Domino’s strategic move to launch its loyalty program, “Cheesy Rewards,” in July 2022 appears to be a successful initiative in regaining control over customer relationships and reducing dependency on food aggregators like Zomato and Swiggy. The program, offering a free pizza after every 6th order but exclusively for orders placed through Domino’s own platform, has shown impressive results:
- 10 million quarterly app downloads
- 16.8 million loyalty members
- 10.3 million monthly active users
- 48% of sales from loyalty members
- Higher order frequency
This initiative has not only helped Domino’s tap into a significant untapped potential by realizing that a majority of its revenues come from a small fraction of customers but has also allowed the company to retain its brand identity and control over customer relationships.
However, sustaining a delivery-led business model in the long run poses challenges. Here are some factors to consider:
- Market Dynamics: Zomato and Swiggy, driven by aggressive discounting and growth-focused strategies, may continue to exert pressure on Domino’s. Market dynamics and customer preferences can evolve, impacting Domino’s ability to compete effectively.
- Dependency on Aggregators: Despite the success of the loyalty program, Domino’s still relies on Zomato and Swiggy for almost 25% of its sales. Any significant shift in market power may influence the dynamics of commission rates and terms, affecting Domino’s profitability.
- Operational Challenges: Managing its own delivery force comes with operational challenges and costs. Retaining delivery personnel amid the gig economy’s fluctuations and increasing salary expectations can impact Domino’s cost structure.
- Changing Consumer Behavior: Consumer behavior is dynamic, and preferences for ordering through aggregators versus individual platforms can shift. The convenience offered by aggregators and their extensive reach may influence consumer choices.
- Competition and Innovation: The food delivery segment is highly competitive, and innovation plays a crucial role. Domino’s needs to continually innovate, both in terms of its menu offerings and customer engagement, to stay ahead and provide a compelling reason for customers to order directly.
While the loyalty program has shown early success, sustaining a delivery-led business model requires a nuanced approach that considers evolving market dynamics, competition, and changing consumer behaviors. Domino’s needs to adapt to these challenges, possibly by leveraging technology, refining its loyalty program, and maintaining a balance between aggregator partnerships and its own platform.