Dominos “Points for Pies” Campaign Is Outsourcing Research To Its Customers… For Cheap
The moment I saw the Dominos “Points for Pies” commercial on TV — a rare occasion these days — I pointed to the screen and yelled to my surrounding friends (who weren’t even watching): “I know what they’re trying to do! They’re incentivizing customers to do their research for them!” My friends — all non-marketers — didn’t care. For them, this was just another commercial on TV… another advertisement asking customers to become loyalists. But to me, it was more than that… It was a company willing to combine marketing with product development.
The “Points for Pies” Campaign
Developed by creative agency Crispin Porter Bogusky, the Points for Pies marketing campaign will run from February 2 through April 28, 2019. During this 12-week period, customers (existing or new to Dominos) will be able to obtain a free Dominos pizza by taking a picture of any pizza (Dominos or not) via the Dominos app. For every picture the AI-enabled app identifies as “pizza,” customers will earn ten points (with a limit of ten points per week… aka one pizza scan per week). Once customers get to 60 points, they’ll be able to redeem for one free medium two-topping pizza from Domino’s.
WWRD: “What Would Rose Do” … if she were the person in charge?
Disclaimer: I do not work for Dominos nor have any insider knowledge, but I do have 10+ years of business, marketing and operations experience. (Learn more about my background and the thinking behind “WWRD” series.)
The moment I saw the commercial, it got me thinking about Dominos’ end goals with this campaign. My conclusion?
Dominos “Points for Pies” campaign is outsourcing the research to its future customers… for cheap.
Let me explain how this could work by starting with the last few words and moving backwards in the statement.
01. “…for cheap”
As most are well aware, companies basically care about the top-line (revenues) or the bottom-line (profits). Thus, initiatives that cost more money than they can bring in are highly scrutinized and often rejected. Marketing and research are those line-items on a P&L considered “expenses,” aka non-revenue-generating. And, due to attribution issues, it is oftentimes really difficult to measure how marketing and research directly affect a customer’s purchase decision. Nonetheless, both marketing and research become extremely important when companies want to grow.
In order to understand how companies justify a marketing campaign spend like the Dominos “Points for Pies,” we must first explore the goals of marketing and why it tends to cost lots of moola.
Marketing typically does two things: (1) bring in new customers (acquisition) or (2) keep existing customers coming back (engagement/retention). Both goals tie back to top-line (revenues) by eventually generating new spend through new or existing customers.
The operative word there is “eventually.”
Initially, marketing campaigns act more like a trailer to a movie. They’re meant to entice the customer in just the right way that leads him/her down the path to spending. Sometimes, the marketing campaign is closer to the eventual spend, like having ads drive you directly to a purchase destination (ahem, those Amazon ads that follow you around).
However, other times, like in this case, it is more about creating a “stunt” — as in, a short-lived campaign meant to drum up excitement for the press and customer-base. Here, the campaign touts the new technology (AI-enabled app that can recognize “pizzas” of any kind). It also includes the familiar loyalty rewards program to bolster engagement. Together, this helps drive customers to download the app, sign up for the loyalty reward, and eventually purchase a pie down the line.
Okay, now let’s get to the “for cheap” part of my earlier statement.
Marketing campaigns (e.g. TV spots, paid search and display ads, mobile ads) can cost anything from $1M to $30M+. (For context, a single 30-second Super Bowl TV commercial in 2019 costed $5.25M.) Each time, you run a campaign, you’ll have to set aside significant budget to run across multiple channels, like running search ads or display banners.
Let’s not forget about the creative development and implementation costs. (You think those commercials and those banners came out of thin air?!) Usually, companies hire a creative agency to help them develop a concept (in this case it was Crispin Porter Bogusky) and produce associated creative assets. Assets range from the video that gets shown on TV to the images you see floating around on the internet. Sometimes, they’ll even have the agencies execute on the marketing strategy. Agencies charge differently, sometimes by project or as % of spend or as the Agency of Record. All of which can cost from hundreds of thousands to millions of dollars.
Like marketing, research can seem nebulous. Research’s goal is to answer big strategic questions that helps a company grow. In most companies, research is outsourced to a 3rd-party company who either has a large customer panel (aka a ton of humans who have agreed to be surveyed pseudo-anonymously) or access to a ton of external data pipes (e.g. data firehose to social media platforms). These projects can cost $10,000 (usually just online surveys) to $250,000 (multi-part research with both qualitative and quantitative aspects). In addition, consumers are fickle, so you have to incentivize them to participate in the research. This could be in the form of direct monetary value (e.g. $5 gift card at the end of the survey) or indirect value (e.g. a chance to win back-stage passes to a Queen Bey concert). So, that could be another $10,000-$50,000 just for incentives… and that’s per project!
