the Hail Mary pass in a game of several moves that the Domino’s team knew had no overtime.

“If you ever read The Art of War, they say the best way to win a war, if the war is fought on an island, is to blow up the bridge,” Weiner says. “Everyone’s fighting for the death, because there’s no retreat.

“When we knew the product was so much better than our old one and the competition’s, we felt like we could go for it. So we blew up the bridge.”

Act III: An Honest Approach

Making a better pizza was one thing, but selling it to the public was a whole other beast.

“The idea is you can’t really say, ‘Hey, we have a new and improved pizza,’ and anyone’s going to really care about it, because the words new and improved are pretty overused from a marketing standpoint,” Weiner says. “We wanted people to reconsider this brand, but what’s the messaging that will get them to reconsider it?”

The right messaging, it turned out, was the unbridled truth. Domino’s launched a series of advertisements supporting the new pizza recipe that featured Domino’s customers decrying the old, and employees—including executives like Doyle—admitting that changes needed to be made.

The key to making the marketing strategy of the new pizza recipe successful, Weiner says, was being as open as the brand could be.

“What consumers were looking for was honesty and transparency because nobody was giving it to them at that point,” he says, noting that the public trust in government, banks, and other big corporations had waned.

The self-deprecating ads from Domino’s were supported by a money-back guarantee on the pizza and were followed by advertisements that showed company employees going after previous critics and “holdouts” that had yet to try the new pies.

“There was clearly no Plan B on this,” Doyle says. “You can’t go out with the communication strategy that we did and have that not work. If that doesn’t work, there’s no way to fall back from that. The confidence came from knowing absolutely 100 percent that we had a better pizza.”

Act IV: A Sense of Victory

Domino’s results in the first quarter of 2010 shocked many industry experts. Even Weiner admits he was “pleasantly surprised.”

But Gary Stibel, founder and CEO of the New England Consulting Group, says the numbers are merely a result of Domino’s doing everything right in its marketing efforts to support the new pizza recipe.

“They engaged consumers with disruptive honesty,” Stibel says. “Once they had gotten people’s attention with disruptive honesty, they delivered a meaningful message: We taste better. They didn’t say, ‘We taste better than your favorite pizzeria,’ because they probably don’t. They said, ‘We taste better than we used to,’ which is not that difficult a statement to make.”

Stibel says that what Domino’s did was not revolutionary, but that it was a textbook example of memorable marketing.

“Unfortunately, much of the fast food and foodservice community has convinced itself that the only way to attract consumers is with emotional appeals and humorous, trendy advertising, and cheap, discount pricing,” Stibel says, adding that too much marketing focuses largely on forgettable antics.

Memorable as Domino’s moves may be, Doyle says it will soon be time for the company to move on without new tagged on to every mention of its pizza.

“It’s quickly going to be no longer relevant to consumers what our pizza used to be,” he says. “But will there continue to be news and change from this brand? Absolutely. It’s how you stay relevant with consumers.”

Although the company will soon end the heavy marketing of the new pizza, 2010 certainly won’t represent the final act in the company’s transition.

“There are more chapters in the story that we haven’t told yet—I just obviously can’t tell you about them,” Weiner says. “But there’s more to tell in this story.”