Pizza Hut has gotten a lot of press lately about how they've "generated" $1 million worth of pizza sales with their iPhone and Touch apps in the first 3 months they were available.
Sounds great! Sign me up, right? Well...hang on a second. Read the fine print, and you'll find that Pizza Hut grants its app users a 20% discount on every order. And I don't know for sure, but I'd hazard a guess that people motivated enough to download and use a pizza-ordering app were already in the brand fold. In other words, they were likely to be buying from Pizza Hut already. Only now, they're doing it for 20% less every time. I bet I could convince people to shackle a cannonball to their ankles if I promised them 20% off every one of their pizza orders, but do I have to cannibalize existing customers and throw my margin at them at the same time?
So my "Marketing, Directly" questions about this initiative are:
- How much of the $1 million in sales was incremental?
- How loyal are the users compared to those who purchase in other ways?
- Does this app improve profitability, and is it therefore a harbinger of operational shift to lower order-cost in the future?
If the answers to those questions are something along the lines of "lots", "more", and "yes", then I'd be willing to call it a success, but until then, maybe the success is tied more to the exposure it got just for doing the program.
Monday, January 4, 2010
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4 comments:
Good stuff.
They'd be well served to determine if the sales were from current or new users of the brand. If they can get some trial from competitive users based on technology and the 20% discount it's worth it. Maybe they've determine that 20% off is the magic trigger to get incremental purchases from current users.
It has some parallels to what the tobacco companies faced with their continuity programs (Camel Cash, Marlboro Miles). As a first mover, Camel Cash, had a real advantage and drove trial and conversion from competitive users. Once the program was adopted by the multiple brands, they essentially became a cost of entry in the full price cigarette category. These programs eventually lost their effectiveness and rewarded consumers for behavior they'd exhibit WITHOUT any incentive. So once others entry the fray and as the duration of the program gets longer it actually makes each consumer less profitable.
You ask some good questions. The answer is probably tough to calculate. You also have to factor in the exposure to the brand by having the app on the phone and the impact that has had, not to mention being picked up by Apple to be a featured app in TV commercials.
In regards to discounts, there are always specials available if calling in the order or placing online. Not sure if those same specials are available from the app or not. While 20% may seem generous, if the pricing is different across channels, it may be a wash.
You have to be where the people are, and with 4 million+ downloads of the app, there has been enough interest to justify the expense.
You could probably have said the same thing about the website 10 years ago: Why would anyone order online when they could easily pick up the phone and call in the order?
from http://marketingdirectly.blogspot.com/2010/01/pizza-hut-sells-1-million-in-pizza-with.html
“In terms of Pizza Hut’s mobile business, over the next three to five years, more and more online transactions are going to migrate to smartphone usage,” Mr. Acoca said. “We always want to be where are customers are going, so we’re going to make the necessary investment to help customers order in ways they are comfortable.”
Rather than consumers simply migrating from calling in or visiting the PC Web site, Pizza Hut believes that the iPhone application is driving sales it may not have closed otherwise.
“We see it as being highly incremental, as much for the reason that people have a genuine need to order pizza and they want to engage with a really cool app that says something about them,” Mr. Acoca said. “The app has show-me factor making people want to engage with it and it also fulfills a functional need of ordering pizza.
“Just speak to any iPhone user, and the passion with which they describe and speak about their phone is incredible,” he said. “If they’ve taken the time to download an app, they perceive it as valuable, because it’s taking up coveted real estate.
Smart stuff. All I can add is, "I like pizza."
Bryan H.
Dustin, I hear you, that's what I was getting at about the potential for future ordering efficiency but clearly it's more than just that. As for measurement, if they have a good CRM program, they'll be able to pretty easily measure how much of the business is incremental. Maybe Chris Dickey should give them a call ;)
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