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Great growth story, but a serious problem at its core
Back in 2010, Domino's was already an international success with 6500 outlets spread across the globe. Back then, it was celebrating its 50th anniversary. Business numbers were looking good, but there was something wrong at the core of its business: a 2009 consumer taste survey that it conducted gave very unflattering feedback on what consumers said about the taste of Domino's pizzas, especially when compared with its US rival, Papa John's. "Tastes like cardboard" was one such feedback that made the company sit up and take note.
The company could have simply bashed on and ignored this feedback drawing comfort from its international growth driven numbers. Or, it could have kept this feedback under wraps and worked diligently to improve the taste of its pizzas. It chose to do neither, but went ahead with what was then seen as a very high risk strategy: it made the survey results public, it publicly acknowledged that consumers didn't like the taste of its pizzas and it started working ground up to improve the taste of its pizzas by addressing every aspect of what went into making its pizzas.
Oh yes we did
Patrick Doyle, CEO, led this initiative from the front. Everyone in the company from the head chef down to the delivery men contributed not just to the effort to re-create a better pizza, but more importantly, send out a strong consumer message with a very catchy line:
Did we actually face our critics and reinvent our pizza from crust up?
OH YES WE DID.
The company posted a "Pizza Turnaround" documentary in a dedicated microsite which readily acknowledged the challenge and charted out exactly what the company was doing to address it and meet consumer expectations.
Check out the Pizza Turnaround microsite
The company engaged with consumers actively on social media to keep them posted on the Pizza Turnaround story. The "Oh yes we did" campaign was prominent across print and web media, in TV and radio. CEO Patrick Doyle went on an overdrive in his PR thrust, talking brutally honestly about what consumers said and what the company was doing to improve its pizzas and meet their expectations.
Results of brutal honesty
When the company conducted taste tests in 2011 after it re-worked its pizza from the crust up, results showed that more consumers were now preferring the taste of Domino's over its rival Papa John's. Many feared that by publicly acknowledging the poor results of its consumer survey, Domino's would only attract negative attention especially among its loyal consumer base who perhaps weren't as vocal as those few who participated in the survey. Brutal honesty, it was feared, would do more damage than good.
Results however proved otherwise. Consumers loved the fact that the company had publicly acknowledged what many believed was true anyway, and was making a sincere attempt to correct its flaws. Instead of being perceived as an arrogant giant who doesn't listen to consumers, it suddenly became the underdog who is determined to fight a rival who was acknowledged as superior. All of us root for an honest underdog, and the US consumer was no different. Quarterly profits in the 6 quarters after the launch of this initiative beat analyst estimates on the back of strong sales. Domino's share price in those 18 months went up 233% as opposed to 37% for its rival Papa John's. The consumer and the stock market had delivered their verdict: brutal honesty and sincerity of effort do work.
Lessons for us in the distribution business
What we are about to say now may seem controversial, but one hopes it will be taken in the right spirit - in the spirit of brutal honesty.
In the financial distribution business, the segment that has by far been the most profitable in recent years has been insurance selling. And the vertical that has been at the forefront of this is bancassurance - banks selling insurance policies. The numbers look very good - top and bottom line. But at the core of this business, there is something that is just not right - rampant mis-selling. And this has been the case for long. Many investors have privately complained, some have done this publicly. In a sense, the bancassurance business is like where Domino's was in 2010 - robust growth, but disquiet at the core.
Banks can ignore this and continue with business as usual. Some may not publicly acknowledge the issue but may be at work diligently to try and correct the issues within their branch network and within the approach towards this business by the senior management. What if a bank that has seen some flak from its customers, were to take a leaf out of the Domino's Pizza Turnaround story? What if a bank actually came out, spoke frankly about the problem at the core of its bancassurance business, and got its entire team to contribute meaningfully to fix it? What if the bank were to actively engage with not only its customers but also the public at large about its honest efforts to correct the problems at the core of its bancassurance business?
If this bank were to really fix the issues and not just paper over them, and were to institute processes that actively deter mis-selling and go the extra mile in right selling insurance and investment products, while keeping the public actively engaged on its efforts, what do you think will be the impact on its business? Will it lose trust among its customers and dry up its revenue stream from cross-selling? Or will it encourage not only its customers but also those of competition, to try out its "new improved" right selling approach towards insurance and investment products? Will it emerge a winner or a loser by imbibing lessons from the Domino's "Oh yes we did" campaign and the Pizza Turnaround initiative?
Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.
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Wise Advice: Evolve
The growth of Domino's Pizza into an international giant has been well chronicled, as has its "30 minute delivery challenge". But, one story about Domino's that's perhaps less known but deserves to be better known, is the story of its "Oh yes, we did" campaign back in 2010. And in this story lies an important lesson for large financial distribution powerhouses in India who have been reporting significant growth in their insurance and investments selling businesses, but perhaps have to contend with a problem at its core - and the lesson from Domino's can be a very useful guide on exactly how to do this.