Comparing the UK Marketing Strategies at Dominos and Pizza Hut - Essay Example

Comparing UK Marketing Strategies at Domino’s and Pizza Hut Introduction The fast food industry is one of the fastest growing sectors in the UK. The UK pizza market, for example, recorded increased sales of 16% in the period between 2008 and 2013 (Mintel, 2013). Volume growth for the pizza market rose partially as a result of popularity and demand for chilled pizza. The UK pizza market is dominated by Pizza Hut, which has delivery and restaurant operations; and Domino’s that mainly runs a home delivery operation. Domino’s commands at least 26% of the UK pizza market share, compared to Pizza Hut that possesses 25% of total market share, which suggests that their marketing strategies are almost equally effective (Mintel, 2013). This paper will compare and critically analyse their business objectives will be made, followed by further comparisons and analyses of their marketing mix, marketing segmentation, and positioning in the UK market. Marketing Objectives The main priority for Domino’s Pizza is to provide timely and customer friendly service, which is reflected in its marketing objectives. For example, Domino’s considered the time when customers place and receive pizza orders as a great opportunity to connect with their customers. To do this, Domino’s offers their customer’s real time updates on order confirmation and delivery time to improve their delivery service. On the other hand, Pizza Hut’s main marketing objective is to engage with its customers by identifying their characteristics in order to provide them with relevant and timely offers. Moreover, Pizza Hut wishes to grow and retain its present customer base through the use of various promotion campaigns. Both Pizza Hut and Domino’s Pizza also seek to build their brand names to become household names in the UK, while also building customer loyalty through the provision of excellent and quality foods and quick service (Yohn, 2014). Marketing Strategies Product The basic product offered by Pizza Hut is dining experience, although they also provide food (Yohn, 2014: p1). The main product offering for Domino’s Pizza is their food, while their excellent delivery services that promise pizza in 30 minutes flat also counts as part of the product offering. As a result, customers whose basic need is food may visit Domino’s for a pizza or order for pizza from the comfort of their residence expecting good taste and hot pizza. The main difference between Pizza Hut and Domino’s is that Pizza Hut is mainly concerned with the dining experience because they run a restaurant operation, unlike Domino’s that mainly offers a home delivery service (Yohn, 2014). With Domino’s providing more convenience for the UK market due to its prompt delivery service, it has managed to compete favourably against Pizza Hut’s experience-based product offering because more people are willing to eat pizza in their residence. Price Domino’s has responded to increasing competition from Pizza Hut by introducing discounts and price cuts in order to attract more customers (Halzack, 2014: p1). The main target for Domino’s is the middle and lower middle-income group. Pizza Hut, on the other hand, pursues a premium pricing strategy, specifically through the use of price skimming. With regards to their price skimming strategy, Pizza hut charges higher prices compared to Domino’s on launching a new product into the market. In addition, the company also offers higher quality pizzas as compared to its competitors, while their restaurant ambience is richer and better than its competitors (Halzack, 2014: p1). Therefore, despite pursuing a premium pricing strategy, customer loyalty ensures that Pizza hut remains competitive. Again, Domino’s has managed to claw back Pizza Hut’s competitive advantage by lowering their prices, which has meant that Pizza Hut mainly sells to higher-income customers, compared to Domino’s whose pricing allows it to sell to middle and low income customers, as well as higher-income customers. Place Domino’s maintains a direct channel with their customer base, where the customers either send a message or call by telephone to order delivery of pizza. Domino’s allows customers to place pizza orders online using the company’s official website (Sheehan, 2014: p1). Domino’s also pursues a medium push strategy in their channel marketing strategy with minimal advertising layout, instead concentrating on giving incentives to their customers, such as promotional coupons and sell-in schemes for dealers. Pizza Hut uses a pull strategy, using promotion and advertising to attract consumers to their establishment, rather than their sales force (Sheehan, 2014: p1). Domino’s push strategy has been very effective because of their focus on pizza delivery since it allows them to use their delivery boys as promoters of their product. Pizza Hut’s pull strategy has also been effective as it allows