Almost 2 decades ago, in 2004, Domino’s launched its pathbreaking 30-minute delivery or free pizza promise in India.
The move was an inflection point, not just for Domino’s, but the food delivery segment in India, bringing about a tectonic shift in consumer behaviour.
Back then, eating out was a rarity, reserved for special occasions and enjoyed in a dine-in format. Food delivery was just a niche market.
However, Domino’s, with its innovative marketing and on-ground operational excellence helped propel food delivery to mainstream acceptance.
Fast-forward 18 years, to March 2022.
Domino’s has just lost its CEO, with Zomato and Swiggy eager to cannibalise its business.
The food aggregators, placing profitabilty at a distant 2nd to growth, have been aggressively discounting to win over customers.
Domino’s itself is also becoming increasingly reliant on them, with almost 25% of its sales coming from Zomato and Swiggy.
Though it’s been able to negotiate a lower commission rate, relative to the ~25% that others are paying Zomato and Swiggy, the threat of rising commissions looms large.
Domino’s is gradually losing grip on its original value proposition and differentiator of delivery. If it continues down this path then it risks becoming more-and-more dependent on food aggregators, losing its unique brand identity and control over its relationship with customers.
Market power may swing in Zomato/Swiggy’s favour, forcing Domino’s to accept higher commission rates like just another pizza chain in the market.
So far though, Domino’s has been resisting, fulfilling orders via food aggregator apps through its own delivery force, to obtain customer data. A Domino’s rather than Swiggy/Zomato delivery person showing up to customers’ doorstep helps it retain its image.
But retaining its delivery force amidst the growing gig economy is nudging salaries higher.
With Zomato and Swiggy piling on the pressure, Domino’s needs a silver bullet.
It noticed that >50% of revenues were coming from <20% of customers, offering huge untapped potential.
So, in July 2022, it launched a loyalty program, “Cheesy Rewards”, offering customers a free pizza after every 6th order… but only if they ordered via Dominos’ own platform.
This move, devised to reduce dependency on Zomato and Swiggy, maintain its individuality, and swing market power back in its favour has since taken off:
✅ 10 million quarterly app downloads
✅ 16.8 million loyalty members
✅ 10.3 million monthly active users
✅ 48% sales from loyalty members
✅ Higher order frequency
With the stellar performance of its loyalty program, Domino’s is taking back control of customer relationships and safeguarding its brand equity against becoming just another pizza chain to order from via Zomato/Swiggy.
However, do you think it can sustain its delivery-led business model in the long-run or will it end-up being cannibalised by Zomato and Swiggy?