Reference no: EM132237714
Sales promotion refers to the promotion activities that stimulate interest, trial or purchase by final customers, channel members, or a firm's own employees. It differs from other promotional efforts in its goal of short-term behavior modification or action on the part of the target of the sales promotion.
Domino's, Inc means pizza. Founded in 1960 by Tom Monaghan for $500, Domino's has grown to over 8,000 stores worldwide. The chain operates the vast majority of its stores using a franchise system of independent store owners. Domino's franchises cost somewhere between $120,000-$450,000 depending upon the size of the store. Also, franchisees must pay a franchise fee of $25,000 and an ongoing royalty of 5.5 percent. Most franchisees report a high level of career satisfaction as a Domino's store owner.
In this exercise, please read the mini-case and answer the questions that follow.
When Dave Jeffries purchased his first Domino's franchise in 1994, his goals were simple—make and sell pizzas. He knew the business model wasn't complicated and that Domino's had a really unique proposition with its quick delivery promise. Dave would work in that single store side by side with his staff and store management. Since those early days, Dave's business has changed quite a bit. He still gets to make pizzas once in a while, but he has to carefully divide his time between the thirteen stores he now owns throughout central Illinois.
Dave jokes that most of his time is now spent on coordinating the promotion activities of his grouping of stores and the pizza making is left to the "professionals" working in his franchises. In a recent interview with a local newspaper, Dave explained the nature of his relationship with Domino's corporate. "The home office (corporate) performs the product development function and administers the distribution of raw materials needed by the independent franchisees. Corporate also buys and schedules national advertising. For these services, each franchisee must pay a royalty of approximately 10 percent of gross sales to corporate. Each franchisee controls local advertising and promotion of their store or stores." Dave indicated that volume is critical to the success of his business. Out of every dollar in sales, $0.10 goes directly to corporate as a franchise fee, $0.52 is spent on raw materials, and $0.10 for labor. Thus, he must market AND make a living on $0.28 per dollar.
He further explained that his job is not as complicated as it seems. Within his thirteen store group, there are really only three types of stores he must manage—University Stores, Large Community Stores, and Small Town Stores. While located on opposite sides of the state, the two University Stores are very similar. Students order at much different times of the day than at other stores. Late night orders are common and there is usually heavy order traffic Thursday through Saturday nights between 11:00pm and 1:00am. Also, the student market is very price sensitive and responds well to deep price deals for simple pizzas. Student groups often place an order for ten pizzas for group gatherings.
Small Town Stores have a much larger family base and many of the orders serve as the family meal. These orders generally contain multiple pizzas (one for the parents and one for the kids). Add-ons (breadsticks, wings, and soda items) are also very popular. Saturday and Sunday afternoons are also a popular order time during sporting seasons.
The three Large Community Stores are much busier during the lunch hour than the other store types. Orders during the 11:30am to 1:30pm weekdays usually consist of multiple items delivered to an office. For example, the typical lunch order might consist of three of the newly introduced sandwiches including chips and a drink and maybe a medium pizza. Occasionally, multiple pizzas will be delivered for a simple lunch party.
Dave calls his business an "out of sight" business. If his business is "out of his customer's sight," they won't place orders. The national advertising scheduled by corporate does a fantastic job of keeping Domino's a strong brand name, but he feels it sometimes falls short of his more local goals of getting his customers to think about his pizza when they are actually hungry. Dave uses local advertising, including community and student newspapers, to promote his stores and often includes price deals. In the past, he has distributed flyers door-to-door to promote weekly specials. With thirteen stores to manage, Dave is looking to streamline his promotional efforts and perhaps introduce some standardization among the various store types.
1. Which sales promotion goal would Dave likely set for the University Stores?
2. Which product – customer market pairing would likely be the most successful?
3. Which type of promotion would best appeal to the Small Town market?
4. In order to be effective at implementing sales promotions for his stores, Dave should expect all of the following to be true, except:
5. In his effort to streamline promotions and introduce standardization, Dave should expect all of the following to be true, except: