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Domino’s shifts marketing focus to price as it ramps up investment

 

Domino’s plans to ramp up marketing investment by around 45% in the second half of 2022, as it shifts focus away from its brand building ‘Domin-Oh-Hoo-Hoo’ campaign to “accelerating spend”.

 

The switch to price-focused activity has been made possible after the chain came to an agreement with franchisees in December, enabling it to “fully align” its systems. This led to the launch of its first national price campaign in two years.

 

Talking on a call with investors this morning (2 August), outgoing CEO Dominic Paul said: “Our value proposition is strong and our message will be amplified in the second half with a significant increase of our marketing activity.”

 

Earlier this year Domino’s ran a campaign offering customers 50% off when they spend £30 on pizza and has since rolled out additional campaigns on collection, which the brand has been working with franchisees to “learn from”.

 

In the last few weeks it has also started trialling an ‘£8, £10, £12’ offer, which Paul said has performed “well above” expectations so far.

 

Domino’s will now be “accelerating media spend” in the second half as it focuses on “sharpening our message and ensuring we offer customers compelling value”.

 

Our value proposition is strong and our message will be amplified in the second half with a significant increase of our marketing activity.

 

Dominic Paul, Domino’s

He said the fourth quarter will be the “biggest of the year” in terms of marketing spend, as it dials up communication ahead of key events such as a men’s FIFA World Cup, which kicks off in November. He said the tournament represents a “real opportunity” for the brand so it will “prime the pump for sales” towards the end of the summer period.

 

Paul, who will be moving to Whitbread in December, described weighting marketing investment towards the back end of the year as “a bit back to front”. Last year the second quarter accounted for its highest spend thanks to the launch of the Domin-Oh-Hoo-Hoo campaign to mark lockdown restrictions being lifted and the men’s UEFA Euros tournament. Conversely Q2 in 2022 will represent Domino’s lowest marketing spend of the year.

 

Domino’s to invest £20m in digital acceleration

Despite marketing spend being lower, the brand increased market share in the UK takeaway market to 6.6% in the second quarter of 2022, up from 6% in the same period last year.

 

Total orders grew by 2.1% in the first half, with like-for-like sales increasing by 2.4%. Underlying profit before tax hit £50.9m, down 16.3% compared to 2021, with the pizza chain saying it expects profitability to be “second half weighted”.

 

Elsewhere, Domino’s launched a trial with Just Eat in 136 stores in the first half, which Paul said is showing “encouraging early signs”, as the tie-up is giving the business access to a new customer base. The brand is now planning to extend the trial to around a third of its stores across the UK and Ireland.

 

“We believe this can be a tailwind for future growth,” he added.

 

Digital transformation

On announcing its 2021 full year results in March, Domino’s committed to investing around £20m in its digital transformation over the next three years, with a particular focus on personalisation and the development of its ecommerce app, as well as in-store innovation to enhance the customer experience.

 

More than 90% of Domino’s sales are now digital, with the app accounting for 43.9% of system sales, a rise of 3.1 percentage points compared to the first half of 2021.

 

Domino’s now has 5.3 million active app customers, an increase of 5% over the last six months, with Paul claiming app customers have a higher lifetime value than other customers, “primarily due to higher levels of ordering frequency”. The chain’s total active customer base is up 2% over the period.

 

“We’re now providing local franchisees with app-based metrics at a store level to accelerate penetration as we push our app to be a dominant order platform,” said Paul. “This means our franchisees can now see the percentage of app users and order frequency at store level.”

 

Personalisation is also high on the agenda, with Domino’s using its customer engagement platform to develop initiatives that have helped to improve the customer churn rate versus the same period last year, which is continuing to drop.

 

“Where we’ve started implementing personalisation logic into our CRM communications, such as meat versus veggie preference. We are seeing enhanced customer engagement rate improvements of up to 60%,” added Paul.

 

Domino’s has also been trialling upsell opportunities, such as dips or extra cheese, which have both delivered “incremental value” and there are “more exciting initiatives” being launched in the second half of the year.

 

Understanding customers

Domino’s did a lot of work during Covid to understand the difference between delivery and collection customers, which revealed differences between the two segments.

 

Domino’s refreshes the data regularly and while there is some overlap “on the edges” with people moving between delivery and collection, the majority of the time customers opt for one or the other, so the brand has a different strategy for each group.

 

“Fundamentally it is a different occasion so we have effectively got a very clear collect strategy, which is buy one get one free with a very strong value message, and then a different set of promotions for delivery because it’s a different mindset and therefore it should be a different offer,” Paul added.

 

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