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Should Social Responsibility be Selfless?

1/16/2022

12 Comments

 
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by David Hagenbuch - professor of Marketing at Messiah University -
​author of 
Honorable Influence - founder of Mindful Marketing 


While people gave gifts to loved ones last month, the world’s largest pizza chain was providing presents to some very surprised recipients—other restaurants.  True, “it is more blessed to give than to receive,” but was Domino’s philanthropy actually aimed at putting itself on the receiving side?
 
As you may have seen in the 60-second spot from its feel-good campaign, Domino’s bought over $100,000 in gift cards from local restaurants and gave them to its own customers.
 
It doesn’t take much business background to know that the goal of an enterprise is to build market share for itself, not competitors.  Even Vickie Corder, one of the restaurant owners who appeared in Domino’s commercial, was astonished by the action: “I can’t believe one restaurant is buying another restaurant’s gift certificates.”
 
Why would Domino’s want to support its competitors’ sales by buying their gift cards, and even worse, giving them to its own customers, making them less likely to buy Domino’s pizza?  Some of the ad text suggests an altruistic reason:  “Domino’s wants to help the people and restaurants in our local communities.”
 
One might take that explanation at face value.  After all, the firm did fork over $100,000.  However, for a company with annual revenues of $4.37 billion and operating income of $801 million, $100,000 is immaterial.  There’s also some understandable skepticism--Why haven’t we heard before of Domino’s feelings of responsibility for other restaurants?
 
Instead, some of the chain’s social responsibility has looked more like ‘marketing gimmicks,’ such as its “Paving for Pizza” program, aimed at filling potential pizza-delivery-wrecking potholes, and its “carryout insurance,” guaranteeing free replacements for customers who inadvertently fumbled their pies.
 
The vast majority of people probably never had a poor pizza experience resulting from either of those issues and never will, so it’s realistic to suggest that in both instances Domino’s was making much ado about nothing, positioning for the free publicity that each unconventional campaign elicited.  So, is gifting other restaurant’s gift cards just another attempt to gain exposure through oddity?
 
The gift card campaign certainly seems like it could be another gimmick; yet, there are some notable differences, namely that COVID has put unprecedented pressure on restaurants, causing many to shutter their doors permanently.  In fact, Domino’s commercial mentions that “over 110,000 U.S. restaurants have closed since March 2020.”
 
That to say, unlike the exaggerated ideas of potholes pummeling delivery vehicles and consumers carelessly dropping carryout orders, the pandemic’s negative impact on restaurants has, unfortunately, been very real.
 
The ad also mentions a related phenomenon that COVID didn’t cause but did increase:  the use of third-party delivery companies.  During the height of the pandemic when most restaurants’ sit-down dining was paused, more and more people started getting restaurant food delivered to their homes and offices by providers like Grubhub, Uber Eats, and DoorDash.
 

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Although selling food, whether for dine-in or delivery, seems like a good thing for restaurants, apparently the math doesn’t work well when third-party delivery companies are involved.  Irene Li, another restaurant owner interviewed in Domino’s ad, affirms the profit predicament: “[Third-party delivery fees] take a huge chunk of our bottom line; all of that comes out of our pocket and goes to them.”
 
Others have echoed her concern, including NPR, which reported that apps often charge commissions of 17% or more, in addition to delivery fees.  Likewise, the LA Times found that one local restaurant paid $35,000, or roughly a third of its annual rent, in delivery fees, which led the Times to recommend, “The next time you order takeout, call the restaurant [directly].”
 
Domino’s suggestion that delivery apps wreak havoc on restaurants’ bottom-lines is on-point; however, the pizza chain is also very well-known for doing its own deliveries.  Does that mean that Domino’s is selflessly looking out for others?  Not exactly.
 
Apparently, some of the many people who have grown accustomed to the third-party apps for food delivery have also used them to place orders for pizza, doing to Domino’s the same fiscal damage described above. In fact, another Domino’s ad has suggested such delivery difficulties, warning consumers that third party delivery firms charge “surprise fees,” but it will reward certain loyal customers who use its app with “surprise frees,” or, free food.”
 
