What makes a company successful?...

... delivering products and services that are relevant and create impact among consumers.

I combine my expertise as a Marketing executive in a Fortune 500 company and my passion as an investor to find the Companies that I think have "cracked the code" with consumers. Advertising does work. When I see a new product that fits relevant consumer trends, and that is supported with a campaign that I find particularly shrewd and innovative, I know that Company is potentially a great investment.

One of the great investors of all times, Peter Lynch, recommends to "buy what you know". You watch TV, go to the supermarket and walk around everyday. Observe... look around: what you see can make you money in the stock market. Now, let's be clear: a Company is not good just because it advertises. What we have to look for is great products supported with -and enhanced by- great advertising. The principle is simple: if something is good enough to draw your interest, it will be of interest to millions of persons just like you.

It is my goal to share with the reader my findings in the world of marketing which I think will turn into great returns for investors. Profit from it!

Tuesday, September 14, 2010

Domino’s Pizza: the impact of Authenticity, Involvement and Reciprocity

In one of the first postings in this blog, “Consumer Values to Look For”, I indicated that two of the key values driving consumer behavior nowadays are “Authenticity” and “Experiential Enablers”. Briefly, “Authenticity” has to do with the transparency and credibility a brand can command among its customers. Consumers are skeptical about the hype and the false promises many marketers make through their advertising, just to vastly under-deliver by the time the consumer receives the product or service. Very pertinent to the case discussed in this article, I would say that the restaurant and food industry is perhaps the most blatant offender in this field. “Experiential Enabler” refers to the depth and relevance of the experiences a brand enables its consumers to enjoy. The experience goes beyond the functionality of the product itself, and involves layers of emotional satisfaction, fulfillment and discovery.

Embracing these key values demands a complete shift in the Marketing philosophy of any organization. It implies a level of honesty and openness that at times might seem counter-intuitive, if not outright suicidal. It requires a focus on –and the will to- inviting the consumers in, and allow them to actively participate in the definition of the brand. It is a commitment to doing what is right for the consumer.

Late last year, Domino’s Pizza (DPZ) chose such a path. When Patrick Doyle took over as CEO of the flailing pizza chain, he decided to address the issues face on, and launched its now famous ‘Pizza Turnaround’ initiative. The Company publicly admitted the shortfalls in its products, and made a commitment to fix them. While it was not the first time a company admitted its mistakes and vowed to fix them, what was different in the case of Domino’s Pizza was the positive energy behind the initiative, and the clear commitment the whole organization was making to be better. This was not a PR stunt; this was not a contrite CEO apologizing in a press conference. This was a group of people, real people facing a problem, overwhelmed by it and then showing the determination to fix it. Doyle himself was approachable, energetic and credible. The guy next door. Authentic.

Fast forward to the most recent marketing initiative. Opening up a brand, as I mentioned before, is not just a campaign. It is a long-term endeavor; an organization commits to involve its consumers, make them part of the brand and … yes, you’ve got it… enable them to participate in the creation of the complete brand experience. So, Domino’s creates its “Show us your pizza” program where it explains to the consumers the fakeness that usually goes into photographing food for advertising and tells the consumers: “We resign to such manipulation. You, consumer, you do it. You take the pictures of our products”.

This is huge in its simplicity. And that is the beauty of great marketing nowadays. It doesn’t need to be complicated; it just needs to be genuine. And consumers want it. They are willing to participate; furthermore, they demand it. Their retribution is the sense of recognition and ownership they get from it. It is the satisfaction of being able to express their opinions in a personal way and see those contributions becoming a part of something bigger.

If this was good, what I found to be a brilliant culmination to a brilliant initiative is the latest TV commercial, where Domino’s not only showcase several of the great pictures they received, but Doyle himself appears again picking on a picture sent by ‘Brian’ which shows a pizza badly battered and personally apologizes to him, assuring the audience that this is not right and that they will not rest until things like that never happen again. This sort of openness, epitomized by the CEO delivering a personalized apology to a consumer –and through him, to all consumers- is disarming, and engenders a level of credibility and admiration that triggers a higher level of consumer interaction: reciprocity.

In social psychology, reciprocity refers to responding to a positive action with another positive action, and responding to a negative action with another negative one. Reciprocity is one of the foundations of the social structure, and it is edged in our psyche. The mechanism works more or less this way: if we feel we are the object of a good action, we feel we need to respond in kind in order to preserve a balance in a relationship. It is what compels us to bring a bottle of wine to a dinner party, even though the organizer has repeatedly indicated nothing is needed. Reciprocity also has a role to play in marketing: for example, when a sales person has been particularly helpful and has spent what might be perceived as an inordinate amount of time with us, we feel bound to buy something from him or her. Likewise, when we perceive that a company or brand has been open and genuine with us, going above and beyond the cynicism we’ve come to expect in economic relations, we feel compelled to reciprocate by at least trying their product. They’ve earned it. Which, in the case of Domino’s Pizza, should translate into a heightened level of trial, which in turn will result in an increased number of new regular consumers. In summary: market share gains. Growth.

Domino’s Pizza is absolutely doing the right things. It is practicing the type of marketing that resonates with consumers nowadays, and that should translate into substantial growth for this company. So, take a bite: this slice is just about to get bigger.

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