Domino’s Pizza: A Quick Service Restaurant Chain or a Tech Company?
How has Domino’s Pizza, the world’s second largest pizza restaurant chain, evolved over the last decade to adapt to the rapid digital transformation in the quick service restaurant industry?
Creating Value for the Customers: Domino’s Business Model and Competitive Differentiation
Domino’s Pizza was founded in 1960 and is a pioneer in the pizza delivery business. [1] As one of the most widely recognized consumer brands in the world, Domino’s competes in the large and highly fragmented global quick service restaurants (QSR) category. In the last two decades, internet technology and the growth of mobile usage have disrupted the company’s traditional pizza delivery business model by enabling digital ordering. [2] These technological changes have pushed the company to compete in new ways. [3] As the market leader in online delivery, Domino’s now competes with both local and large global QSR companies, such as Pizza Hut, primarily based on product, service speed and quality, technology, and price. [4] To stay competitive, Domino’s has invested in building digital capabilities, mobile technologies, and data analytics platforms to differentiate itself from competitors and to meet the evolving expectations of customers. [5]
Domino’s Operating Model: How does Domino’s deliver on its customer promise?
Domino’s technology choices have enhanced the value that customers derive from the company’s service offering. [6] There are several key operating model choices that have enabled Domino’s to deliver its customer promise of convenience, timely delivery, transparency and price. [7]
In-House Digital Ordering Platform
Convenience of the digital ordering process is critical to Domino’s customers and is essential for the long-term success of the company. In 2015, approximately 50% of Domino’s U.S. sales came from digital orders, with that number being higher in some international markets. [8] To ensure the sustainability and continued growth of digital orders, Domino’s made the strategic decision to invest in an in-house e-commerce ordering platform. The innovative platform enables customers with an online profile to re-order their favorite meals within 30 seconds, significantly improving order time and overall delivery time. The platform also enables order ETA tracking and delivery updates, which provides greater transparency.
Mobile Applications
Domino’s launched mobile applications for smartphones and tablets to capture the growing number of mobile users placing delivery orders on their smartphones. [9] In 2014, the company launched Dom, a voice ordering application, and in 2015 it launched text messaging and Twitter ordering platforms using emoji, which were a hit among millennials. These new platforms enabled Domino’s to capitalize on the growing personalization of services (“The Internet of Me”), which places users at the center of every digital experience. [10] By incorporating personalization and by making pizza ordering a social experience, Domino’s has been very successful in capturing a younger audience and making its product stickier by creating a network effect. [11]
Integrated Point-of-Sale Technology System and Vertically Integrated Supply Chain
Finally, Domino’s has invested significantly in optimizing operational efficiencies to reduce costs and to be able to offer an affordable product to its end customers. The company rolled out PULSE, an integrated POS system, to improve coordination between its franchisees and the corporate office and to reduce the number of order mistakes and improve training hours.[12] Additionally, Domino’s has a vertically integrated dough manufacturing and supply chain systems, which enhances the quality and consistency of products, allows Domino’s to leverage economies of scale and enables store managers to better focus on store operations and customer service. [13]
The Future of Digital Pizza Delivery for Domino’s
The food industry has attracted a lot of venture capital investments in the last decade and thus Domino’s now faces increased competition not only from other QSRs but also from food delivery start-ups such as UberEATS. To maintain its competitive advantage, Domino’s needs to ensure that it has the right talent in place to drive continued innovation. Training and employee development will be key for Domino’s, especially with regards to international expansion.
Additionally, to continue to deliver on its customer promise, Domino’s should explore alternative delivery methods to reduce costs, such as autonomous delivery vehicles. [14] Partnerships with other delivery service providers may also provide opportunities for cost cutting, which will be very important for maintaining profitability, given the company’s lower margin.
Finally, growing Domino’s customer base will be key in the future, especially as millennials comprise a significant portion of consumers. Domino’s has a robust online platform that enables the company to collect data on consumer preferences and the company should use this data to stay ahead of trends in consumer preferences and to innovate its menu offering.
Conclusion
Continued technological innovation has transformed Domino’s from a traditional fast food restaurant chain to a fast-growing technology-enabled delivery services company. However, as the company continues to face more competitive pressures in the future, will Domino’s be able to continue to innovate and launch autonomous drone delivery and artificial intelligence ordering platforms [15] or is it doomed to go on a steady path of decline as millennials continue to become more and more health conscious?