Likewise, during an interview on CNBC’s Mad Money, Domino’s President and CEO Ritch Allision suggested that third-party delivery apps have, to some extent, stunted the company’s growth.
 
All this to say, by buying and giving away other restaurants’ gift cards, Domino’s has brought added attention to an issue that doesn’t just hurt its local restaurant competitors.  It also  bruises Domino’s own bottom line.
 
The question, then, becomes, Is it right for Domino’s to help itself while helping others?
 
Before considering the ethics of this query, it’s worth noting that Domino’s strategy does seem to be effective marketing.  The unconventional approach gains attention, and the corporate social responsibility builds goodwill.
 
What’s more, because delivery is both the focus of the ad and a key component of the company’s value proposition, the promotion is more meaningful and memorable.  When people consider Domino’s brand, the company wants them to think of food delivery, which the commercial accomplishes.
 
So, what about the marketing’s morality?  One consideration could be the amount Domino’s spent on the gift cards ($100K+) versus how much it’s paid for the ads.  Excluding  production expenses, U.S. television broadcasting costs alone, average about $115,000 per 30-second spot, which means the campaign’s promotional budget certainly far exceeded the value of the gift cards.
 
The extreme imbalance may make some rightly question the company’s motives.  Although Domino’s franchisees did assume some risk by giving other restaurant’s gift cards to their own customers, most people who eat out probably patronize multiple restaurants, making it unlikely that Domino’s lost business.  In fact, free gift cards may have led some of their recipients to reciprocate by buying more pizza.

All said, it’ hard to paint Domino’s promotion as selfless:  The company benefited from the tactics as did the other restaurants and those who scored the free gift cards.  So, is such mutual benefit problematic?
 
Most business exchanges result in win-win outcomes.  From the clothes we wear to the computers on which we type, we’re usually very glad we have those products and not the money we paid for them.  Meanwhile, the marketers are grateful for our money and don’t want back their products. 
 
Mutually beneficial exchange, in commercial and noncommercial contexts, is a very good thing. Some may argue that such a philosophy shouldn’t extend to corporate social responsibility, but why not?
 
Several years ago, two colleagues and I conducted research in which we identified three unique types of corporate social responsibility: donation, volunteerism, and operational integration.  In the study we affirmed that helping others was very good, but implementing philanthropic acts that simultaneously furthered the economic goals of the organization was even better.  The positive response to this article and another like it suggests that many others share the same viewpoint.
 
The reality outside business isn’t much different.  When individuals give of their time, money, etc., benevolence in some form usually comes back to them.  The stories found in the Go Giver artfully describe that phenomenon.
 
Domino’s did a good thing by buying and giving away other restaurants’ gift cards.  Although it wasn’t a major act of corporate social responsibility, it was a meaningful one.  The fact that the philanthropy also benefited the pizza chain, doesn’t stop the strategy from being "Mindful Marketing."


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12 Comments
Doyle Lucas
1/16/2022 05:45:56 pm

Thanks for these very good thoughts David. I think I know the three authors of that article. Wonderful to see the concept has staying power.

Reply
Davd Hagenbuch link
1/16/2022 09:55:30 pm

Thank you, Doyle. About those researchers, I only work with the best!

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Alyssa R.
1/31/2022 12:31:43 pm

I agree that Domino's handing out gift cards from other local restaurants to their customers is an example of mindful marketing. What they did was both nice to the local restaurants and their customers. In addition, giving these gift cards out made Domino's look like a great company. As a result, customers showed more respect for Domino's, which caused them to return more often. While I do understand that Dominos may have used their donations to actually benefit them in the long, I don't think this is necessarily a bad thing. The reason being, they could have done much worse in order to gain publicity and increase their sales, but instead they chose an option that would benefit themselves, other restaurants in the area who were struggling from Covid, and their loyal customers.

