Marketing Management II

Pizza Hut
Group N o: 10

Nikhil Pathak – 21BM63024

Shubham Divate – 21BM63028
Mohit S. – 21BM63040
Bala Sai Tarun C. – 21BM63130
Dipojjwal Ghosh – 21AI91W02
 About Pizza Hut Features:

 Distinctive freestanding design and familiar red roof

 Full service, eat-in/carryout family style operations
 Seating capacity : 60 to 90
 Timing : 11 am to midnight
 Main product : Pizza
 High quality product at premium price
 Leader in marketing
 Many comprehensive national & local market strategies

1958 1968 1969 1977 1981 1986

First Pizza Hut Chain grew to Went Public Acquired by Largest pizza chain Reached $2bn
Restaurant 296 Outlets Pepsico with $1 bn sales & sales with 5,025
highest no. of outlets units

 Market share grew from 14.9%(1979) to 18%(1983) but fell back to 15.4%(1986) due to rise of dominos

 Net sales growth also increased from 12.7%(1980) to 21.9%(1983) but decreased to 11.3%(1986)

 Total no. of US domestic units & total revenue were been on constant rise
The pizza market 60%
$4.3 bn
Pizza Market Segments

50%
$4.7bn
 In 1980’s pizza market was growing fastest
$3.1 bn $4bn $5.1 bn $9bn
 Pizza market contributed $9.7 billion to the $53 billion fast 40%

$5bn $7 bn
food market 30%
$5.9bn
 Three main segments – Eat – in, Carryout and Delivery 20% $2.6 bn
 Trends observed – Overall pizza market expanding rapidly
10% $1 bn
due to significant increase in home delivery
$0.1 bn
 In restaurant consumption share decreasing, industry 0%
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

observers believed pizza parlours were overbuilt

Eat - In Carryout Delivery

pizza hut

revenue
Eat-in Carry-out Delivery Total
1982 to
$ 4.3 Billion to $ 3.1 Billion to $ 0.1 Billion to $ 7.5 Billion to
$ 5.9 Billion $ 9.0 Billion $ 7.0 Billion $ 21.9 Billion
1990
Consumer base
 Perception – Predominantly dinner
food, many consumers viewing it as
evening snack
 Consumer sentiment – Pizza was a
personal & sensual experience,
Compromise in experience in fast –
food chain
 Tastes in pizza varies based on
demography and geography of the area
 Convenience crucial to consumers
increasing carryout & home delivery
 Target consumer base - Rapid growth
in number of children of baby boomers
to boost demand along with nuclear
families/working couples
Delivery at Pizza Hut, Inc.
• Domino’s rapid expansion was deemed a threat and this pushed Pizza Hut into delivery market
• Pizza Hut entered the delivery market with separate delivery-only units
• These units were considerably smaller and offered no parking space
• Idea behind delivery-only units was to keep cost as low as possible because of small expected
margins
• Occupancy cost was only 2.1% of sales compared to 6% of traditional eat-in restaurants

Expense Comparison
20
18
Traditonal Restaurant 1 Delivery Unit
16
14
12
10
8
6
4
2
0 Advertising & Promotions Occupancy cost Vehicles CSC

(Expense as a percentage of total cost)

Unique Propositions:

Customer Service Center (CSC)

 Computerized central ordering system, allowing
customers to call a single number to place an order
 Capable to handling large number of calls

Upsizing delivery pizzas

 Size and price of delivered pizzas were slightly
increased
 Delivery sizes were 10-14-16” compared to
traditional 9-13-15”
Expansion of delivery-only units
 Delivery market enabled getting business from users who were ordering competitor’s pizza for convenience
 Delivery-units were predominantly in the metropolitan areas, markets with high levels of traditional restaurants
penetration
 In the first half of 1986, Pizza Hut doubled the number of markets where it operated delivery-units and
quadrupled total number of units

Open Pizza Hut Traditional-Restaurants and Delivery Units

Company-Owned Franchise-owned  Company-Owned delivery units increased by over
2100% from 1984 to 1986, compared to 7% growth
Year Traditional Delivery-only Traditional Retrofit Delivery- in Traditional-Restaurants
Restaurants Units Restaurants only Units
 Franchise-Owned delivery units increased by over
December 2,025 16 2,137 98 20 380% from 1984 to 1986, compared to 12% growth
1984 in Traditional-Restaurants
December 2,004 78 2,352 162 46
1985
December 2,173 361 2,395 292 96
1986
 Strengths
SWOT Analysis
 Pizza Hut is a huge popular brand
name and high brand loyalty
 Innovative range of pizzas under one Opportunities
roof provided by Pizza Hut
 Hygienic food preparation and quick  New Pizzas & food preparations with
service different flavors can help Pizza Hut
grow
 Sound financial situation and
 Venture more into home delivery
international turnover of the brand  Pizza Hut can venture into newer
 Pizza Hut has good advertising and markets Threats
marketing through TVCs, print,
 Threat from competition can decline
online ads and OOH media
Weaknesses the market share for Pizza Hut
 Health conscious people avoiding
 Franchise management and service pizzas
 The rising prices of special
quality is a massive challenge
ingredients like cheese, used in pizzas
 Many options for customers means  Constant vigilance of food regulatory
high brand switching and limited bodies can affect operations of Pizza
market share for Pizza Hut Hut
 They held internal meetings and
They introduced 10-14-16 inches split Advertisement division into a
pizza for delivery in place of 9-13-15 separate unit exclusively for
inches pizza in the traditional delivery. Also the resources for the
Product Promotion
restaurant, in order to cover up the marketing were distributed evenly.
less margin and compete against Over that to promote among
Domino’s 10-14 inch pizza franchise, incentives were offered.

The
They introduced Delivery only units
whose occupance cost was only 2.1%
4P’s The price for the pizza was not
changed instead they changed the
of sales, compared to 6% of size of the pizza to be delivered,
restaurants. and thought that people would be
Place Major places to introduce company Price comfortable to pay for slightly
owned delvery units were well bigger pizza to be delivered, Also
developed markets where people they kept delivery to be free due to
could order using one phone number. competitive reasons
 The Franchise
Experience
Unofficial & Back
Right to Deliver The Yellow Flag
door delivery
• Some franchisee delivered • Many franchise were • With increasing resistance
student mess and military base avoiding to risk their eat-in- IPHFHA and Pizza Hut kept
unofficially. restaurant business. working with yellow flag.
• Some wanted to retrofit delivery • Pizza Hut gave time to perfect • Internal assessment were
in their restaurant by back door delivery unit before it may continued to perfect the
delivery use it’s right to setup delivery delivery system.
units. • Focus was shifted from internal
clashes to Domino’s.
The Changing
Instances
The Reorganisation of Pizza Hut, 1986. Autonomous status given
to Delivery system.

Franchisee opposed due to lack of resources to market and sell

through separate delivery unit.

The Split-up of Advertising team led to some more trouble.

Separate team to work on delivery system. This may lead to
more mismanagement.

Baxter & Reinemund intencive scheme for the franchisees

opening delivery unit: no royalty for specific time period.

The August Franchise meeting: Pizza hut decided to press harder,

they trained 10,000 people and started delivery through 284
company owned outlets.

Pizza hut gave an upbeat presentation to convince them to

support, to sell the delivery concept to them and to launch the
new agrrement.
Thank
You !