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Thursday
May302019

Domino's

Domino's success as the largest US pizza chain (#1 delivery & top 3 carryout with a 36% domestic share among the top 4 players) reflects its tech innovation positioning which is based upon the idea that consumers primarily choose pizza brands by their ordering & delivery options. In essence, Domino’s emphasizes its leading-edge, digital ordering convenience and seamless payments (frictionless & fast delivery) as opposed to "flavor-of-the-month" LTOs. The chain's positioning is also based upon compelling everyday value with deals at the $5.99 & $7.99 price points that have run so long that Domino’s believes they currently contribute to brand equity. Domino's believes that scale enables value and that profit power is better than pricing power and it is notable that Domino's delivery costs are much lower than 3rd party delivery aggregator options with the hope of even lower delivery costs driven by its "fortressing" market fill-in strategy. The brand's impressive 65% digital sale mix benefits from 18 ordering options on its AnyWare platform and its average check is +36% higher than the pizza segment average, reflecting a greater number of add-ons (salads, chicken, stuffed cheesy bread & desserts) and less discounting associated with digital sales. Sales also benefit from the use of effective marketing stunts that reinforce its brand focus and include: “points for pies” which allows customers to receive loyalty reward credits for eating a competitor’s pizza; carryout insurance (replacing pies that are inadvertently dropped, etc.); pot hole paving free for municipalities (smooth ride to protect pizzas in transit); and free “hot spot” delivery to places like public parks, etc. Domino's 20MM member Piece of the Pie Rewards loyalty program effectively drives traffic and its IT and marketing scale represents a key advantage relative to smaller industry players who represent the bulk of Domino's competition and source of market share gains. Notably, Domino's traffic grew +7.4% from 4Q17 to 3Q18. In conclusion, Domino's story remains a real 21st century tale of how an iconic brand is leveraging digital and big data to create an edge in providing convenient access and low prices to American consumers who never grow tired of their pizzas.

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