Reply
Maggie L.
2/4/2022 07:33:38 pm

I agree that this Domino's campaign is mindful marketing. I think this article is an important reminder that mindful marketing needs to be both beneficial to society and effective marketing for the company. Often times, it is easy to quickly judge a company who uses a philanthropic service as a chance to help their own business. In reality, this doesn't negate the good works done by the company- it simply multiples the value created by one activity. In other words, Domino's came up with a "win-win" situation, where they could help their own business and show support for their competitors.

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Adrianna G.
2/5/2022 12:29:48 pm

I agree that the campaign Domino’s had handing out local restaurants’ gift cards with their pizzas was an example of mindful marketing. I think mutual benefits are a very good thing. It can be very tempting to say that Domino’s could have done more or that the company should not have promoted their philanthropic acts as an advertising campaign, but they also could have done nothing. The benefits those local restaurants received mattered a whole lot to them, especially when many such businesses were struggling so much because of the pandemic.

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Gene Boonpienpol
2/5/2022 01:26:11 pm

I think what Dominos did is mindful marketing. The act of handing out gift cards' to local, smaller restaurants was a nice act and could help them in such a tough time of the pandemic, where sales and revenues are hard to generate. It's a win-win situation because Domino can help promote their own business, while also help other struggling business by showing support.

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Josiah D.
2/5/2022 01:36:51 pm

I agree that the Domino's campaign is mindful marketing. It upholds societal values by pointing out the value of small family owned restaurants are to the US economy. The campaign shines a light on what has made the country so successful. It creates stakeholder value for their customers by giving away free food to its customers essentially. They are creating stakeholder value for themselves by encouraging their customers to use Domino's delivery services the next time they get pizza from them instead of other delivery services.

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Jie Hao
2/5/2022 11:33:54 pm

Domino's is campaign is consider mindful marketing in terms of the Earthly standard but not the heavenly standard. In my opinion, many businesses or individual often focus on the "doing" side but is blinded with the "being" side. What did the Bible says about doing good deed? In Matthew Chapter 6 verse 1, it is said that we should not advertise our good action because it goes against God's injunction. To non-believer Domino's is doing a fantastic job, helping others and itself at the same time, a situation where everyone benefits. But in a Christian view, I believe it is something unholy that Christian should not follow. Just a question to consider about.

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Emily Seibert
2/7/2022 10:14:40 am

Dominos campaign is considered mindful marketing. By handing out gift cards to customers who purchase their pizzas to other companies, they are creating a system of mutual benefits. By going through with this campaign, they are upholding values of a good business. They are putting a spotlight on smaller companies and family owned restaurants. This is something that many of the top companies wouldn’t even think of doing. Instead Domino’s is taking their opportunity to help those in need. It also looks good to the consumer. Many would be more inclined to support a business that reaches out to small, family owned business.

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Tyler Whitesel
2/7/2022 12:44:04 pm

Thank you for sharing this wonderful method of marketing that Domino's empolyeed. I would one hundred percent agree that what Dominos did would be considered mindiful marketing. As not only did they help their own stocks by giving the appearence that they are morally responsible but they also were actually morally responsible in thier actions. This way of helping other businesses who may have been struggling due to the pandemic was a brilliant way of bringing attention to the issue and supporting those who may have been suffering due to the issue. Even if this way of marketing was self serving, there was still benefit for those small businesses and I believe that this is the main thing we should be focusing on, how they helped others.

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Imaobong Undieh
2/8/2022 09:23:10 pm

I agree that this is mindful marketing. While philanthropy better benefits the companies that give, there is still some benefit to the society in that it tries to relieve the burden smaller companies or non-profit organizations face under the free market during unprecendented crises. Of course, a company should never operate against their best interest, and it is expected of most companies to perform in a way that increases their market share, thus it was witty of Domino's to consider this a smart way to increase their good will while maintaining their share of the market and not giving too much as to lose customers during the pandemic.

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Grace H.
4/14/2022 01:06:17 pm

I agree that this was a very mindful marketing campaign for Domino's. This not only shows their respect for other restaurants but it also helps their sales and promoting.

Reply



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