They were definitely dropping some “New Coke” references in those first few months. But Patrick Doyle and his leadership team would just smile at each other. No matter what the media pundits said, they knew they were right.
When Domino’s Pizza made the decision to scrap its old pizza recipe in 2009, Doyle’s team had amassed a year and a half’s worth of data that said customers viewed Domino’s as a convenience brand first. They ordered Domino’s for a pizza in 30 minutes, not for quality food. Customers perceived the pizza itself as a brand weakness.
It’s something the leadership at Domino’s never really took to heart. Like its customers, Domino’s leaders had always viewed their specialty as convenience. Any complaints about the food would be offset many times over by the customers who kept coming back for the efficient service. It’s a philosophy that made Domino’s the worldwide gold standard in pizza delivery, with yearly sales in the billions.
That all changed in early 2008.
“We had launched a new ad campaign called ‘You Got 30,’ which kind of took us back to our roots,” says Doyle, the president and CEO of Domino’s Pizza Inc. “While we weren’t guaranteeing anyone a 30-minute delivery, we were reminding them that most of the time, they’ll get their pizza in 30 minutes. The campaign emphasized how Domino’s saves you time and what you could do with that 30 minutes.”
The campaign fell on deaf ears. Consumers had heard it all before.
“They simply did not care,” Doyle says. “The consumers who already used us because they appreciated the convenience already knew what we were telling them. Those that didn’t, who said the convenience factor was great but we needed better food, it didn’t change their minds about anything. So it was right then, in March 2008, about two months after we launched that ad campaign, that we decided we needed to go back to the drawing board with our pizza.”
Take a bold step
To this day, it’s something of a parlor game at Domino’s Ann Arbor headquarters: Who else in the world of business has admitted an inferior flagship product, scrapped it and rebuilt it from scratch?
“We still can’t come up with one,” Doyle says. “The closest example I ever heard was an ad in the late ’60s from Volkswagen, which had a picture of one of their cars, and under the picture it said ‘lemon.’ They were dealing with some quality perceptions head-on, but it was a single print ad from 45 years ago. We have wracked our brains, and our ad agency’s brains, to come up with a comparable example where a company has come out and said, ‘Our product wasn’t good.’ We haven’t yet.”
To make the product better to the eyes and mouths of customers, Doyle and his team had to go directly to the source. The first step was to listen to the people who had an ax to grind with Domino’s. Throughout 2008 and into 2009, Doyle and the rest of the company’s leadership stayed quiet, listened and took their verbal lumps as consumers launched repeated salvos, comparing the crust to cardboard and the sauce to ketchup, among other things.
“We did every possible kind of research,” Doyle says. “We were doing qualitative research like focus groups, where you’re getting people into a room and having them help you get a sense for where the opportunities were. Those were the comments you ended up seeing in the commercials themselves. But then, we also went out and tested every possible ingredient change, every combination of new sauces, crusts and cheeses, until we thought we had it optimized. Then, we took the new pizza ideas to our most loyal customers to see if they’d appreciate the change. We took it to people who weren’t doing business with us. We went to kids, we went to every possible demographic group and kept testing it.”
The rounds of data gathering and testing put Domino’s on the path to wholesale product change. The recipes for the crust and sauce were completely remade, and new cheese would be used.
Doyle and his leadership team had their new product ready for rollout by the fall of 2009. Then came the next step: explaining themselves, first to the company’s 4,900 U.S.-based franchisees, then to public at large.
State your case
The biggest momentum boost for Doyle and his team might have come with a show of hands.
In the weeks leading up to the rollout of the new pizza, the corporate leadership at Domino’s held a series of meetings around the country, meeting with the leaders of all franchise locations.
“We had five meetings over the course of a couple of weeks,” Doyle says. “We showed them the research and talked to them about customer perceptions of the pizza. We had them sample the old product and the new product, and laid out all the implications for them.”
At one point during one of the meetings, Doyle had the franchisees sample the old and new versions, then vote for which pizza they preferred.
“At one point, we did a show of hands,” he says. “It was nearly unanimous. Out of over 1,000 franchisees in the room, there were 12 who preferred the old pizza. It was absolutely overwhelming. We made the case, we allowed them to give us input, but ultimately we had overwhelming support from our system. And that is maybe the most important constituency. Those are the people who pay us to manage the brand. They’re the ones who are relying on us to do the right thing.”
But Domino’s is an industry giant and a public company to boot, meaning the convincing didn’t stop there. When Domino’s made the announcement near the end of 2009, members of the media and pizza-consuming public were quick to whip out references to New Coke, the famous 1985 business blunder in which Coca-Cola reformulated its flagship beverage, resulting in a massive consumer backlash and, ultimately, the reintroduction of the old formula as “Coca-Cola Classic.”
However, Domino’s reasoning for changing their pizza recipe was fundamentally different from the reason Coca-Cola changed its formula a quarter-century ago.