To understand this in $$$, I made some very high-level cost assumptions below for Dominos “Points for Pies” campaign (totaling $20M)… that is, if they had to pay for the components of this campaign (marketing, research, and pie giveaways):
- $10M for marketing (incl. agency costs and marketing spends on various TV and online marketing channels)
- $2M for research (to answer questions around customer behavior and pizza preference)
- $8M for the free pies redeemed during the campaign***
*** Assuming a medium pie sells for $8 and applying Dominos’ gross margin of 38% (FY2018), that’s a cost of ~$5 per pie given away. Assuming each customer who participates in the campaign can redeem a pie for 60 points and the full 100M points has been allocated, that’s ~1.7M potential customers engaged throughout this program. Applying 1.7M customers getting a free pie that costs Dominos $5 to make each, that’s a total cost of $8M given away as free pizza incentives.
How is $20M cheap, you ask?
First, Dominos didn’t spend on the Super Bowl, which meant they saved $5M.
Instead of advertising during Sunday’s game, we decided to invest in a breakthrough program that rewards everyone who loves pizza as much as we do.
Art D’Elia, Domino’s senior vice president — chief brand officer
Dominos capitalized on the pizza-heavy Super Bowl Sunday weekend by spreading the $5M ad budget before and after the Super Bowl. Since 30-second national commercials could still cost upwards of $200,000, let’s assume Dominos got a media deal that allowed them to run their 30-second ads at a highly discounted rate. Along with their TV spots, they also spent on paid marketing (e.g. search ads, display ads, mobile ads). Together, I assumed they spent $10M on marketing (inclusive of agency and creative development fees as well as paid marketing budget).
The $10M marketing campaign is all about generating buzz, which could produce earned interest that helps spread the word. This means, as long as Dominos gets more than 160,000 customers (applying the average $63 cost per acquisition for Food & Beverage industry), their marketing spend essentially paid for itself in acquiring customers. Based on my back-of-the-envelope calculation on customers, even if Dominos was able to get acquire 10% of their potential 1.7M customers, that would be 170,000 customers right there!
Let’s give Dominos more credit than that and say, through this program, they are able to obtain 25% of that 1.7M potential customers. That could be 425,000 customers acquired. If each of them ordered at least one medium pizza (selling at $8 each) in the next year, that would be $3.4M incremental revenues generated through this campaign.
Regarding research, which I’ll expand on later, Dominos will save $2M because the 1.7M potential customers would be providing Dominos customer data for “free.”
Lastly, the $8M free pie incentive could be offset by 15% (or $1.2M) because of the specific restrictions in the Campaign Terms:
Limit: Each participant is eligible to receive 10 Points for Pies one (1) time during each Weekly Period, up to a maximum of sixty (60) Points for Pies throughout the Giveaway Term (from up to six (6) total Submissions). Once a participant has earned Points for Pies as a New Member of the Piece of the Pie Rewards loyalty program, all future Points for Pies will be awarded from the Returning Member allotment.
Since you can only earn 10 points per week and you need 60 points to get the free pie, if you came into this program after Week 8, then you’re not going to have enough weeks left to get the points to redeem a free pie. In addition, as per the statement above this chart, you can only redeem for one free pie in this whole campaign. Adding up all the available points from Week 1 thru Week 8, that’s 85M points available, which leaves only 15% points left to be redeemed. Assuming those 15% points won’t get redeemed for a free pie, then we’re only really giving away free pies from a total point allotment of 85M points. Therefore, we can assume, Dominos is really only spending $7M on pie incentives.
Oh yeah, another freebie Dominos will be getting is the ability to use the “pizza” images collected from the app for free and in perpetuity for any future projects or marketing (see Campaign Terms):
By providing a Submission, you consent to give Sponsor a royalty-free, irrevocable, perpetual, non-exclusive license to use, reproduce, modify, publish, create derivative works from, and display such Submissions in whole or in part, on a worldwide basis, and to incorporate it into other works, in any form, media or technology now known or later developed, including for promotional or marketing purposes.
Image licenses can cost anything from a few dollars to hundreds of dollars per image for limited use. With this terms agreement, customers who download and use the app have given permission to Dominos and its agencies to obtain hundreds of thousands of pizza images for free. That could be a conservative cost savings of $10M in just image licensing fees (that’s assuming all 100M points get used up with each pizza scan being 10 points and image licensing fee costing $1 per).
So, to sum up:
- $10M marketing cost could be reduced by $3.4M in revenues generated by new customers and by $10M in image fees recouped;
- $2M in research won’t be spent; and
- $8M free pie incentives could be offset $1.2M by the Terms
That means the $20M marketing and research investment could really just be $5.6M… for 425,000 new customers, which essentially equates to a cost per acquired customer of $13 (~5X less expensive than the industry average of $63).
Now, that’s cheap!
02. “…future customers…”
The way the campaign is positioned indicates it’s all about attracting new customers.
How?
