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Pizza Protection

6/29/2019

7 Comments

 
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by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

Unfortunately, there are accidents in life.  Cars collide.  Homes flood.  People break bones.  Insurance lessens the impact of such events, but what about damage to pizza?  Well, Domino’s now offers protection for even that unexpected occurrence.
 
The nation’s pizza deliver leader is very good at getting its products from its stores to our doors, but it seems less confident about our ability to do the same.  For that reason, the company recently introduced “carryout insurance.”
 
Domino’s now promises: “If damage occurs to your carryout order after you leave the store, just bring it back and we’ll remake it for free.”  The firm lists a few reasonable provisos:  The order must be uneaten, with nothing missing, in its original packaging, and accompanied by a receipt. The firm also offers examples of accidents that qualify for a claim like slipping and falling, "my kid sat on it," and "a stranger sneezed on it."  In other words, it seems like the company will cover just about any claim consumers make.
 
How much does the pizza insurance cost?  According to Domino’s it’s “free for all customers.”  Some may be thinking, “But, there are no free [pizza] lunches,”—customers must be paying for the insurance indirectly.  That may be true; however, Domino’s doesn’t appear to have increased its prices.  The company needs to be careful that the costs of its pies stay in-line with those of Papa John’s and Pizza Hut in the highly competitive pizza market.
 
It’s also likely that pizza insurance claims haven’t taken a significant bite out of the firm’s bottom-line, which raises a key question, “Do people really need pizza insurance?”
 
Let’s say that someone spends $30 on a pizza pickup order, then drops it while taking it out of their car.  The accident may ruin their day, but it probably wouldn’t pose any significant financial hardship.  People who can afford to spend $30 on takeout food generally can afford to lose $30 worth of takeout food.
 
Contrast that loss to a serious car accident, a home fire, or the death of a family’s primary breadwinner.  Those events could prove financially devastating, if not insured.
 
Such scenarios remind me of advice my dad once gave me: Insure the big things that could break you; don’t bother to insure littler things like electronics and lawn mowers.  Even though they may be somewhat costly to replace, it’s worth the risk because replacement wouldn’t be financial catastrophic.  I also liked the line my Dad said to salespeople who tried to pressure him to insure small items: “All your talk of insurance is making me wonder about the quality of this product and whether I should be buying it.”
 
My father’s insurance advice is similar to that of Todd Erkis, a professor of finance and risk management at Saint Joseph’s University, who says that “Insurance is key to protecting yourself against financial ruin.”  Consistent with that view, Erkis suggests that new college graduates should buy just four types of insurance in order to hedge against possible financial hardship: health, long-term disability, renter’s, and car insurance.
 
Writing for Mint Life, Nicholas Pell adds just two other types of insurance to buy: home owner’s, which is analogous to renter’s, and life insurance.  New college graduates often don’t have dependents and, therefore, don’t really need life insurance, but those who do should use insurance to protect their survivors from poverty.
 
All this to say, people don’t need pizza insurance, even if it’s “free.”  So, what is Domino’s doing?  In the very crowded market for restaurant pizza, Domino’s is probably trying to gain a little bit of perceptual separation from its closest competitors.  Papa John’s and Pizza Hut don’t offer carryout insurance, which makes Domino’s distinct.
 
However, while Domino’s may have created a difference, the insurance doesn't deliver any real competitive advantage.  Again, people don’t need the insurance, so it probably won’t sway many purchase decisions.  Furthermore, who ever thinks they might drop their pizzas?  In sum, the insurance just doesn’t offer any measurable improvement to Domino ’s value proposition.
 
Still, Domino’s has savvy marketers.  The company wouldn’t be so successful if it didn’t.  The firm’s marketing team probably intends carryout insurance as more of a promotional strategy than a product enhancement.  In other words, it doesn’t matter if the insurance causes people to buy more pizzas, as long as publicity and word-of-mouth about the unusual offering helps keep Domino’s top-of-mind.  That added exposure, in turn, should lead to more pizza purchases.
 
But would the firm really go to such lengths just for promotion?  It's done so before.
 
