Why it takes time for Domino’s Pizza to create ‘critical mass’

Domino’s Pizza UK features as the End-of-chapter case to chapter 1.  Since our book was authored, the company has grown and taken on responsibility for developing the Swiss and German markets.  Whilst sales growth continues to be good in the UK and Ireland, the two European markets are taking some time to develop.  In reporting their half-yearly results in 2013, the Group’s Chairman writes – “[Making profit in these markets] will take longer than originally expected. Those of us with long memories will recall that it felt similar in the UK back in the 90’s and we have been through this before. It is important to remember that Domino’s businesses round the world have taken some time to reach critical mass, before going on to be real profit generators”.  So why is this?

The case example in the book gives some hints.  First, Domino’s needs to create brand awareness in order to drive consumers to try out their home delivery service.  This means that the infrastructure needs to be set up to operate the business, along with a concerted marketing campaign.  This is a significant investment.  Second, the age group most likely to trial the product is the 18 to 30 age group, often students, living away from home.  This market segment on its own is not enough to drive business, but over time this group gets older and stays loyal, so the size of market served grows.   But it all takes time.

This entry was posted in Chap 14 Operations strategy, Sector: Retail and tagged , . Bookmark the permalink.

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