Pizza Hut Case Study

Executive Summary

Pizza Hut started out as a pizza parlor opened up by two brothers in Topeka, Kansas. Today, the company has restaurants all over the world and its annual sales are in the billions. The growth of the company was due to a good product being delivered at a good price and offering perceived value. The company has adjusted to new entrants into the market and has managed to stay ahead of the competition.

The philosophy for growth is simple: Take care of the customer, and the customer will take care of you. Pizza hut focused on providing good customer service in order to create customer loyalty. In return, the customer will return and more importantly, the customer will become an advocate.

Customer feedback programs were put into place in order to measure the customer experience and also to uncover opportunities. The restaurant managers are paid bonuses based on the result from their respective customers. The problem was that the company noticed that managers of underperforming locations where receiving bonuses while managers of extremely profitable locations were not. Recommendations have been made in order to fine tune the bonus plan so that manager incentives will be balance between profits and customer service.

Pizza Hut is a pioneer and continues innovation with its service initiatives and product lineup. As long as the company keeps focusing on its customers, then the company will still be a leader for generations to come.

Table of Contents

I. History & Background................................................................4

II. Customer Loyalty Program..........................................................5

III. Macroenvironment Variables.......................................................6

IV. Microenvironment Variables.......................................................7

V. TOWS Analysis.........................................................................8

Threats...................................................................................8

Opportunities...........................................................................8

Weaknesses..............................................................................8

Strengths..................................................................................9

VI. Recommendations & Rationale.....................................................9

VII. Conclusion.............................................................................11

VIII. References..............................................................................12

IX. Questions...............................................................................13

I. History & Background

Pizza Hut was started in 1958, by two brothers in Wichita, Kansas. Frank and Dan Carney had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959, the first franchise unit opened in Topeka, Kansas.(Grumpert, 1989) Almost ten years later, Pizza Hut would be serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on the New York Stock Exchange under the ticker symbol PIZ.

In 1986, Pizza Hut introduced delivery service, something no other restaurant was doing. By the 1990's Pizza Hut sales had reached $4 billion worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and launched their famous campaign "The Best Pizzas Under One Roof." (PizzaHut.com 2007) In 1996, Pizza Hut sales in the United States were over $5 million. However, Pizza Hut's market share has slowly eroded because of intense competition from their rivals Domino's, Little Caesar's and newcomer Papa John's. Home delivery was a driving force for success, especially for Pizza Hut and Domino's. Competitors started to look for new methods of increasing their customer bases. Many pizza chains decided to diversify and offer new non-pizza items such as Buffalo wings, and Italian cheese bread. The current trend in pizza chains today is the same. They all try to come up with some newer, bigger, better, pizza for a low price. Offering special promotions and new pizza variations are popular today as well. For example, chicken is now a common topping found on pizzas.

In the past, Pizza Hut has always had the first mover advantage. Their marketing strategy in the past has always been to be first. One of their main strategies, which they still follow today, is the diversification of the products they offer. Pizza Hut is always adding something new to their menu, trying to reach new markets. For example, in 1992 the famous buffet was launched in Pizza Hut restaurants worldwide. They were trying to offer many different food items for customers who didn't necessarily want pizza.

Another strategy they used in the past and are still using is the diversification of their pizzas. Pizza Hut is always trying to come up with some innovative way to make a pizza into something slightly different. In 1983, Pizza Hut introduced their Pan Pizza, which had a guarantee of being ready to eat in 5 minutes when dining at Pizza Hut restaurants. In 1993, they introduced the "BigFoot," which was two square feet of pizza cut into 21 slices. In 1995, they introduced "Stuffed Crust Pizza," where the crust would be filled with cheese. In 1997, they marketed "The Edge," which had cheese and toppings all the way to the edge of the pizza. Currently, they are marketing "The Big NewYorker," trying to bring the famous New York style pizza to the whole country.

II. Customer Loyalty Program

Pizza Hut has always valued customer service and satisfaction. In 1995, Pizza Hut began two customer satisfaction programs. A 1-800 number customer hotline was set up to hear from customers who visited dine in restaurants. Customers would receive the hotline number on the back of receipts and offer coupons for participating in surveys and also for expressing comments about experiences good or bad. A customer call-back