Prior to carryout insurance, the company’s “Paving for Pizza” campaign represented a similar strategy.  Domino’s promised to patch potholes around the country so the road hazards wouldn’t wreck pizza deliveries.  Of course, a company as far-flung as Domino’s could never repair enough roads to actually make a significant delivery difference in most of its locations.  However, the notion of a pizza company patching roads was so novel it captured press attention, as well as created some community goodwill.  In short, the program seemed to be a very effective, albeit unconventional, means of pizza promotion.
 
Will carryout insurance, work as well for Domino’s?  I doubt it.  Despite the fact that I’m writing about it now and you’re reading about it, I don’t believe the company’s newest ploy will capture the interest or hearts of people like the paving program did.
 
There’s nothing wrong with Domino’s promising extra protection for pizzas; in fact, it’s a nice extra benefit, if anyone ever needs it.  However, that lack of real consumer value, teamed with minimal promotional impact, places carryout insurance in the box of “Simple-Minded Marketing.”


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7 Comments
Rachel
10/30/2019 05:43:56 pm

I have heard about Dominos new insurance policy but honestly did not really understand it either. Their commercial is attention grabbing with outlandish scenarios that require pizza insurance, but it is hard to determine how this translates into actual sales. This promotion seeks to create more buzz than it does to actually provide benefit to buyers. Unlike their last marketing technique it does not engage the community which is why I agree it will fall flat.

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Caleb
11/1/2019 03:52:40 pm

I agree with the author’s idea that the Domino pizza protection plan is a publicity stunt. In my life, I have taken pizza over a hundred times. In my experience, I have never once had an accident happen to my pizza. It is a tiny percentage chance that anything at all will happen to the pizza. Therefore, Domino’s pizza insurance feels more like a marketing gimmick than an actual help policy. I think that Domino’s did this tactic because they wanted to generate more goodwill. As stated, there is no real monetary benefit behind this new policy. It more is to get the consumer to realize that Domino’s care about them. Therefore, the next time someone has a bad experience with a pizza company. It will be in the back of their mind that Domino’s cares for its customers with the pizza protection program. Then they may get Domino’s the next time, because of this marketing plan. However, the pizza protection plan is not absolute to drive-in customers the next time they have a terrible experience. Also, there is no tangible way to track if this policy is driving in customers. They can only monitor the number of claims that a customer makes. Therefore, I agree that it is very simple-minded marketing because it brings no real value to the stockholder.

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Joshua Lawrence
11/5/2019 05:27:09 pm

I think this policy is definitely more a marketing tactic than anything. While it is not likely to be taken advantage of often, it draws attention to the company and builds their reputation in consumers' eyes. For me personally, I'd never really heard much about Dominos or tried it until commercials advertising carryout insurance came out. While it wasn't a deciding factor for me, it brought my attention to the company and led me to try their pizza.

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David
11/7/2019 07:16:59 pm

I did see a handful of Domino's pizza insurance commercials. It is definitely an advertisement meant to promote Domino's as a business rather than product enhancement. Pizza insurance is something that consumers don't necessarily need, but it is indeed a way to separate themselves from the competition. It is a clever marketing scheme to add on to their advertisements.

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SG Financial INC. link
6/25/2020 11:53:46 am

Wow! Thank you so much for this wonderful blog and how beautifully you explained, after read this i changed my thoughts..

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Sydney
10/22/2020 02:15:00 pm

I think that the pizza carryout insurance can be both good and bad. It gives customers more assurance that even if something was to happen to their pizza, they can get a new one for free. It also sets up Dominos apart form their competitors because no one else offers the insurance. Their commercials they used to promote the carryout insurance were funny and got the attention of the viewers. On the other hand, I can also see from this point of view that it isn't worth it. It may be free in price like the article said but not free overall. Nothing is for free, there are always opportunity costs. In this case, the opportunity cost would be the time it takes them to take their damaged pizza back in for them to make a new one. I think overall, that as long as people don't take advantage of the insurance by always remaking their pizza that it would be an asset for them. The second that their insurance costs the company more that they should get rid of it.

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2/3/2021 08:56:18 pm

The original trademark name was Napoli, and it was transformed to Bertello in December 2019. While my stove claims Napoli and your own says Bertello, they’re still the same wonderful mobile pizza oven.

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