direct customer contact that is important since they offer the dining experience as their main product-offering. Moreover, it has also worked for their premium priced products. Promotion Domino’s maintains direct contact with their consumers through assured, punctual door-to-door deliveries. Sales are dependent on their delivery boys’ efficiency and on telemarketing as well. Domino’s also uses new offers and schemes to maintain their customer base by making home delivery free and, sometimes, offering a discount of 50% for the second ordered pizza (The Independent, 2013: p1). Pizza Hut, on the other hand, mostly concentrates its promotional activity on building brand equity and introducing new products. They also use advertising, unlike Domino’s, especially during festivals where they offer discounts on their products to attract clients. Moreover, Domino’s success is dependent on their local marketing for local outlets that may use newspaper inserts and hoardings to direct potential customers (The Independent, 2013: p1). Domino’s promotional strategies have proven effective, especially because their delivery boys deliver pizza on time, which has increased customer trust and loyalty. Market Segmentation Demographically, the major segment for Pizza Hut is younger people with higher incomes or from high income families aged 12-30 years (Bainbridge, 2012: p1). This demographic segment is more likely to pay premium prices for the ambience and experience found at Pizza Hut. Moreover, they also offer Halal foods to their Muslim customers. In terms of psychographic segmentation, Pizza hut uses the lifestyle segmentation strategy, in which their market is divided into various groups on the basis of personality characteristics and social class. Finally, Pizza Hut’s behavioural segmentation involves the class of people who spend money to give themselves the best eating experience, normally middle and upper class customers (Bainbridge, 2012: p1). However, as spending power in the UK has not recovered fast enough, this segmentation strategies have left it at a disadvantage compared to Domino’s because their segments may also ask for home delivery services, which Domino’s is better placed to satisfy. Domino’s Pizza does not have a specific market segment, instead selling their pizza to anyone who can order their products. Because they do not sell their pizza according to their customer’s preferences, they are able to sell to anyone (statista.com. 2015: p1). Geographically, Domino’s mostly sells its products to people from B-grade towns and cities, specifically because of their lower prices and lower insistence on dining experience. Demographic segmentation does not apply much to Domino’s, although middle class people are more likely to buy from Domino’s because of their lifestyles that make cooking difficult. In relation to psychographic segmentation, people who buy from Domino’s are mainly those who want their food faster than is usually possible for other pizza companies (statista.com. 2015: p1). A lack of specific segmentation for Domino’s has proven effective as fast food consumption in the UK increases across different social and income groups. Pizza Hut’s segmentation strategy, on the other hand, means they can only leverage one section of the market. Entry into Different Markets Both Domino’s Pizza and Pizza Hut used a franchising entry strategy in the UK. For Domino’s, they were able to gain competitive advantage through the positioning of their pizza product as a snack that is delivered to one’s residence efficiently (Farrell, 2014: p1). Their franchises in the UK involve the organisation providing concepts, branding, and expertise to franchisees, while management is controlled by the mother company. Pizza Hut also uses franchising as their market entry strategy like Domino’s and both companies use this strategy in unfamiliar markets, as well as in order to learn consumer behaviour and realities in the market. The franchise model used by both companies is also important for their expansion plans in the UK, especially since it has relatively low expenses and overhead costs, while it also enables the companies to tap into the local expertise that is provided by the franchisees (ibisworld, 2015: p1). Conclusion Pizza Hut and Domino’s Pizza are fierce competitors in the contemporary UK pizza market, possessing 25% and 26% of the market share respectively. Because the two companies are competitors in the same niche market, which possesses similar market demographic characteristics, their market strategy comparisons were based on a level comparison ground. However, whereas Pizza Hut focuses its marketing on their superior dining experience and customer service, Domino’s Pizza mainly focuses on the quality of their delivery service. This also means that Pizza Hut, which runs delivery and restaurant operations, charges higher than Domino’s, thus mainly targets urban areas and cities. Read More