The REAL Domino Effect

          Think of delivery pizza and you don’t necessarily think of A-plus cuisine. But how about being considered grade-F cuisine only because you traditionally can’t go further down the alphabet on the grade scale? Well, that’s where Domino’s pizza found itself in 2008’s Brand Keys index of consumer taste preferences among national pizza chains, tied for dead last with Chuck E. Cheese’s—ouch[i]. After sales fell 6% in 2009, then CEO, Dave Brandon, and then President, now current CEO, Patrick Doyle, decided it was time to act on their plan for change for the nation’s largest pizza delivery chain. From 2007-2009, Domino’s had been ranked first in convenience and price among most customer satisfaction surveys. However, they had also consistently ranked near the bottom on taste. It was time to go for the “Trifecta” and get all three near the top of the rankings. How did Domino’s go about pursuing it? They listened to their customers (there’s a novel idea).

            Brandon, Doyle, and the Domino’s team decided to do a complete overhaul of its core product. For those of you playing at home, that’s an incredibly risky thing to do. Need I remind you of the time Coca-Cola changed their taste? Drinkers and fans almost unleashed carbonated anarchy. Brandon and team were well aware of the risks and ready to take that chance when he commented, “Once you’ve built a brand, that’s your brand. To change it means that everything you’ve stood for isn’t right…It’s time to make things right”[ii]. Not only did they completely retool the pizza’s crust, sauce, cheese, and other ingredients, they also retooled how they would re-establish their brand.

                                                            (Watch it. It's very insightful)

            Saying “sorry” is one of the hardest things to do. But that’s what Domino’s did; they launched a major ad campaign to apologize for their subpar product that they had been putting out and vowed to make it better. For starters, people love it when others own up to their own mistakes; people love it even more when the people owning up are millionaire executives who work for billion-dollar companies. I, for one, absolutely loved it. It takes some serious…cojones (that’s Spanish for “testicular fortitude”)...to do that. I never saw AIG or banks go around publicly apologizing for having to get mass bailouts from the government, or Toyota create an ad campaign apologizing for the hassle it causes consumers when a part is recalled. So with their apology part complete, they took the next step, commitment to correcting the problem. They did an excellent job of demonstrating to the customer that they were listening and were going make a whole-hearted effort to do their best at fixing what was wrong. They asked customers to send in pictures of their deliveries, cited specific examples of customer complaints in their campaigns, “…the crust tastes like cardboard”, came out with ads showing where the ingredients are grown and harvested, and cited surveys that customers had previously taken[iii]. In continuation with their revamped product, apology, and commitment to correction, Domino’s also decided it was time to repair their image.

            Domino’s brand image had taken a hit, but through research, social media utilization, and continued feedback loops with customers, they gained a new, more respected one. The pizza giant spent two years re-tooling their core product and innovation of their overall menu in order to provide more options to customers; currently, about 80% of Domino’s menu items were introduced in the last year and a half[iv]. Next, they tackled an area that had traditionally been a thorn in their side—social media. For years, blogs had been degrading Domino’s pizza quality. Domino’s instead reached out to these food bloggers who had bashed them in the past and took proactive steps to sway them by providing them with research, new surveys, and in some cases, samples. Furthermore, they began monitoring Twitter for feedback about their new product and ways to correct continuing errors. Finally, Domino’s invested time and effort into communication with customers to re-illustrate that they had been heard and their opinions would be valued. Most recently, Domino’s has run an ad about their new chicken and their “Rate Tate’s Chicken”, Tate being Tate Dillow, the head chicken chef. This involves more customer feedback and opinions about this new product by selecting varying levels of satisfaction about the taste of the chicken. To quote Patrick Doyle from this commercial, “I wanna hear from people. That’s the way we run this company.”

            So what did this entire product and brand image overhaul mean in terms of numbers and success to Domino’s? Was it worth the risk? ABSOLUTELY. After the ad campaign began to air in late 2009, profits more than doubled the very next quarter from $11 million to $23.6 million. Full year profits also surged by 48% to $79.7 million in 2010 from $54 million in 2009[v]. If that isn’t enough, Domino’s vaulted to No. 1 in the 2010 Brand Keys taste index[vi]. Not too shabby if you ask me. So, much like Hardee’s similar apology campaign in 2004, the risk was completely worth it. Not only did profits increase, but customer satisfaction appears to be at an all-time high. Currently, Taco Bell is taking a page from Hardee’s and Domino’s and running a campaign to combat speculation about the quality of their meat recipe by telling consumers it’s “88% premium ground beef and 12% signature recipe.” Now I may not be able to pronounce half of those ingredients in their “signature recipe”, but at least they’re being honest. I respect them for that. Also, word on the street is that they’ve already started seeing an increase in sales.

