The Internet of Pizza - just the latest digital topping for Domino's

Profile picture for user slauchlan By Stuart Lauchlan May 2, 2017
Summary:
While other fast food firms are playing catch-up on home delivery, Domino's has been on the frontline since the 1960s, with digital now accounting for 60% of orders.

dominos
This ‘new’ trend towards food delivery is something that we started three years before I was born in 1960. And our founder in 1960 was pretty convinced, it was a good idea, and he's a smart man and he was correct, bringing people their food is a really good idea.

So says Patrick Doyle, CEO of Domino’s Pizza, reflecting on the supposed innovation around the idea of having food delivered to the home. Last week, I looked at McDonald’s decision to ‘bet the farm’ on a combo of digital and delivery services. At the time, I noted that one of the success stories in the field of both was Domino’s.

Built around a delivery model from the get-go, some 60% of Domino’s business now comes in from digital channels, as opposed to the traditional telephone ordering of the past. That totalled $5.6 billion in global digital sales in 2016.

But the success of the Domino’s model shouldn’t lead others to believe that this is an easily-replicable trick, cautions Doyle:

It is really difficult, and I think people continue to underestimate how difficult it is to do efficiently and give consistent service to your customers. Stay tuned as [other] people talk about executional issues and margin effect and all the rest of it. Delivery is not easy, and we will see how all this plays out but we're growing our delivery and our carry-out business.

On the digital front, Doyle says that the firm is so-well established now that it’s able to make fun of its own technology track record:

We are in the midst of a national ad campaign, revisiting something in our back catalogue of innovation that is no less to this day a fan-favorite, Domino's Tracker. This is very cool. It's one of our foundational innovations and was our breakthrough hit with customers. It helped demonstrate our forward-thinking approach early on as it was initially developed and launched back in early 2009. It's a great ad and nice to have some fun with our digital fans and customers while revisiting the pioneering piece of technology, first delivered by Domino's last decade.

That tracker tech just took a step forward with the inevitable Internet of Things topping. The so-called Internet of Pizza sees Domino’s partnering with the IFTTT free web-based platform, which allows developers to to add and create connections between digital devices and services with simple conditional statements, called Applets. Domino’s launch statement explains:

Domino's has created a few useful IFTTT Applets, including one that will automatically turn off their sprinklers when Domino's Tracker says their order is out for delivery. Customers can also download a Domino's Applet that turns on their Samsung Powerbot when their order is being prepared – perfect for when the house needs a good vacuuming before the gang stops by for a pizza party.

This latest platform play joins the pizza firm’s other digital channels, including Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter and text message using a pizza emoji. Doyle says that innovation in ordering remains a priority:

We’ve introduced the latest in the new wave of anywhere ordering platform innovation, the ability to start and complete a new order from scratch without the need for a profile or saved Easy Order. Customers can now order this way through Facebook Messenger and Google Home with more to come. This is very exciting, the next major step in the evolution of our ever-growing suite of unique and forward-thinking ordering platforms which continue to be unmatched within our competitive space.

Easy as pie

Another key asset is the Piece of the Pie Rewards digital customer loyalty program, take-up of which is on the rise and boosting revenues, says Lawrence:

We recently held our first Loyalty Member Appreciation Week, offering double points to our digital rewards program members for a week-long time period earlier this month. The simplicity of this program continues to be very well received by customers and the focus on driving frequency continued to be a meaningful contributor to sales performance during the first quarter.

Domino’s does also have a healthy carry-out business and in support of that, there’s also investment in technologically-upgrading offline stores, says CFO Jeffrey Lawrence. These branches have been a contributor to the firm’s digital culture, he adds:

Our team USA corporate store footprint skews a little bit more urban on average than all of our other franchise stores in the US and as a result of the fact that our company-owned stores were really adopters of digital and online a little bit quicker than our franchise stores, years and years ago. You're seeing a little bit more digital mix in our corporate stores which means that the impact of loyalty and the tailwind we're getting from that is a little bit more as well.

Currently there’s a focus on getting EMV (Europay, Mastercard and Visa) chip-and-pin readers into the US stores, says Lawrence, as customer requirements change:

More and more customers are choosing to use credit cards with us over time, as you would expect with most QSR (Quick Service Restaurants) folks that have a digital presence.

For digital challengers, such as McDonald’s and other QSRs, there are lessons to be learned from Domino’s experiences, but the main one is that this doesn’t happen overnight. Doyle notes:

Our story is one of a true long game approach, riddled with difficult decisions, reset priorities, and smart risks, which, while they took time to bear fruit, eventually reshaped our brand and system. I say all of this because we are often asked about which specific activities are driving our near-term success. While our great analytics give us many of the answers, we know that the cumulative effect of a lot of long-term decisions over many years is what is ultimately driving our success.

And while there are lessons it could teach rivals, there are no plans to offer ‘white label’ versions of the Domino’s digital delivery platforms to third parties. This is Domino’s own version of ‘secret sauce’, concludes Doyle:

The competitive advantage that we've created in digital and in delivery is something that we're going to use to grow the Domino's brand…When you're selling one in six pizzas or one in seven pizzas in the US, there's an awful lot of growth for us in sticking to our knitting. I think our results are kind of evidence that the potential distraction of doing [digital platforms] for others is not a risk really worth taking.

My take

After saying last week that I hadn’t been in a McDonald’s for years, I made a point of popping into my local digitally-upgraded branch over the weekend. The only word to describe the experience was “chaos”. The self-ordering kiosks just resulted in bottlenecks, while I couldn’t see how you could customise an order to remove items you didn’t want (eg no gherkins etc). And the ‘Hostess’ on duty was unable to offer any other suggestion than that I should go to the counter.

In contrast, Domino’s digital ordering looks pretty damn seamless. Like Starbucks, Domino’s is a great example of a ‘first mover’ advantage.