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[1] Domino’s website. https://www.dominos.com. Accessed November 2016.
[2] Michael C. Ottenbacher, Robert J. Harrington, (2009) “The product innovation process of quick‐service restaurant chains”, International Journal of Contemporary Hospitality Management, Vol. 21 Iss: 5, pp.523 – 541. http://www.emeraldinsight.com/doi/abs/10.1108/09596110910967782?journalCode=ijchm. Accessed November 2016.
[3] Marco Iansiti, Karim Lakhani, (2014). “Digital Ubiquity”, Harvard Business Review, https://hbr.org/2014/11/digital-ubiquity-how-connections-sensors-and-data-arerevolutionizing-business, Accessed November 2016.
[4] Domino’s 10-K report, Industry and Competition sections.
[5] Ibid.
[6] Min Kyung Lee, Rohit Verma, Aleda Roth (2015). Understanding Customer Value in Technology-Enabled Services: A Numerical Taxonomy Based on Usage and Utility. Service Science 7(3):227-248. http://dx.doi.org/10.1287/serv.2015.0105. Accessed November 2016.
[7] Domino’s 10-K report, Company Overview and Technology Innovation sections.
[8] Ibid.
[9] Advertising Age magazine, http://adage.com/videos/is-dominos-pizza-the-next-tech-giant/1145. Accessed November 2016.
[10] Bruce Weinelt et al. (2016). Digital Transformation of Industries: Digital Enterprise. World Economic Forum. http://reports.weforum.org/digital-transformation-of-industries/wp-content/blogs.dir/94/mp/files/pages/files/digital-enterprise-narrative-final-january-2016.pdf. Accessed November 2016.
[11] He, W., Zha, S., & Li, L. (2013). Social media competitive analysis and text mining: A case study in the pizza industry. International Journal of Information Management, 33(3), 464. http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1344302274?accountid=11311. Accessed November 2016.
[12] Domino’s press releases, http://search.proquest.com.ezp-prod1.hul.harvard.edu/abicomplete/docview/446997550/fulltext/545F7954BD18400DPQ/8?accountid=11311. Accessed November 2016.
[14] Advertising Age magazine, http://www.adnews.com.au/news/domino-s-reveals-tech-data-and-ai-plays-at-innovation-event. Accessed November 2016.
[15] Ibid.
It seems as though the big US pizza chains are racing through incremental changes to edge out their competitors by marginal amounts. Do you feel as though Domino’s has a sustainable advantage with how they’ve incorporated digital technology? It would be interesting to see if any of these pizza chains use technology to streamline the pizza making process and instead focus on the customer service aspect (instead of outsourcing to other delivery service companies).
Much as I detest the waterlogged crackers that Domino’s tops with some ketchup and stale cheddar and calls a pizza, I do think they are making a strong effort to progress in the digital space. You mention autonomous delivery- and indeed, just a few days ago I noticed an article describing how Domino’s has just made the world’s first pizza deliveries by drone [1]. As autonomous vehicles continue to receive enormous investment I think that autonomous food and especially pizza deliveries might be one of the first and most obvious (due to it simplicity and need for quick delivery) applications of the technology. You point out that UberEATS might take some of their delivery business- I wonder if this ultimately is a good thing for Domino’s as it’s a current cost of business they might not have to bear as the world becomes more “uber-fied” and Uber-like services continue to “figure out” package delivery.
Re: their apps, I would like to see them invest more in data analytics so that, for example, if a given location can expect a certain number of pepperoni pizzas to be ordered each night, they can already be making them before they’re ordered to shorten delivery time even further. As the delivery business continues to face heavy competition and new entrants, it seems to me that the quality of their product will become more important than ever before, as low-cost delivery will now be available effectively anywhere, so people will have to order a Domino’s pizza because they want a Domino’s pizza and not simply because they offer delivery. I found an interesting article describing how they are in fact taking some steps in this direction and integrating information from, e.g., their app, Twitter, Amazon, and the USPS in an attempt to better customer behavior and preferences [2].While I truly despise their “pizza”, I have a hard time faulting their efforts in trying to address these challenges to their business model.
[1] Hongo, Hudson. “Incredible! Domino’s Completes First Delivery of Terrible Pizza by Drone”. Gizmodo. 17 November 2016. Retrieved 19 November 2016.
[2] Marr, Bernard. “Big Data-Driven Decision-Making at Domino’s Pizza”. Forbes. 6 April 2016. Retrieved 19 November 2016.
