The Confidence-to-Competence Ratio
Patrick Doyle reversed the fortunes of Domino's Pizza by listening to customers, launching a better product, and fessing up to past mistakes.
Photo by Matthew Gilson
Time was, you ordered a pizza, the guy showed up, you paid, you tipped, you ate. If you were a college student, you ate the cold leftovers for breakfast. But that was it; over and done, an oversize box that wouldn't fit in the trash can and pizza that tasted remarkably like the box.
Now ordering pizza is an "experience," the new brand-building mantra. Customers don't want a transaction; they want a relationship. They want what they buy, even what they eat, to say something about them. They want to be part of the Pepsi Generation or the Harley-Davidson pack, the one who wears boat shoes instead of wingtips, who drives a MINI Cooper instead of a sedan. They want to hang out with a brand, a brand that understands them.
Who knew ordering pizza could be so fraught with meaning? Apparently, Patrick Doyle knew. Doyle has been CEO of Domino's Pizza, Inc., since 2010, having taken the reins just nine months short of the Ann Arbor, Michigan, company's 50th anniversary. In those two years, he turned around a company whose stock was in the tank, whose debt was through the roof, and whose pizza ranked at the bottom. In the process, he has transformed Domino's into a modern brand that engenders loyalty, a sought-after product, and a better eating experience.
He did not do this single-handedly, of course. No turnaround is as sudden as it sounds when commentators start calling it one. Doyle has been with the company since 1997, first in marketing and international operations, and has ridden the roller coaster of family, private equity, and public ownership. He rode the customer satisfaction barometer from "fast but just okay" to "reinvented from the crust up."
A native of Midland, Michigan, Doyle began his career in financial services, with a five-year stint at First National Bank of Chicago, now part of JPMorgan Chase & Co. He earned his Booth MBA under the bank's First Scholar program and polished his command of finance. "It was the best finance program around," he said in an interview from his Ann Arbor office.
"What it taught me has carried me forward as I've become more of a marketing guy, creating value for consumers, for shareholders, for franchisees - for those three groups and our employees. How are they perceiving the value of what they're receiving from Domino's? Franchisees ultimately are the ones who generate growth for us around the world. It's how we generate so much cash. But how do we best use that cash flow - paying our shareholders, reinvesting, reducing debt? That's a discipline [rigorous financial analysis] that came out of Booth."
An advertising coup
In 2009, Doyle, then president of Domino's USA, was on vacation on what turned out to be the company's darkest day. Two employees in North Carolina, bored on an Easter Sunday, shot a disgusting video of themselves doing rude things to pizzas and posted it on YouTube. The video instantly went viral. It was a PR disaster just as the company was preparing to launch its revamped pizza, two years in the making, and working to build market share in a down economy.
The company's response to that social media fiasco, with Doyle as the public face, became part of its giant mea culpa for years of mediocre pizza - and an advertising coup.
Domino's had spent almost as much time crafting a marketing campaign around the "new and inspired" pizza as developing the recipe, which featured a seasoned, garlicky crust, a more robust sauce, and better quality cheese. That marketing campaign was now scrapped in favor of a gutsy mass media and social media blitz.
The chain not only admitted that its product had been subpar, "we rolled around in it," Doyle said. "This was no little 30-second spot. We showed consumers talking about how bad it had been." The term to "do a Domino's" entered the advertising lexicon as shorthand for falling on your sword. The ads tested well among consumers. More importantly, they were effective, contributing to a sizzling 14.3 percent quarterly revenue gain following the marketing campaign and introduction of the new pizza, the largest quarterly same-store sales jump in quick-serve history. Same-store sales in the United States have risen 13.4 percent over the past two years.
Social media leads marketing
"We broke every rule of advertising when we relaunched," Doyle said. "And we've kept it up."
Authenticity has enabled the company to be one of the savviest users of social media, especially for a company as old as the family-founded pizza maker. Most companies tack social media onto the end of an existing marketing communications strategy that still relies on mass media advertising. At Domino's, social media leads marketing. The company listens to its customers and responds to what it is hearing in real time. It has gone so far as to stream live, unedited (except for obscenities and libel) social media content in Times Square - the good, the bad, and the ugly.
"We accept the idea that social media, which by definition is people's friends and family talking about brands, has more credibility than companies talking about themselves," Doyle said. "Our view is what matters is how people are viewing the brand. We listen. You have to filter out the noise but what we're doing is listening, hearing what they're saying, acknowledging that, and responding to that." The company has 7 million likes on Facebook and 139,000 followers on Twitter.
Although Domino's was always mindful of its margins, it didn't hesitate to launch price wars with rivals Pizza Hut, Little Caesars, and Papa John's to drive volume. Just as the economy was headed down and commodity prices were headed up, Domino's lowered its prices and forced competitors to follow. The strategy resonated with cash-strapped diners. The family that had eaten at a white-tablecloth restaurant retreated to Applebee's and T.G.I. Friday's, and the family that had eaten at Applebee's and T.G.I. Friday's started ordering pizza. And right then, Domino's hit the street with a much improved pizza, a cool social media presence, a user-friendly website - and a lower price than other pizza chains.
Mike Lawton, Domino's CFO who has worked with Doyle for 20 years, said, "If we get the price right, and bring the customers in, that's not a price war, that's just
Lawton had interviewed Doyle at Gerber Products Co. and was impressed with the then-28-year-old who went on to serve as vice president and general manager of Gerber's domestic baby food business and headed Gerber's Canadian subsidiary. Lawton and Doyle have been a team ever since.
When Doyle became Domino's CEO, "he was in my office saying, 'You know what I want,'" Lawton said. "He wanted a CFO who had run something because he's not afraid to be challenged on anything. He is a very optimistic individual and I'll blame my CPA training for always seeing the potential downside. We've worked together so long that every now and then I can say, 'Oh, come on!' He has the ability and the willingness to take on any challenge in any discipline and still lead people - not many people can do that."
The recession was instructive. Having your back against the wall is an incredible motivator, Doyle said. "You learn where all the rocks are when the water level goes down."
Eric Larson, '87, managing partner of Chicago-based private equity firm Linden, LLC, and a Booth classmate, observed that Doyle arrived at the graduate program with a paradigm that he called the confidence-to-competence ratio. "He observed that a lot of people in finance had more confidence than competence," Larson said, "so their ratio was well over 1.0. There was overconfidence bordering on arrogance."
Doyle still uses that ratio and the proof, as they say, is in the pudding - or in this case, in the pizza. When he appears in Domino's commercials, self-deprecating, able to laugh at himself, and completely believable, or when he walks into a room, all six-foot-four commanding CEO of him, he is the image of confidence. But if that confidence were not backed by the competence that his company can deliver on the promises he makes, he would not be succeeding in his own eyes. The magic ratio is 1:1: a CEO who can speak with absolute confidence of the value of his own product - and know it can be delivered in 30 minutes. ■