“Interestingly, while New Coke won in blind taste tests, if you went to Coke customers, they’d tell you that the taste of Coke is why they bought the product. It’s what they were used to,” Doyle says. “When they changed the formula, they were messing with what made Coke what it is. What made Domino’s a household name was the fact that we deliver really quickly. We didn’t build our reputation around the taste of the old pizza. So it was a far different level of risk involved with changing something that consumers considered a weakness. At Coke, they were changing something that consumers considered a strength.”
By the time the New Coke questions came raining down, the new pizza recipe had already caused a spike in sales. The company’s first-quarter U.S. sales in 2010 were up 14.3 percent over 2009. Year over year, Domino’s finished 2010 with a 9.9 percent bump in sales.
“It actually made the New Coke questions kind of humorous,” Doyle says. “The fact that sales were up double digits made it very easy for us to say with confidence that we weren’t pulling a New Coke. Whenever we’d get the New Coke question, we’d just kind of smile at each other.”
But before Doyle and his team could chuckle at the New Coke references, there was still a great deal of work to be done. In December 2009, Domino’s had to retrain 4,900 franchises on how to make a pizza. Corporate leadership had to ensure that the old ingredients ran out and new ingredients were stocked as close as possible to the changeover period, which was the week between Christmas and New Year’s Day, when Domino’s rolled out their first ad campaign touting the new pizza.
It was a massive logistical balancing act, and it had to be carried out in the span of several weeks.
“We trained a hundred trainers, they each had 50 stores to cover, and there are typically two to three people in each store who are making the pizzas,” Doyle says. “We’d have the trainers organize the pizza makers into groups of 10 to 15 people per day. Over the span of a couple of weeks, each trainer probably trained about 150 people. You just get the people into a store and go to work. You show them how to do it, and you don’t let them leave until you’re confident they can do it right.”
The scope of the transition didn’t allow for a completely clean break between old and new. There was a period of about a week just before Christmas when a given store could have been selling the old pizza or the new.
Despite the months upon months of research, communication and training, Doyle still had a knot in his stomach as the initial rollout was taking place. Despite overwhelming evidence that the consumers wanted an improved pizza from Domino’s, there was no fallback plan if it failed. Doyle and his staff had to completely commit to the new product, because they were going to finish destroying the reputation of the old product by openly admitting its inadequacy. It was an all-or-nothing proposition.
“I remember one of the meetings with the franchisees,” Doyle says. “One of our greatest franchisees raised his hand and asked a great question: ‘I’m on board with the changes, but what do you do if this doesn’t work?’ All I could do was laugh and say, ‘My successor will have a really hard time dealing with that.’ There was no Plan B. There couldn’t be. On the plus side, when you’re facing something like that, it does tend to help you focus more.”
Domino’s, which generated $6.2 billion in global sales in 2010, also rolled out a similar product change in Mexico. The company’s overseas markets were not altered because they already use different ingredients from those used in North America.
Make meaningful change
Doyle admits that much of what happened is unique to Domino’s, but there are still some lessons about change that are applicable regardless of the nature of your business. Chief among them, you need to make change that has an impact. Otherwise, your customer might not even notice.
Don’t change the label and expect consumers to embrace it as a real, meaningful improvement.
“There are a lot of incremental changes made by companies and trumpeted to consumers as something completely different,” Doyle says. “But consumers tune it out. They know it’s not true. They recognize it for what it is. You have to do things that are material in order to get consumers’ attention.
“You walk up and down the aisle in the supermarket, and there are all kinds of new and improved products, with starbursts and arrows pointing to what is improved. But all they did was change the color of the cap on the jar. And then the company is surprised that consumers don’t get excited about it. You lose credibility as a brand and a company if you so clearly overstate the magnitude of the change. You have to make changes that are real and relevant to consumers, and big enough that they’re going to notice.”
The Doyle File:
Name: Patrick Doyle
Title: President and CEO
Company: Domino’s Pizza Inc.
Born: Midland, Mich.
Education: B.A., University of Michigan; MBA, University of Chicago
First job: I was mowing lawns and maintaining some tennis courts when I was 12 or 13 years old. So pretty much as soon as I was tall enough to reach the lawn mower bar.
What is the best business lesson you’ve learned?
The fundamental lesson is that every business is about people, and the companies with the best people are going to win. If you’re recruiting the best and training the best, and getting the best excited about what the company is doing, you’re going to succeed.
What traits or skills are essential for a business leader?
The ability to listen well, the ability to build consensus when you need to build consensus and the strength of your convictions. Once you’ve listened, you go out and lead. That takes a bit of confidence sometimes.
What is your definition of success?
There are a lot of basic ones in terms of creating shareholder value, growing sales and earnings. But personally, what is most gratifying to me is to see the people we’ve brought into this business, whether employees or franchisees, winning and succeeding. It’s about seeing them build great careers and great businesses.