Ha! @CaptainKoloth I happen to be a huge fan of the so-called crackers topped with ketchup by which you have characterized Dominos’ pizza … so I’ve been an active user of the ordering app and find it incredible engaging. In particular, Domino’s includes a minute-by-minute ordering timeline called the Pizza Tracker. From time-of-order to delivery, users on the app can view exactly what part of the pizza production process their food is in, which infuses both transparency fun into the customer experience. The transparency means customers are less impatient and annoyed about waiting for pizza, because their expectations are 100% aligned with what they see. The fun of it stems from being able to know exactly how and when the pizza is being produced (and by whom!). Although there are moderate arguments that the Tracker may lack full accuracy [1], it has certainly added entertainment value to an otherwise mundane process (from the customer’s POV).
Kristina, also am intrigued by the “Internet of Me” concept and how Domino’s has embraced that. Along with the drone deliveries mentioned by the Captain above, Domino’s has also released a widget on Facebook in which users can order via the Messenger app [2]. Domino’s is leveraging “Internet of Me” by continuing to bring its products to the fingertips of its customers.
Finally, I wonder about how Domino’s digital efforts are influencing its brick-and-mortar operations. If ordering online for delivery is an entirely seamless and easy process, have franchise sales revenues seen any decline? It seems like a greater number of large pizza chains are reducing their storefront footprint from restaurant style to more a carry out model. Perhaps continued downsizing is sustainable and would help reduce overhead operational costs while allowing Domino’s to prevail in the e-commerce space.
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[1] http://www.huffingtonpost.com/rev-joel-montgomery/dominos-pizza-tracker_b_5947734.html
[2] https://www.slashgear.com/dominos-brings-pizza-ordering-facebook-messenger-bot-to-us-15456336/
I, too, am a huge fan of Domino’s. I personally believe that it is in a different category of food than pizza, it’s more a ‘pizza-food’, much as nachos at a ballgame are topped with ‘cheese product’. The Pizza Tracker was indeed brilliant and ahead of its time.
Kristina, you failed to mention my favorite tech integration by Domino’s – my Alexa! Just like you can tweet or text Domino’s to get your favorite pizza ordered, I can tell my Amazon Echo to do the same with a simple voice command.
I’d be interested to see what Domino’s breakdown of in-store sales are compared to delivery – I would think delivery is much larger than in-store. As such, I agree with Kristina’s evaluation of the firm into a tech company. Should Domino’s completely abandon their brick-and-mortar locations? That would undoubtedly save on costs, but would the firm still be able to operate without these stores serving as marketing and promotion hubs.
(Also @RitaSkeeter, I’m watching HP right now)
One thing that Domino’s has done especially well is making their technology fun. When companies launch new platforms or technologies, there’s often pushback from consumers who are set in their established ways (think about Facebook redesigns in the past, for example), and the drive to get people to engage is often a tricky one.
For those of you who’ve used Domino’s online ordering system before, they try to make it an enjoyable experience. There are animations associated with each step of the process, you know the name of who’s preparing your pizza, and you have the chance to communicate with the staff (albeit with a limited number of fixed sentences). That, along with the fact that it’s a good way to assess when your pizza is ready/will arrive at your door, makes it fun to engage. Other firms could learn from that approach — although being in the pizza business does give you a leg up on having fun.
Hi Kristina! Thank you for the thoughtful post on a product that is held close to my heart. As a frequent user of the Dominos app, I was excited to read your post. I did not realize the Dominos created this platform internally. I tend to think the power of this application is the reduction of friction in the pizza ordering process. The first aspect of this relies on creating a profile so one does not have to input customer information every time. This makes it far easier for customers to order. Additionally, Dominos does a fantastic job marketing to its customers through the app. These notifications increase the frequency with which customers order pizzas, resulting in greater sales.
My concern with Dominos going forward is shift in food preferences towards healthier options. Dominos has historically tried to introduce a varied menu to appeal to customer demands though his frequently fallen short. I think its success going forward relies heavily on introducing healthier options, which will require greater operational efficiency to produce so many varied products. Digitizing the supply chain should help Dominos reduce costs.