The program allows customers to take a picture of any pizza, not just from Dominos. This emphasis on non-Dominos pizza indicates the company is looking to target customers who are buying their competitors’ pizzas. Leveraging the hook of a “pizza identifier that will scan each pizza or slice and will then use artificial intelligence-driven software to identify the image as pizza,” Dominos has lowered the barrier for engagement with these new customers. They’re basically saying: “Ooo, look at this cool new app. Take six pictures of pizza and get a free pie.” To a potential new customer, that sounds pretty easy. And, once the customer downloads the app and signs up, the campaign has completed the hardest part.
Like with any other campaign aimed at capturing new customers, the end goal is to be able to connect with the new customer and help them form spending habits. Connecting with a customer is really hard unless you have an easy communication channel. Having the customer sign up for the Dominos loyalty program in order to participate in the campaign allows for direct communication between Dominos and the customer (a la email and push notifications).
Now, if Dominos’ original intention was to increase engagement with existing customers, the campaign would have been more focused on rewarding existing customers for their purchasing behavior, much like what Starbucks does. So it would employ tactics like doubling reward points and extending marketing in existing communication channels like email, not national TV.
For Dominos, the win begins once a customer downloads the app and signs up for the program. Because, in that simple move, Dominos now has access to valuable data such as a customer’s unique mobile identifier, location, and email address. Then, when the customer decides to redeem for a free pie, Dominos will be able to collect additional information such as delivery address, phone number, etc. Eventually, Dominos would be able to entice their customers to purchase by leveraging the two new communication channels: email and push notifications.
03. “…outsourcing their research…”
As mentioned earlier, research can cost quite a bit, especially when they become resource-intensive. And, they often are, because research projects are typically used to answer big strategic questions around customer behavior: What does the customer want? When do they want it? Why do they want it? What else might they want? What’s keeping them from coming to my brand for the thing they want? The answers to these questions could help companies develop innovative solutions in technology, product, logistics, and more.
Research projects can be too cost-prohibitive to run for long periods of time and, thus, they can’t answer granular questions like: what types of pizza are customers really interested in during the winter months? Why did one set of customers in a particular locale order on desktop over mobile? Are there geography or event-based differences that can impact pizza-buying behavior?
This is where the app, paired with behavioral research, becomes invaluable. With the various facets of data captured through the app, Dominos can tackle many granular questions because it has collected customer behavior data, including what time of day or day of week customers are purchasing or eating pizza. If they compare that to geography and the weather channel, they could figure out purchase habits tied to weather patterns (e.g. do their customers tend to purchase pizza when it’s raining out?). If they connect the image upload timestamp to local events, they could understand when their customers want to purchase pizza.
In addition, with a massive library of images related to “pizzas,” Dominos can now understand what types of pizzas their future customers enjoy. For example, what style are most of the “pizzas”? Small bites, deep dish, or thin crust? What are the most popular toppings? What shapes are the pizzas?
Dominos has this type of information from their existing customers who order online or in-app; however, they don’t have this info from non-customers. With this campaign, they can now figure out a starting point for these future customers… something they can personalize and append to each customer’s profile. This is something that would not be possible with traditional research.
These types of meta data will allow Dominos marketers to build richer customer profiles, which can then lead to better marketing campaigns like special promos during weather or local events that will increase the likelihood a customer will make an immediate purchase.
This is the first time Domino’s is using AI technology like this. It will be running the pizza identification process and is already smart enough to identify all pizza, even if it is a homemade English muffin pizza, a pizza with a hotdog stuffed crust, or a high-end artisan pizza. It can even identify if it’s a dog’s squeaky pizza toy.
Dennis Maloney, Domino’s chief digital officer
Takeaway
Instead of spending millions of dollars on either: (1) acquiring new customers with promotions and discounts; or, (2) figuring out what their future customers might want with their pizzas,
Dominos “Points for Pies” campaign has tackled acquisition and data collection by outsourcing the research to its future customers… for cheap.
Originally posted on rosejia.com as part of a series “WWRD: What Would Rose Do.”
SOURCES & RELATED LINKS
- Dominos Press Release — “For the Love of Pizza: Domino’s to Offer Rewards Points for Any Pizza — Even Competitors’” | Jan 30, 2019
- Dominos Points for Pies Terms & Conditions
- Dominos Pizza 2018 Annual Report
- “Domino’s Offers Rewards Points On Rivals’ Pizza” | Ad Age | Jessica Wohl | Jan 30, 2019
- “Machiavellian Mega-Chain Domino’s Wants to Trade Pizza for Data” | Eater | Greg Morabito | Feb 21, 2019
- “Domino’s Pizza-Spotting App Is a Window Into a Future of Justified Paranoia” | Popular Mechanics | Eric Limer | Feb 20, 2019
- “New Domino’s Campaign Adds AI Element To Its Rewards Program” | MediaPost | Larissa Faw | Jan 30, 2019
