Cheap and Good?! Shut the Front Door
So in my day-to-day perusing of trade news, I am always on the lookout for articles that talk about a company doing a major “rebranding” or a brand overhaul or a total brand strategy do-over if you will. Why am I looking for these? Mostly (and somewhat pathetically) because I’m a total brand strategy nerd, but more because it’s a great way to test your own brand strategy chops, i.e. what would I do.
There was an article recently in AdAge titled “Little Caesars Seeks Shop for Brand Overhaul”. What was interesting about the article wasn’t really the fact that Little Caesars is seeking a new agency to assist them with the rebranding and marketing of themselves. What spurred my desire to write this post was what was written in the comments.
Comment 1: Little Caesars should take note from Domino's. Making your pizza as cheap as possible is not what is most important; it is improving quality and taste.
Comment 2: There is clearly a market for cheap pizza. It is their position and no one can compete with them. Why would they move away from that?
To me, these two comments perfectly frame the question of how do you gain a competitive advantage and how will your brand strategy help support that core business strategy. Michael Porter (who literally wrote the book on business strategy), in Competitive Advantage: Creating and Sustaining Superior Performance, identified two ways to have a competitive advantage; 1) Cost Advantage or 2) Differentiation Advantage. Cost advantage calls for being the low cost producer to gain higher profit and market share by creating process efficiencies, lower cost sourcing of materials, outsourcing decisions etc. A differentiation strategy calls for a product or service that offers unique attributes that are valued by customers and are perceived to be better and truly different than what competitors provide.
Now that the b-school recap is through, what does this have to do with our Little Caesars example? The first comment said that Little Caesars should take note from Domino’s. My first reaction was “Wrong!” I was in total agreement with the second comment. In my mind Domino’s was the one that had made the mistake. They were a cheap pizza brand that had repositioned itself as being the maker of high quality pizza, even using the word “artisan” to describe some of their fare. There is too much equity in the Domino’s brand around “cheap and fast”, so who in their right mind would believe that? After all, you get what you pay for, right? To me, it seemed that a competitor in Little Caesars’ world had decided to step out of their wheelhouse and move on to a world of bigger and “better” pizzas. My thinking was Little Caesars was now were free to roam in their Pizza!Pizza! (read: Cheap!Cheap!) world.
The problem to this thinking is that it isn’t just a competitive advantage or business strategy question; it’s also a brand and messaging question. The reality is that Domino’s didn’t leave the low cost pizza game. They reinvented it. Cheap and tasty!? What a concept. They created a hybrid position where they could continue to live in their world with a competitive advantage from a cost perspective, but decided that they could also differentiate themselves through repositioning their brand and through marketing. They recognized that tasting bad and cheap are not symbiotic in the pizza world. They could make bold claims to having done the work and research necessary to make a high quality, low cost product. The results? Dominos pizza just announced a 28% jump in Q4 earnings (building on more than three years of growth since the repositioning). Again, that was not done solely because of their position as a low cost pizza provider and their skills at sourcing low cost materials, retail strategies, etc. It was done because of their brand strategy, which differentiated them in the low cost pizza market and changed their value proposition.
The author of comment #2 stated “There is clearly a market for cheap pizza. It is their position and no one can compete with them. Why would they move away from that?” to which I answer, “because the cheap pizza market has been redefined and it isn’t a question of just being cheap anymore”. How Little Caesars rebrands itself will be an interesting process where they will have to look within and see what they need to do to level the playing field. Their two-for-one strategy might work again someday, but it might need to read BetterPizza!BetterPizza! In any case, an overhaul seems like the right way to go. What do you think?