Great article, Kristina! I ordered from Domino’s all the time in college and even then their website surpassed my expectations. Their site is engaging, and their online ordering system is easy to follow and it lets you easily track your delivery. I’m not at all surprised to see Domino’s staying ahead of the Internet of Things revolution. It’s cool to see Domino’s investing even in drones. Clearly staying ahead with technology is important to them. I wonder if in the future they will have less need for their brick and mortar stores and if they will switch to just delivery. They are integrating with more and more partners, so I have faith that Dominos will succeed with its technological innovations and will continue to be a staple of our future.
I find Domino’s adoption of the ‘Internet of Me’ concept quite interesting. Digital strategies such as this one provide companies with a large amount of data that puts them in a unique position to truly tailor their experience to the individual. Allowing customers to re-order their favorite meals is one approach to this but I wonder if Domino’s could take this a step further to increase sales. If I use my online florist to send flowers on a birthday or anniversary, I receive an e-mail reminder the following year as that date approaches with a link to the website. This has actually saved me from the embarrassment of forgetting a friend’s birthday in the past. I wonder if Domino’s could leverage the data it is obtaining on its customers to employ similar strategies – I can imagine there are people who order several pizzas to watch sports games with friends for example, and it could add further to the convenience element to have Domino start to use analytics to predict such purchases. Of course, there is always the risk of being labelled an annoying spammer for clogging customers’ inboxes with such e-mails so it would be important to approach this in a controlled way.
Marvelous topic and well-written article Kristina. Additionally a company near and dear to my heart. I believe that I’m one of those who almost exclusively orders online – utilizing Dominos’ online tracking system (akin to those utilized by Caviar and other food delivery services these days – where you can see your food in the process and understand how close it is to delivery) to set my own expectations. With an inundation of new competitors (both in the delivery space – e.g., Seamless/Caviar/Push for Pizza as well as the creation space – including healthier alternatives) – where do you believe that the future of Dominos’ lies? Who is its core future demographic?
Can a feature like the online digital delivery service where consumers can have a realtime feed into the status of their order be hacked? I have heard rumors that indeed dominos just follows a time based sequence that isn’t based on any human inputs, so it is more like an animation rather than a real-time update of that. Maybe it is necessary to do this in an industry in which any additional steps in the supply chain fulfillment leads to unhappier customers?
Thanks Kristina for this great article which discusses a company so involved in the day to day life of students like us!
I’m impressed to see all the efforts in dgitalization that you describe here, and I’m convinced that it will definitively give an edge to Domino’s in this competitive environment.
However, in line with the comments above, I would be concerned about the long term trend of pizza consumption, especially outside the US. Domino is directly threatened by underlying trends in the food industry: customers looking for healthier options, quality and reliable sourcing, organic food, local products, renewed interest for cooking at home…
Besides, from an ecological point of view, I’m not sure that food delivery is a long term solution neither.
Now that Domino’s is equipped with these strong digital tools, it should leverage them in its reflexion about its long term strategy.
Great post Kristina – as big lover of Domino’s, this hit home.
A few thoughts on your post:
– Very impressed with their digitalization efforts so far; for such an old-school business model to adapt is key
– To echo the comment above, I too am concerned about Domino’s place in the industry, especially as we start seeing a shift in customer preferences towards healthier options. Do you think Dominos will do a good job adjusting to this? (much like McDonalds has for instance by introducing slightly healthier options in their menu.
– I’m surprised that they haven’t outsourced their delivery efforts yet. It seems like a huge fixed cost to undertake. Agree that there is much room for improvement here.
Very interesting read! I am a huge lover of Domino’s and enjoyed getting to learn more about their investments in digital technology. I frequently use their mobile app and have been very impressed with its responsiveness and transparency. The experience is so painless that it encourages me to order from Domino’s more frequently than I otherwise would. Your post got me thinking about their traditional storefronts. I am curious to know how much business is done through carry-out versus delivery. I would assume delivery far outweighs the carry-out. It makes me think that maybe in the near future, Domino’s could reduce their real estate expenses by operating strategically located kitchens that do not offer the carry-out option. These kitchens could be small and in less valuable real estate spots (i.e., not street facing) and could help the team focus solely on cooking the pizza and the logistics of delivery. I wonder if this makes financial sense or if it will ever be a reality for Domino’s?
Very fascinating article on Dominos and its digital strategy. I do think that they, along with many of their competitors have effectively transitioned many of their operations and consumer touch points online. Today consumers much rather order a pizza through an online portal as opposed to calling or going in the actual stores. I wonder if there is a way for them to continue to invest behind digitization above and beyond what their competitors are doing to boast their competitiveness.