How Much Can Innovation Sell Pies?
by Robert F. Brands with Jeff Zbar
First, there was pizza – round dough, with cheese, sauce, and toppings.
Then, competition arrived, and the simple pizza pie simply wasn’t enough.
Delivery companies began a string of innovations. Hand-tossed, think-crust, “Chicago-style,” stuffed crust and “Meat Lovers” were among the pies du jour. Then one chain rolled out cheesy sticks. Another offered various desserts. Then, a line of pasta – in plain tin pans, or in bread bowls.
Most recently, the New Product Development team at Domino’s posed a remarkable innovation: It created what it called a “better” pizza. Aggressive marketing hyped its culinary research into its new taste, and the company rolled out its new pie – seemingly same as the old pie, only tastier.
Innovation in the delivery pizza category is as circular a process as pizzas are round. This doesn’t include sit-down pizza restaurants, like California Pizza Kitchen or the string of “coal-fired” pizza chains.
Innovation, in pizza or Corporate America, is a double-edged sword. Pizza companies invest immense time, energy and brain power conjuring up the next innovation. With industry sales softening and competition razor sharp, a simple innovation can turn the tables. Yet, innovation done “Just Because” can fail miserably.
Innovation extends beyond mere product. A broad approach to innovation based on consumer needs or habits can invite loyalty and deliver long-term returns. Look at brick-and-mortar companies that have introduced online innovations – beyond the du rigeur services like online ordering – like the ability to list and keep lists and favorites. This brings customers back, and boosts the relationship between company and customer.
Domino’s recent move toward taste is a noteworthy innovation for a number of reasons. Essentially, the company went back to the foundation of its business: “Build a better pizza, and they will come.” Domino’s – even the entire $22 billion pizza delivery category – needed something. At a time when sales across the category were as soft as unbaked dough, the market responded. The company recently reported a 14.3% rise in comp sales among stores open at least one year – a remarkable, almost unheralded feat in the fast-food business. Christopher Muller, a professor of hospitality the University of Central Florida in Orlando, told USA Today, “No one in the industry thought it was going to be this successful.”
But innovation trends continue. One of the most recent “innovations” revolved around pricing. Five-dollar pies, or $5.55, or three for $15. Buy one, get a bottle of soda. Toss in some bread sticks with the latest dipping sauce. But pricing alone isn’t innovation. In fact, pricing doesn’t drive long-term loyalty or differentiation. Pricing just begets lower pricing from the competition, which drives down margins and profitability.
Alas, price and taste alone aren’t long-term fixes, either, especially when a company is public and answers to Wall Street as much as it does its Main Street. Though its stock had been up 70% over the past year, Domino’s stock dipped almost 13% soon after news of its double-digit sales growth. It seems some had projected even stronger growth following the chain’s marketing and discounting.
Then there’s the issue of the original brand or concept promise delivery pizza heralded: Speed and service. Domino’s was built on a 30-minutes-or-free mantra. The idea was, it’s hot, or it’s free. Over time, it seems they’ve strayed from this commitment. Although this is historically has been an imperative in many delivery chains’ success, they must stay focused on this.
So does the customer really want a $5 pie? Or a tastier pie? Or meat, pasta or cheesy sticks?
Or does the customer want a hot pizza fast? (Hint to pizza delivery companies: That might be the next game-changing innovation).
Between the recession and innovations in the frozen pizza business, forces have been brutal on delivered pizza companies. This makes Domino’s taste “innovation” all the more noteworthy.
Will this sort of innovation continue. Given market competition, it will have to. These companies will have to find new lures to hook customers. But few innovations seem to deliver long-term allure. As Doyle conceded to USA Today, “If we did this every quarter for seven years, we’d be bigger than U.S gross domestic product.”
If you’re an innovation officer or employee charged with new product development, there’s much to learn from the pizza industry’s example.
If you’re a pizza lover, you can only hope the industry’s pursuit of innovation continues.
Robert Brands is the founder of InnovationCoach.com, and the author of “Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival”, with Martin Kleinman – published March 2010 by Wiley (www.robertsrulesofinnovation.com).