Dominos Effect: Is too much free getting too expensive for brands?

Just a couple of weeks ago, India’s number one brand in the food space was in news for reasons it would have never liked to be; ET and Inc42 taking a jab at the shrinking net profits and same store sales growth (SSSG) of Dominos. This was followed by a frenzy of Buy One Get One offers which flooded my phone (as a Dominos customer) everyday during the lunch hours. With all this going around, it caught our interest at Connaizen to do a little number crunching and see if the Goliath of Indian food space has everything going right with the way it lures its potential and existing customers.

Dominos Effect: Is too much free getting too expensive for brands

With the consent of one of our banking partners, we took a distributed data set of anonymised customers and their transaction history and did what we do best. We drew patterns and customer profiles for Dominos and another direct competitor not so focussed on heavy discounting (say X Pizza). A very interesting caveat which caught our attention was that 35% of the customers who transacted at X Pizza with an average transaction size of INR 850 when turned up at Dominos had an average transaction size of less than half the value i.e. INR 420. We compared this across categories and the same customers were spending on an average of INR 1700. Quite surprisingly, the pricing of both these players is exactly the same. Then what makes the same customer spend half the money on one player than on the other? Our guess says giving the same offer to every customer without understanding them first may not be the best approach.

No doubts that the BOGO campaigns have been a hit in attracting a huge customer base. But has overdoing it beyond a point altered the customer purchase behaviour towards the brand? The data points signal in a direction where something needs to change. The way brands incentivise their customers needs to evolve. We understand that targeted marketing may just be a brick in the huge wall of issues that brands with shrinking net profit margins face currently. They know the best about what the customer does when he enters the store but what is done beyond is a grey area which needs a lot of light to be thrown upon. This is one area which continually excites us to come to office each day and help brands script the story of turnaround using Connaizen’s spend based micro targeting. Yes, we have just started and have a long way to go before we advise the marketing gurus on what to do but we do have the arsenal they need to sustain the challenges that await.