At the Consumer Electronics Show in early January 2014, Domino's Pizza (NYSE: DPZ) announced that by mid-year Domino's customers who have a Pizza Profile on their Domino's mobile app will be able to use Ford's voice-activated SYNC to place their order. Why on earth would a pizza maker make a splash at an event known more for flashy televisions? And beyond both of them headquartered in Michigan, why did Domino's pair up with Ford Motor Co. (NYSE: F)?
Is the pizza app more dough or cheese?
Domino's is making improvements in their digital platform, which includes online computer ordering and mobile apps. CEO J. Patrick Doyle noted that the digital platform is important to the company, especially in introducing new products and keeping those innovations in the mind of the consumer. He noted that in the past, the consumer would forget new products as soon as the television ads announcing them went off the air. The collaboration with Ford, the first ever between a fast-food brand and an automaker, is one of the ways that Domino's is expanding its digital platform.
There are advantages to having a digital platform. First, it keeps the brand awareness and product innovation at the top of mind for the consumer at a fraction of the cost of television marketing. Furthermore, the digital platform gives Domino's an advantage over the regional local pizza competitors that cannot compete on the same level of information technology. An effective digital platform has proven to result in better customer satisfaction, frequency, and retention. The technology is used to assess the operational effectiveness of the stores too.
Domino's is seeking to make their digital platform broadly available. Beyond its connection with Ford, Domino's app is available to 95% of the smartphone market. The broad distribution of the Domino's app has helped make an impact, with digital sales accounting for 40% of total sales in the third quarter of 2013. This comes to $2 billion in global sales per year for Domino's.
The Ford connection is a novel way toward increasing their mobile presence even further. Speaking to the Detroit Free Press, Doyle said the Ford SYNC app "will make it easier for someone to order from Domino's for either delivery or pickup than it is for them to go through a drive-through window" at a quick-serve restaurant. "The convenience of solving dinner that night while driving home is a pretty interesting step forward for us as traditional leaders around convenience within the pizza industry."
Digital competition for a larger slice of pizza pie
Domino's major competitors, Papa John's International, (NASDAQ: PZZA) and Pizza Hut, which is owned by Yum! Brands, (NYSE: YUM) have significant digital platforms. Both of them have leveraged their technology toward branding awareness and resulting in increased portion of sales from those platforms.
Papa John's was the first of the large pizza makers to offer systemwide online ordering back in 2001. In 2010 Papa John's offered the digital rewards program, Papa Rewards. Papa Rewards is the first and, to date, the only digital rewards program for the larger pizza companies. At the end of October 2013, Papa John's topped $5 billion in all time system wide digital order pizza sales. Currently, 45% of all of Papa John's sales come from digital channels.
Pizza Hut started its online ordering system for a handful of stores in 2001. By 2008, Pizza Hut had $1 billion in digital platform sales. Pizza Hut increased its digital platform footprint with an iPhone app in 2009 and an Xbox 360 app in 2013. Digital orders for Pizza Hut grew 100% since 2009, with mobile app orders growing 4,000% in the last three years. By 2013, Pizza Hut topped $6 billion in all time system wide digital order pizza sales. Within the first ten days of the new year, Pizza Hut set its all-time high for digital orders, accounting for 40% of all of its pizza sales.
Will the Domino's fall their way?
While the digital platform competition among all three of the large pizza makers remains fierce, Domino's is the first (and currently only) one to have an app in a car. This is a novel method of increasing its mobile presence, away from the traditional smartphone app market. By having additional mobile devices that have multiple connections and interactions with the consumer, it's no wonder that Domino's will be top of mind. And Domino's hopes that when you get into your Ford, you'll think about their pizza. After all, you shouldn't be driving and looking at your smartphone at the same time, even if you're hungry.
Fool contributor Johnny Chen has no position in any stocks mentioned. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford and Papa John's International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.