In conclusion, kudos to you Mr. Brandon and Mr. Doyle for taking a serious risk of reworking your core product, listening to your consumers, providing opportunities for feedback, and for taking responsibility by apologizing for past transgressions, it’s very refreshing. The moral of this story is that apologizing, along with a well thought out marketing plan to back it up, equals success and great returns, or at least in the recent world of the fast food industry. I wonder how many points I could bump up my finance exam if I made an artistic video apologizing to my finance professor for my performance on his last exam and posted it on YouTube. Alas, I feel that may be too great a deficit to overcome…

---

[i] Horovitz, Bruce. "Domino's Pizza Delivers Change in Its Core Pizza Recipe - USATODAY.com." News, Travel, Weather, Entertainment, Sports, Technology, U.S. & World - USATODAY.com. 16 Dec. 2009. Web. 04 Mar. 2011. <http://www.usatoday.com/money/industries/food/2009-12-16-dominos16_ST_N.htm>.

[ii] Horovitz, Bruce. "Domino's Pizza Delivers Change in Its Core Pizza Recipe - USATODAY.com." News, Travel, Weather, Entertainment, Sports, Technology, U.S. & World - USATODAY.com. 16 Dec. 2009. Web. 04 Mar. 2011. <http://www.usatoday.com/money/industries/food/2009-12-16-dominos16_ST_N.htm>.

[iii] Farhi, Paul. "Behind Domino's Mea Culpa Ad Campaign - Washingtonpost.com." Washington Post - Politics, National, World & D.C. Area News and Headlines - Washingtonpost.com. 13 Jan. 2010. Web. 04 Mar. 2011. <http://www.washingtonpost.com/wp-dyn/content/article/2010/01/12/AR2010011201696.html>.

[iv] Wiesendanger, Betsy. "Change at Domino’s." Nyse Magazine. Web. 04 Mar. 2011. <http://www.nysemagazine.com/dominos?page=3>.

[v] "Domino's Says New Recipes, Frank Ad Campaign Help Double Profit - USATODAY.com." News, Travel, Weather, Entertainment, Sports, Technology, U.S. & World - USATODAY.com. 2 Mar. 2010. Web. 04 Mar. 2011. <http://www.usatoday.com/money/companies/earnings/2010-03-02-dominos_N.htm>.

[vi] Dentch, Courtney. "Domino’s Changing Recipe to Help Lift U.S. Sales (Update2) - Bloomberg." Bloomberg - Business & Financial News, Breaking News Headlines. 16 Dec. 2009. Web. 04 Mar. 2011. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aapXMS5qu0YU.

Pabst Blue Renaissance

“What did you guys get to drink?”

“Blue Moon.”

“PBR.”

“So you’re a girl, and you’re a hipster?”

That was a small segment of a conversation held between myself, Ben Pratt, and Randall Bourquin after ordering drinks at the AMA Collegiate Mixer in Atlanta. I had the PBR. Little did I know that my PBR would come in a 16oz tallboy can; thus ensuring that my business casual attire, and any chance I had of looking professional, would be cancelled out by the aluminum beacon in my hand screaming out, “White trash! Right here!” I digress. Before I came to UGA, I had always thought of PBR as the average, working man, American choice of beer. Over the last year or so, I had slowly become accustomed to PBR being the retro-chic and trendy choice of the “hipster” crowd. However, though I am far from a hipster, my loyalty to this brand has not wavered, despite months of ridicule. Randall’s comment got me thinking, though, “What happened? When did this all change? When did PBR replace blue collar and become the official beer of flannel, tight jeans, and vintage clothing?” This is what I found…

For starters, let’s get acquainted with this fine brand and its past and present: Pabst Brewing Company was founded in Milwaukee, Wisconsin in 1844. The beer was originally called Best Select and then Pabst select, but was renamed to Pabst Blue Ribbon in 1893 for the blue ribbons tied around the bottlenecks from 1882-1916. Sales of PBR peaked in 1977 with a production of over 18 million barrels a year. It then steadily declined and in 2001, production fell below one million barrels a year.[i] In the early 2000’s, PBR received a boost in sales from an unlikely source—“alternative people”.[ii]

            These “alternative people”, also known affectionately as hipsters, punks, or other non-conforming subcultures, started consuming the product in mass. Wait a second, how did this subculture adopt the brand and product that former Pabst CEO Brian Kovalchuk deemed an “authentic American beer for the average American”?[iii] Pabst was focused on its target market of the 45-60 year old demographic and seemingly would never intentionally target a demographic that appears the exact opposite of their original target. So again, how did this come to fruition? The answer is pretty simple—they didn’t intend for it to happen, it just did. After some thorough research, Pabst determined the revival indeed stemmed from the Northwest, the lovely birth of the Grunge scene (sound and look familiar?). They also determined that the people who like and embraced the brand detested traditional marketing. Kovalchuk worried that the hipsters might “jeopardize the authenticity” of the brand, but its current CEO, Kevin Kotecki, decided to take a proactive approach to the situation.

            After understanding why and how the hipster and other alternative subcultures had developed a loyalty to their brand, Pabst did what every other company would do in its situation—capitalize on it. Through additional research, Pabst made sure it had a solid understanding of the hipster demographic and took proactive steps in their marketing. Ask yourself this, “When was the last time you saw a PBR commercial or big promotional event?” If you're my age, the answer is most likely never. For those who might have a few more wrinkles, your answer would probably be around the late 70's or early 80's. The beer industry in the US spends around $1 billion per year to pitch its products, while Pabst spends a tiny fraction of that. It decided it would be wise to do nothing, or at least appear to do nothing, in order to keep their image for these groups. And it definitely stuck to its guns: Pabst turned down endorsements from Kid Rock and other famous musical artists and passed on the opportunity to be a sponsor of major snowboarding and other action sports events.[iv] Pabst didn’t follow traditional marketing strategies and redesign the package, or create new ads with their target audience featured when a brand picks up steam; it decided to let the consumers lead the brand. It counted on one of the oldest forms of marketing, word of mouth, to sway those beer consumers whose loyalty was up for grabs.

            In 2001, Pabst inked an outsourcing deal with beer industry-titan Miller Brewing Company. One would think this would have spelled the end of PBR’s revival before it even got started. Instead, statistics show that since 2002, sales have increased 9.4%.[v] So the collaboration with a company that would seem to be all that these alternative groups loathe resulted in a positive effect. This probably attributes to the fact that the younger generation, Generation Y, is wise to marketing and business deals and understands that a deal such as the one made with Miller Brewing Co. doesn’t have an effect on how Pabst will be run or how its image will be managed.

            So back to the original question that sent me off on this wondrous journey through marketing strategies, research, and the understanding of Pabst Blue Ribbon, “Why and how did PBR develop this cult-like following from the hipster crowd?” It’s a combination of several factors: Cheap prices having a positive influence during the recession; the constantly cash-strapped college drinkers and those in their 20’s demographic; brand and lack of mainstream image appealing to the hipsters; and loyal consumer endorsements. The main component of PBR’s revival, however, is that Pabst made a conscious effort to understand their drinkers and adapted to them through a consumer-driven marketing campaign. And if more drinkers take the approach of self-proclaimed punk and avid PBR drinker Phil Barnes, who said, “The only thing that’s going to stop me from drinking Pabst is when I die,” PBR may just return back to its former glory. As for me, I will never grow my facial hair into thick sideburn chops or wear jeans that constrict my blood flow, but I will happily continue to take the abuse I receive for drinking PBR. And it’s not because of its marketing strategy, although I do respect Pabst more now that I’ve uncovered the secret to its revival; it’s simply because it’s cheap, not horribly detestable, and I’ve been doing it for a few years now and am too stubborn to change.

---

[i] http://en.wikipedia.org/wiki/Pabst_Blue_Ribbon

[ii] Walker, Rob. "The Marketing of No Marketing - New York Times." The New York Times -    Breaking News, World News & Multimedia. 22 June 2003. Web. 12 Feb. 2011. http://www.nytimes.com/2003/06/22/magazine/the-marketing-of-no-marketing.html?src=pm.

[iii] Walker, Rob. "The Marketing of No Marketing - New York Times." The New York Times -    Breaking News, World News & Multimedia. 22 June 2003. Web. 12 Feb. 2011. http://www.nytimes.com/2003/06/22/magazine/the-marketing-of-no-marketing.html?src=pm .

[iv] Walker, Rob. "The Marketing of No Marketing - New York Times." The New York Times -    Breaking News, World News & Multimedia. 22 June 2003. Web. 12 Feb. 2011. http://www.nytimes.com/2003/06/22/magazine/the-marketing-of-no-marketing.html?src=pm.

[v] Baskin, Jonathan S. "Could Pabst Be Too Cool? | Futurelab – We Are Marketing and Customer Strategy Consultants with a Passion for Profit and Innovation." Futurelab | We Are Marketing and Customer Strategy Consultants with a Passion for Profit and Innovation. 1 June 2010. Web. 12 Feb. 2011. http://www.futurelab.net/blogs/marketing-strategy-innovation/2010/06/could_pabst_be_too_cool.html.