In the quick service restaurant (QSR) industry, having a loyalty program strategy is often seen as a hygiene factor. Something that needs to be in place just to be on par with the competition.
As loyalty consultants, Loyalty & Reward Co recognizes just having a loyalty program is not good enough. Loyalty programs need to constantly evolve to meet changing business needs and shifts in customer behavior. Evolution is so important that it is highlighted it as one of our Eight Essential Principles™ of best-practice loyalty program design.
Domino’s Pizza’s Domino’s Rewards program is a perfect example of a loyalty program that continues to evolve and deliver tangible results in a highly competitive industry.
The evolution of the Domino’s Rewards program
Domino’s launched their loyalty program in 2015 with a core focus on driving purchase frequency. The program took the form of a digital stamp card whereby members needed to spend at least $10 to earn 10 Rewards points. Six orders (or 60 points) got you a free medium pizza. Easy-cheesy, however…
This program construct led to limited participation particularly with their carryout customers, who typically spend less per order and make up more than half of Domino’s transactions. The program also failed to impact frequency of light frequency customers.
A new recipe for success
In September 2023, Domino’s introduced significant changes to their loyalty program:
- Lowered the minimum order spend to earn points from $10 to $5 [2].
- Introduced new redemption tiers at 20 and 40 points [2].
- Expanded the variety of menu items available for redemption with 60 points [2].
- Introduced exclusive access to member-only deals, special discounts and opportunities to earn bonus points
The new rewards structure remained familiar to existing members but now delivered even more value. It also offered fresh appeal to non-members, lower spend carryout customers, and light frequency customers which significantly boosted engagement [1].
Key ingredient: Reward accessibility
The revamped program has significantly improved reward accessibility, making interacting with it more desirable. Members can now earn 10 points on every order of $5 or more, making it easier to accumulate rewards [2]. The introduction of lower redemption tiers allows customers to access benefits more quickly, with options such as free dipping cups or drinks available for just 20 points [2].
The impact of these changes has been substantial. Domino’s added 3 million new members to its rewards program in 2023, with 2 million joining after the September updates [3]. Orders with loyalty redemptions doubled in the first half of 2024 compared to the previous year [1], indicating increased engagement and program utilization.
Key ingredient: Effective marketing
Domino’s promoted its revamped program by emphasizing the increased accessibility and value for customers. The company highlighted that members could now earn 10 points on every order of $5 or more, making it easier to accumulate rewards [10]. Domino’s also launched an “emergency pizza” promotion, awarding loyalty members a free pizza for qualifying online orders, which CEO Russell Weiner described as a “powerhouse” for driving program signups [11].
The results are mouthwatering…
Increased order frequency
Domino’s revamped loyalty program has had a significant impact on customer behavior. Orders with loyalty redemptions in the first half of 2024 doubled compared to the same period in the previous year [4]. This increase in redemptions demonstrates the program’s effectiveness in encouraging repeat purchases and fostering a stronger customer base.
Higher customer counts
The loyalty program has contributed to higher customer counts overall making for a happy franchise network with same-store sales rising by 4.8% [1]. The company added 3 million new members to its rewards program in 2023, with 2 million joining after the September updates [4].
Carryout vs. delivery performance
Domino’s has seen remarkable growth in its carryout business. Same-store sales increased 7.9% for carryout customers and 2.7% for delivery in the second quarter [1]. The carryout business now contributes about half of Domino’s and 40% of sales [5]. This growth has positioned Domino’s as the number one carryout pizza brand in the U.S. [6].
Higher revenue
The loyalty program’s success has translated into higher revenue for Domino’s. In the fourth quarter of 2023, revenue increased by $10.7 million to $1.4 billion, a 0.8% increase compared to the same period in 2022 [7]. The company’s U.S. same-store sales growth reached 3.6% in the first quarter of 2023 [5], indicating a positive trend in overall sales performance.
Stealing a larger slice of the competition pie
Domino’s has demonstrated significant market share gains. The company reported a 5.6% increase in U.S. sales in its latest quarterly earnings [8]. This growth has been largely attributed to the success of its loyalty program, which has attracted new customers and increased engagement among existing ones.
Domino’s has shown strong performance compared to its main competitors, Papa Johns and Pizza Hut. The company’s loyalty program offers a competitive edge, with a return of up to 21.65% on customer spending, compared to Papa John’s 13.3% and Pizza Hut’s variable returns [9]. Domino’s has also been innovative in its product offerings and marketing strategies, helping it maintain a strong position in the market.
A loyalty strategy beyond the program
Domino’s are well renowned for loyalty initiatives that extend beyond their loyalty program. In 2022 Domino’s launched Carryout Tips rewarding carryout customers who ordered online and picked up their order in-store with a $3 “tip” for being their own delivery driver. The $3 coupon could be redeemed on future online carryout orders.
Now in 2024 they have launched You Tip, We Tip – a promotion that tips customers who tip their delivery drivers with a $3 coupon to use on the following week’s online order.
While these promotions sit outside of Domino’s Rewards, they demonstrate Domino’s ongoing commitment to delivering value to their customers and rewarding them for their loyalty.
Conclusion
Domino’s changes to their loyalty strategy, including lowering the minimum spend and introducing new redemption tiers, have led to a surge in program membership and a notable increase in order frequency. Domino’s Rewards is a brilliant case study in loyalty program evolution and how a well-designed program can have a significant impact on both customer behavior and business performance.
Do Loyalty Programs Work? Explore other examples of winning loyalty programs here.
Ready to increase your share of the pie just like Domino’s?
Whether you are considering your own loyalty program or want to unlock the full potential of your existing one, Loyalty & Reward Co can help. We design award-winning loyalty programs for global brands. From our offices in New York, London, Sydney and Melbourne we can help your company supercharge its loyalty strategy.
Our team of loyalty consultants are ready to talk everything loyalty. Contact us now.
References
[1] – https://restaurantbusinessonline.com/financing/how-dominos-upgraded-loyalty-program-helps-it-win-market-share-again
[2] – http://media.dominos.com/stories/dominos-rewards-story/
[3] – https://www.restaurantdive.com/news/dominos-loyalty-relaunch-emergency-pizza-draws-2-million-new-members/708477/
[4] – https://www.pymnts.com/news/loyalty-and-rewards-news/2024/dominos-loyalty-refresh-doubles-members-pickup-orders-amid-consumer-hesitance/
[5] – https://www.nrn.com/news/domino-s-leans-carryout-more-and-more-delivery-struggles-continue
[6] – https://www.meatpoultry.com/articles/27425-dominos-sees-carryout-sales-increase
[7] – https://www.nrn.com/quick-service/domino-s-makes-comeback-refreshed-loyalty-program-and-marketing-push
[8] – https://www.pymnts.com/news/loyalty-and-rewards-news/2024/dominos-captures-larger-slice-revenue-with-rewards-program/
[9] – https://thepointsguy.com/guide/pizza-loyalty-programs/
[10] – https://restaurantbusinessonline.com/marketing/dominos-upgrades-its-loyalty-program
[11] – https://www.marketingdive.com/news/dominos-loyalty-relaunch-emergency-pizza-draws-2-million-new-members/708531/
