Marketing Concept and Market Segmentation in Practice Term Paper

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Marketing Concept and Market Segmentation in Practice

Marketing Concept and Marketing Segmentation in Practice

Criteria for Evaluating Marketing Concept and Segmentation

In completing this analysis of Domino's Pizza Global Operations, a SWOT Analysis, assessment of the company's external and industry factors, Porter's Five Forces Model of Competition, and a thorough analysis of the existing and potential Domino's customers have all been used as the basis of completing this analysis and recommendations. The result is a series of marketing goals and objectives, marketing strategies, market mix recommendations by objective, and a series of evaluation control and contingency plans.

Situation Analysis

Today Domino's is the leader in the delivery segment of pizza sales in the U.S., second only to Pizza Hut in total pizza sales, as this competitor has 4,000 Red Roof restaurants with over 100-person seating capacity. Domino's strength in delivery is evidenced by the fact that the company delivers an average of one million pizzas a day and has the greatest market share of the delivery business at 19.4% at the close of 2005.

The figure to the right shows the market share in the U.S. For pizza delivery, and this is from the March, 2005 investor presentation given by Domino's CEO.

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Year-to-date the company has sold and delivered well over 600,000 pizzas according to the latest earnings call hosted at the close of their last quarter. This delivery-only approach allows Domino's to focus its marketing and operations strategies on delivery only, without the distractions and potential struggles of a dine-in business, as is the case for Pizza Hut.

TOPIC: Term Paper on Marketing Concept and Market Segmentation in Practice Assignment

According to many industry analysts and experts and also by reviewing Domino's financials and low asset investments and exposure to long-term debt through ration analysis (see Appendix I for ratio analysis) the delivery-only business is the best area in which to operate within the $33 billion pizza market. Approximately $12 billion of the pizza category's sales are through delivery, and according to Roper (2005) delivery will continue to gain share in the category as lifestyle trends continually place more and more of an emphasis on time and convenience, and using pizza delivery to overcome the highly hectic times from 4:30pm to 6pm on weeknights. This has also been validated through research completed by Domino's Market Research (2005).

Figure 2 illustrates how the change in families and lifestyles in general provide a favorable backdrop for the pizza delivery business.

Figure 2: The shifting mix of pizza sales favor delivery

According to Roper, at 4:30 on an average afternoon, 73% of Americans have no idea what they will feed their family for dinner. With the growing amount of last-minute dinner decisions, pizza delivery is a timely and convenient option that gives families a viable meal replacement option for an affordable price. As daily lives become more hectic and people are less inclined to cook, shop, and clean, we would expect this occasion to increase and provide continued demand for pizza delivery

Product Market Structure

The quick-service restaurant (QSR) pizza category is the second-largest category within the $187 billion QSR sector, with an estimated $33 billion in 2005. The QSR pizza category consists of four components: delivery, dine-in, carryout, and a diminutive drive-thru business. Domino's operates primarily within the delivery segment of the QSR pizza category. Delivery accounts for 36% of the total U.S. QSR pizza category, with $11.8 billion in sales for the 12 months ended November 2005. Pizza delivery sales growth in the U.S. was close to flat during that same time frame, although over the past several years, delivery has grown steadily as a percentage of the pizza category, to 36% of the pizza category sales in 2005 from 29% in 1997 according to NPD (2005) shown in Figure 3.

Figure 3: Industry-wide pizza delivery choices by consumers

The External Environment

The following sections of this marketing plan review industry analysis, competitive pressures, factors leading to economic growth and stability, sociocultural trends, the customers' environment, and the internal organizational climate.

Industry Analysis

Throughout the last five years, Domino's has outperformed both Pizza Hut and Papa John's in same-store sales growth yet in 2005 has seen their lead in this area falter. In the most recent surveys from Roper (2006), there is clear evidence that Domino's same store-sales are being driven down by Papa John's highly effective uses of promotion and new products. 2006's competitive challenge is to re-invigorate same-store sales and become the industry leader once again.

