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How Domino's Keeps Customers Engaged

By Demitri Kalogeropoulos and Parkev Tatevosian, CFA – Updated Oct 20, 2021 at 2:06PM

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The pizza chain prides itself on being a tech leader.

Domino's (DPZ -0.98%) recently announced operating results for the fiscal third quarter. Yes, sales declined for the first time in years. But the pizza delivery leader had plenty of good news for investors.  

In this video from "Beat & Raise" from Motley Fool Liverecorded on Oct. 14, Fool contributors Parkev Tatevosian and Demitri Kalogeropoulos discuss how the chain is succeeding in keeping customers engaged in its fast-food platform despite surging competition.

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Demitri Kalogeropoulos: That's what this slide summarizes. How do you boost engagement with your customers in general? Particularly how to do that in today's environment where it seems like every restaurant chain is either personally moving into the home delivery space, or they're partnering up with a third-party service like these aggregators that will deliver food to your house. That's also including restaurants.

Not just fast food restaurants, but all kinds of chains so that the delivery space has gotten a lot more crowded over the last year or so. This isn't particularly new. This actually started around before the pandemic struck. There was this flood of places like Grubhub and other, like I said, third-party aggregators that were selling below cost in some cases.

There was a big pressure there. Domino's was feeling a little bit of that so trying to gain, gain market share, when you're introducing your product you have a reason to convince people to do it. They were cutting prices a lot. But Domino's made it through that. What this slide summarizes is a couple of ways that they are engaging their customers this year and keeping everybody excited. They've got obviously a huge army of these people using that loyalty app.

They have this popular mix and match program, two items on the menu for $5.99 menu, innovations are really key, they've got a few popular ones, the one that just recently did not remembering right. It's like a twisty bread, some sort of like that dip and twist, I think it's called.

But I think they said that early indications are that's popular. They've got to keep customers engaged by releasing these new products and by making it super easy and engaging to use the app. That's a place that Domino's has excelled many years ago. They made it really easy for you to order anything you want through using your smart speakers or in this case, you can see an Apple Watch, I believe that is on the screen. You can just tell your wrists to order your normal Domino's product and it will do it. Of course, they pride themselves on being innovative in that tech world.

Like Brian mentioned at the beginning of the show with these autonomous driving robots and things like hotspots. I thought that was really interesting. They did that last maybe a year-and-a-half ago where they allow you to deliver the pizza to thousands of locations that aren't necessarily address. If you're at the beach or you are at a park or something, you can go to Domino's and they've established a hotspot right next to you.

You can just go there and you don't have to go to the nearest address to do it. It's things like that that help keep their customers engaged. That's a big reason why Domino's market share, I believe is climbed up steadily over the last 10 years, whereas they've been stealing share obviously from a lot of other pizza places and fast food places. Parkev?

Parkev Tatevosian: That's great. I'm especially interested to see how they develop the partnership with Nuro and drive down those delivery costs and remove that constraint from looking for drivers. That's going to be interesting to see how they're able to use that and blend that into their business.

Parkev Tatevosian owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Domino's Pizza and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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