Dominos: Econometrics

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Dec 10, 2018
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After sustained success since launching in the UK, Domino’s sales growth slowed for the first time in 2011 and 2012. The likes of Just Eat and Hungry House were driving changes in consumer expectations and behaviour. Traditional rivals were redoubling their efforts and copying our marketing strategy, which relied on a calendar of short-term aggressive promotions and NPD. We needed a new marketing and communication strategy that could be implemented immediately. A strong foundation of evidence would give us the confidence to take the brand in a new direction.

We built a hugely detailed modelling program to completely challenge assumptions around short-term response strategies, investigating all key areas of the business – national marketing, local marketing, all sales channels and even pricing strategies. Whilst many brands are using data to optimise the short-term ROI of targeted offers, our data pointed towards the need for a long-term focus on brand value. This meant that from 2013 onwards, our strategy was to stop optimising pizza promotions and instead focus on distinguishing the brand through pizza moments. Whereas once we were known for BOGOFS and stuffed crusts, Domino’s would now be synonymous with great family occasions.

Over this period we have built an increasingly sophisticated econometrics programme. Over 100 models reflect the complexity of the Domino’s business. Our core models are regional and cover all four sales channels, from a walk-in order in London to an app order in Glasgow. We collect granular franchise data to model local versus national media and examine the price elasticity of specific products and how that varied with different levels of discount. Three key findings reversed the category conventions Domino’s had previously established:

  1. Focus on long-term brand-building. By determining that optimum discount levels were up to 5% lower than typically set, we demonstrated a need to be less reliant on discounting and to improve perceived long-term value. A new brand communications model, Greatness, launched in 2013. We identified an immediate ROI uplift of 40% from our new approach.
  2. Shift to value based consumer targeting: We’ve re-engineered performance marketing, focusing on valuable customers, not lowest CPA, reducing investment in channels that don’t deliver incremental sales by attributing the sales contribution of acquisition media across all channels. This has enabled us to double e-commerce revenue in three years whilst actually reducing our digital performance media budget by one third, which we invested in brand communications.
  3. Managed evolution away from the doorstep: With national media nearly 4x as effective as local, we found the right balance to fuel growth, building a business case to reduce the reliance on, and frequency of, menus through the door. 

We’ve built our plan around brand-response campaigns that we’ve become distinctive for (like Winter Survival, Big Night In and Pizza Legends), which deliver higher short- and longterm ROI than a series of stand-alone promotions.

Results

Since 2013 our models show that marketing communications generated £230m in incremental revenue, and have given £287k in profit to every single Domino’s franchisee.

Media ROI has increased a further 19% since 2011 as a result of implementing recommendations based on our econometrics, continually increasing the effectiveness of every pound we invest.

Domino’s are now the number one pizza brand by market share and preference. Domino’s revenue and profit have increased, like-for-like sales growth has increased year-on-year, and share price has doubled since 2013.

Like-for-like base sales have increased from £11.5m per week to £15m per week since the launch of Greatness, meaning that both mature and new stores now generate more sales.

As a brand and business we’ve realised Greatness, thanks to an econometrics programme designed to give us business intelligence and marketing insights. These have not just optimised short-term gains, but shaped strategic decision-making.

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