This Pizza Company Fails Often -- And That's Its Secret to Success

The pizza business is huge and (get your pun-o-meter ready) its piece of the pie is only growing larger. According to research firm CHD Expert the pizza business could bring in annual sales of more than $43 billion within the next decade.

If that figure doesn't drop your jaw, perhaps a few individual statistics from Pizza Marketplace will change your tune. According to its studies, 5 billion pizzas are sold each year, of which 3 billion are sold within the U.S. alone! This equates to the average person eating about 46 slices of pizza per year, or nearly six pizzas all by themselves, and about 350 pieces of pizza being consumed each second! Furthermore, 93% of Americans eat at least one piece of pizza per month! I'm not sure whether to be astounded by this shockingly high figure or disappointed that I'm one of the outcast 7%.

Source: Hungry Dudes, Flickr.

With more than 70,000 pizzerias in operation in the U.S., 65% of them being independently owned, there's perhaps no greater challenge for a pizza company than to stand out among the crowd. The basic tenets of making a pizza don't change much from restaurant to restaurant, so the finer points of marketing, ingredients, exterior and interior presentation, and the ability to forge an emotional bond with the public, is what often determines whether a pizzeria chain will succeed or crumble.

Source: Domino's.

Standing out from the crowd
Speaking firsthand, I've tried many nondescript pizzas in my time that I was coaxed into buying during my college years based primarily on price. More than a decade removed I couldn't even tell you a tenth of the names of these places, proving that these independent businesses, at least with me, failed to differentiate themselves and stand out from the crowd.

One surprising large chain, however, has managed to stand out from the crowd, and even its peers, by demonstrating a high degree of innovation and squaring off with its customers on even ground, which allows consumers to form an emotional connection with the brand.

Perhaps this chains best attribute, and the reason it's so successful, is that it's really good at failing. I know that doesn't make a lot of sense, but I promise I plan to explain why Domino's Pizza aims to fail in order to succeed.

Failing in order to succeed
Domino's latest quarterly earnings report is filled with solid growth. Domestic same-store sales rose 4.9% while its international division same-store sales surged 7.4% for its 81st consecutive quarter of sales growth (that's more than 20 years!). 

But, it wasn't always this way. During the trough of the recession Domino's and its CEO Patrick Doyle had to face the harsh reality that its pizza recipe wasn't very good. According to CBS News, Domino's and its executives listened to some pretty harsh criticism from focus groups that called its pie everything from "cardboard" to "the worst pizza ever."

Source: Domino's.

What's truly amazing is that rather than defend its pizza against these harsh criticisms, Domino's chose to completely revamp its pizzas from the ground up. We often hear about consumer-based companies taking their cues from consumers, but many fail to follow through on their own advice and try to dictate what consumers want (ahem, J.C. Penney!). Domino's took these criticisms to heart and redid its entire recipe and menu to consumers' delight.

Not only did Domino's listen to consumers' suggestions, but it also publicly admitted defeat. Normally the reaction of large companies in the wrong is to sweep an unpleasant situation under the rug. Domino's, understanding that so most people in the U.S. eat pizza on a somewhat regular basis, and realizing it had a chance to completely shake up brand loyalty within the sector, aired its multi-year mea culpa campaign featuring its CEO Patrick Doyle. These ads squarely admitted Domino's previous failures and pledged to fix them by listening to consumers' wants and needs.

Specialty Chicken Jalapeno-Pineapple, Source: Junk Food Living, Flickr.

Of course, innovation is a slippery slope that can often lead to failure. As entrepreneur and Tesla Motors CEO Elon Musk is known to have said, "If things are not failing, you are not innovating enough." Domino's latest product attempt just might be its next failure. Introduced in April, Domino's unveiled its specialty chicken, which is an order of 12 light breaded chicken bites topped with one of four toppings. I don't know about you, but when I think of ordering a pizza the idea of buying Jalapeno-Pineapple chicken bites isn't really crossing my mind. But, that's the beauty of Domino's-it's willing to give new things a try, because even a failed product gets its name in view of the public and gives consumers a reason to dig more deeply into Domino's menu. You might even say it's the basis behind the company's new "Failure is an option" campaign.

Socially successful
One area where Domino's has yet to fail, but is another large component to its success, is social media. These days both Facebook and Twitter are playing a more crucial role in connecting users with companies. Not only do these sites allow businesses to reach out to mass audiences (for a price), but these social media networks can set the stage for how a company is perceived by millennials and even Generation Z.

As I noted two weeks ago when we took a closer look at brand engagement and loyalty - for which Domino's came out on top in the pizza category - it has outhustled its peers when it comes to garnering Twitter followers and making tweets which sends the perception to consumers that it cares more about their opinions. This is, of course, the basis to good customer service, and is another reason why Domino's stands atop its peers as America's go-to pizza brand.

I would obviously expect there to be hiccups in Domino's growth prospects moving forward as new products are tried and some fail. However, it only needs to find that one home run product every now and then while maintaining its tight connection to consumers via its ads and social media to maintain its long-term growth prospects. I'd suggest, as of now, that long-term investors are certainly in line to get their fair share of the pie from Domino's.

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Sean Williams is short shares of Tesla Motors, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends Facebook and Tesla Motors. It also recommends Twitter. 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.

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