Papa John's sales out performance has been driven by an improved and consistent delivery-focused marketing message, as well as strong new and limited-time-only products. Domino's stressing Cheesy Bread, the Philly Cheese Steak pizza, and last year's 5-5-5 promotion have all contributed to greater in-store sales yet the company is still struggling relative to competitors. Despite a strong presence in a very competitive category, Domino's most pressing marketing challenge is to retain same-store sales leadership. The company has been extremely consistent in achieving at least some degree of same-store sales growth each year, an achievement that its peers cannot claim. Domino's has had 12 consecutive years of flat or positive same-store sales growth. The most recent 7-7-7 promotion is anticipated to be just as success as 5-5-5 based on the feedback of franchise advisory council members.

Porters' Five Forces Model of Competition applied to Domino's

The five forces that comprise Dr. Porter's model are industry competitors, pressure for substitute products, bargaining power of suppliers, bargaining power of buyers, and the influence of potential entrants. Diagram 1 shows the Porter Five Forces Model graphically. Each of these areas is now discussed in bullet form in the following series of sections.

Assessing Domino's Industry Competitors

Highly fragmented series of competitors throughout all nations Dominos competes in makes branding consistency and product quality critical.

Strongest global competitor is Pizza Hut.

Significant churn in the smaller mom-and-pop independent shops.

Pressure from Substitute Products

Significant competition from QSR concepts that include both lunch and dinner, and also have a steady stream of new products and services.

Focus on QSR entrees that are easily delivered by drivers is the major substitute competitive threat.

Instant dinner products in many food stores is also forcing a significant emphasis on innovation over simply relying on price as the competitive strength.

Bargaining Power of Buyers

Dominos' buyers demand innovation in the form of both new menu and food items but also in the definition of new pizza concepts. Pizza Hut has been slow to innovate on certain product areas and as a result has faced pressure from buyers as they seek out competitor's newer pizza and dinner offerings.

Domino's customers demand regional variation and quality. Their most loyal customers are less concerned with price and more concerned with consistent quality and taste.

Domino's customers are less price-sensitive than the majority of pizza purchasers as a result the customer base has significant influence on future product direction.

Bargaining Power of Suppliers

Highly dependent on the very volatile commodity of cheese and its price. The price of cheese has a direct impact on the company's broader profitability.

Domino's has yet to fully vertically integrate into cheese production, yet has moved aggressively into dough and distribution facilities to gain greater control over their supply chain

Highly dependent on the price of other dairy and cheese products as well, as innovation in this industry centers on how to re-define entirely new product concepts based on cheeses.

Potential Entrants

Apart from Pizza Hut and Papa Johns at a national level, Domino's has no chain-based competitors today of any size in the United States today.

Secondary competitors include the smaller chains of ten stores or more stores that comprise 40% of the total U.S. pizza market.

Competitive Pressures Most Prevalent in Advertising

Advertising as a Competitive Weapon

Domino's has the second-largest advertising budget in the pizza category behind Pizza Hut. Although Domino's advertising budget is lower than Pizza Hut's in the aggregate, the company can narrow its focus on promoting its delivery business. Almost every Domino's Pizza commercial features a delivery driver, and its slogan, "Get the Door, Its Domino's," has helped create a top-of-mind awareness that has made the Domino's brand synonymous with pizza delivery. Recently, the company has been at the forefront of alternative media strategies that use various Internet promotions as well as product placements in movies such as in Good Company and television shows like the Apprentice.

The pizza QSR category is very advertising driven in general, and any additional media weight can be pivotal given that approximately 85% of transactions include an advertised deal, promotion, or coupon according to Roper (2005). Franchisees from Domino's agree with an advertising shift toward national media once again because of the impressive 4.6% same-store sales growth that it helped generate at franchised stores in 2005. Although franchisees are given the option to spend less on local advertising to offset the national increase, the company expects many franchisees to continue prior local marketing levels. Domino's sees much higher advertising effectiveness from national media buys vs. local media, as the former are… [END OF PREVIEW] . . . READ MORE

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