Domino’s Pizza – Brand Stretching

Domino’s Pizza is the U.K’s largest pizza delivery chain with almost one thousand franchises across the country.  Hitherto, the company has benefited from cash-strapped consumers staying in and ordering a take-away meal, rather than eat out at an expensive restaurant.  This, and the growth of online ordering through their website and smartphone apps, has helped boost sales by 9% this year.  However to keep this momentum rolling, Simon Wallis – marketing director – has decided to introduce gourmet pizzas aimed at the up-market consumer.  This is an example of an upward brand stretch: expanding a brand into more expensive, higher quality product ranges.

But will middle class consumers be prepared to pay for a premium take-away?  Will they even want to purchase from Domino’s Pizza?

The benefits are pretty straight-forward.  By focusing on a more upmarket consumer, the company can charge higher prices and increase their profit margins.  Moreover, the new product range will be great for the company’s reputation; a new product is far more effective than any advertisement, PR or branding at convincing consumers that the firm produces high-quality products.

This is particularly important for Domino’s Pizza, who are infamous for selling greasy pizzas to students and teenagers.  Hence, by launching a new range pizzas – which are easily distinguishable from their old menu, made from healthy ingredients and use thin crusts – they may find their brand image improves as the more affluent market become regular users.

However, brand stretching is a very risky business strategy – just how far can a brand stretch?  That is a question marketers at Domino’s Pizza must have thought long and hard about.  The problem with focusing up-market is that any company still has its old brand image associated with any new product ranges; this is bad news for Domino’s Pizza.  The firm’s brand image has never been good; consider the YouTube scandal a couple of years ago.  Can the firm convince this new market segment that the firm produces luxury pizzas?

The main problem is I am not sure that the new product range of gourmet pizzas is enough to convince the premium market that the firm can produce high-quality pizzas, even if it can.  The mistake I feel Domino’s Pizza have made is that they have focused too heavily on the product.  Although the actual product is the single most important factor in creating a brand image and is often over-looked, I feel that in this case other branding issues have been forgotten about.

For instance, the ‘People’ aspect of a service.  The company has given no thought to the delivery of these new gourmet pizzas.  Hence, when you pay a premium price for your luxury pizza, you will still receive it in a cardboard box from a man who arrived on his scooter, wearing an awful looking company cap.  It is hardly a service that boasts ‘luxury’.  Thus, although the pizzas may be amazing, this is irrelevant if everything else from the brand image to point-of-sale reminds the consumer of standard take-away food.

Ultimately, Domino’s Pizza have been very successful up to now at focusing on the budget range of the market.  They do particularly well at selling to students!  This makes me wonder why this brand stretching is necessary.  All good marketers know that true marketing is about building relationships with customers; these are highly profitable.  Hence, the company would be better off trying to retain their current customers, rather than trying to attract new up-market consumers.

Do you feel Domino’s Pizza have a good brand image?  If so, do you feel this is good enough to move up-market?

© Joshua Blatchford, author of Manifested Marketing, 19/08/2011

Toyota and Geely – Provenance Paradox

The Harvard Business Review recently made me aware of the effect provenance paradox has on a brand’s positioning. Provenance paradox is the issue marketers have to deal with when their brand is assessed by consumers according to the country of origin. Hence, if I ask you who makes the best chocolate, you’re likely to think Switzerland or Belgium; likewise, France make the best wines, Cuba make the best cigars and Germany make the best cars. In the previous examples, this benefits brands associated with their country’s reputation – such as Volkswagen of Germany.

But, what happens if a company does not want their brands judged according to their origin? As positioning of a brand in consumers is fundamental to successful marketing –  provenance paradox can be a critical weakness in any the most fool-proof of marketing strategies. In this post, I will contrast two different responses that two different car manufacturers have adopted to over-come this negative brand association.

The first way of countering provenance paradox is through selecting a strong positioning strategy that dominates consumers minds. This is the approach used by Toyota in 1989 when they wanted to break into the American market for luxury, saloon cars – market development expansion – while competing against German manufacturers like Mercedes, Audi and BMW. To do this Toyota adopted a brand extension strategy to alter their value proposition; thus, Lexus was created. Lexus became part of Toyota’s multi-brand strategy to appeal to different a different market segment from Toyota’s that wanted affordable luxury. Hence, the value proposition for consumers was ‘more for the same’ – Lexus offered greater benefits for the same price as their German rivals. Consequently, a competitive advantage was created as a result of price benchmarking and advertising directly comparing the value of Lexus to competitors. This meant that the parent company, Toyota, was hugely successful in differentiating their offerings.

Geely, however have taken a very different approach. Geely, are a Chinese car manufacture and, until this year, only made budget or Rolls-Royce copy-cat cars for their national market. At this point, provenance paradox – China being famous for low-cost, low-quality products – was not a problem as they were positioning ‘less for less’ to their consumers. However, expansion into international markets meant that they would have to offer greater quality. Moreover, as expensive purchases like cars are considered complex buying decisions, consumers need reassurance from the brand they are dealing with. Hence, Geely acquired Volvo, who are synonymous with Sweeden’s reputation for innovation and creative design. This form of upward stretch allows Geely to sell more up-market cars for a higher price, while hiding the identity of the parent company. This has been a smart move – I bet you have heard of Volvo, but you are far less likely to be aware of Geely. Hence, Geely have used different methods than Toyota to implement a similar multibrand strategy.

Despite the success of both these strategies, there are inevitable drawbacks to both approaches. Toyota’s decision to reposition their product range of luxury autos through the creation of a new brand requires significant, long-term investment. This carries huge risk – more so than acquiring a new brand because if Lexus cars was to flop, sales of Toyota cars, their cash cow if you like, would also decline. On the other hand, Geely’s upward stretch of their product line also has its drawbacks. Namely, the company may lack the experience and skills required to manufacture and market high-quality cars. furthermore, the acquisition process is highly complex and – such is the case with any form of merger or takeover – Geely’s culture may conflict with Volvo’s, resulting in management difficulties.

Check out these links to see there differences in brand value and culture. Here Volvo claim to be market-leaders in safety; this suggests a conservative, prudent approach to business by senior management. Geely, on the other hand, are keen to stress entrepreneurialism and diversity. This spells out a more risky corporate attitude that simply may not go down well in Volvo’s boardroom.

This dilemma poses a question: what is the best way to overcome provenance paradox? Unfortunately, there is no answer. How a firm choose its marketing strategy depends on its strengths, weaknesses, opportunities and threats; moreover, these need to correspond to external changes in the political, economic, social and technological environment. Hence, a SWOT and PEST analysis should identify the best strategy for a given firm in a given situation. But, if I were to choose which strategy I respect the most, Toyota’s repositioning is what I consider ‘true marketing’ – acquiring another brand is a bit like cheating.

© Joshua Blatchford author of Manifested Marketing 20/12/2010

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