Elon Musk: Stop discounting the Tesla

One sure sign of a failing brand (or a failing market) is if it starts discounting. Fighting on price is sure fire way to send you into irrelevancy, unless you’re Walmart whose brand is but on low prices.

Elon Musk understands that. The CEO of Tesla sent an email to the entire company to vehemently stop discounting its cars. Musk and other Tesla executives caught wind of some situations in which reps discounted the cars.

Tesla
Elon Musk understands discounting would lower the value of the Tesla brand.

In response, Musk said, “There can never – and I mean never – be a discount on a new car coming out of the factory in pristine condition. That is why I always pay full price when I buy a car and the same applies to my family friends, celebrities, no matter how famous or influential.”

Tesla has had a “no negotiation and no discount” policy since it started selling cars a decade ago. And there’s a reason for that. Fair price (or in this case, a luxury price) is important because consumers see the value in the brand and the product. We, as consumers, instinctively believe that you get what you pay for. The best product is not the lowest priced one. For some, always buying the top price means you are getting the best.

Discounting a Tesla is the start of brand failure.

The lowest priced products are rarely the market leaders. Sure, there are some items we will search for the lowest price, but in general we equate price with quality.

If you think about all the brands and markets that are currently struggling, most of them (if not all) began that descent by discounting. It’s an attempt to buy market share, forgoing the difficult work of actually creating a meaningful and preferred brand.

You become mired in a losing proposition once you battle on price. You will forever battle on price. Margins will shrink. And you will have taught target audiences to shop on price.

Think of the major pizza chains. That war is waged on discounting. Few see the difference between Pizza Hut, Domino’s and Papa John’s, except on the daily deals. Musk’s outrage is well placed. He knows that the perceived value of the Tesla cars will drop into the fray if the cars are discounted.

Dominos DXP is a gimmick

Dominos has apparently entered the car business. Last fall, Dominos announced it had created a delivery car, the Dominos DXP, which was specialty built to do one thing: deliver pizzas. Now, it has started a new advertising campaign featuring the Dominos DXP that looks more like a car commercial than a pizza commercial.

The ads spotlight the features of this new delivery vehicle, including its warming oven and interior built for one. The problem is that creating a car that is specifically designed to deliver pizzas does not create brand preference.

The Dominos DXP is systematic of the larger problem.

I have written about the pizza delivery industry before, specifically how none of major chains have given consumers any meaningful reasons to choose. We have seen $10 pizzas, flavored crusts and expanded menus. None of those values provide any real reason to prefer one to the other beyond a special deal or taste.

And let’s be real. If people were ordering pizza delivery purely for taste, there is a local pizza place in most communities that would put Dominos, Pizza Hut, Papa Johns and Little Caesar’s to shame.

What I don’t understand about the Dominos DXP is why should a consumer care? Does it make the pizza less expensive, taste better or get it to me quicker? The answer is no. I bet the people at Dominos would argue that the warming oven would keep pizza warmer while it’s out on delivery.

But that’s a table stake. How many times have you ever ordered a pizza that arrived cold?

This is more of a gimmick than it is about building preference. Joe Jordan, Dominos CMO, said that the car represented “a tangible indication of our dedication to delivery.” So, in other words, the car means you deliver pizzas.

Pizza Hut has no car and it delivers. To be a pizza delivery company, you have to be dedicated to delivery. It is the definition of what you do. Now, if the car got my pizza to my house five minutes after I ordered it, that may be something else. But there simply is nothing that the Dominos DXP provides that makes choosing that pizza brand a better choice. Table stakes do not make brands.

Let’s face it. This is just an ad campaign. How sad has the pizza delivery business become when, rather than giving customers a reason to choose, one of the players gives them a car ad. I agree that, in order to build real preference in this category, it will take some out of the box thinking. But this is just a case of confusing activity with accomplishment. Sure, Dominos built the first pizza delivery car but it forgot about building its brand along the way.

Pizza Hut rebrand, we told you so

“We obviously have not been happy with the performance of the relaunch of Pizza Hut,” Greg Creed, CEO of parent Yum! Brands Inc. said last Wednesday at the Bernstein Strategic Decisions Conference in New York City.

Really? How much did you pay for that mistake, Pizza Hut? Flavor of Now was never about brand.

What now, Pizza Hut?
What now, Pizza Hut?

We called this failure even before it was fully launched back in November of last year. Now, its CEO is raising the white flag. Originally calling this the largest rebrand of Pizza Hut in more than 50 years, Pizza Hut is now losing ground (3.7% last year) and must go back and figure out what it needs to do.

Again.

There is a single fundamental flaw in the Pizza Hut rebrand. I won’t use terms like differentiation, positioning or branding because companies like Pizza Hut confuse them and improperly define what they mean. The issue is that Pizza Hut’s failure to change customer behavior (i.e., get more customers to choose them) was because it actually failed to change.

Sure, Pizza Hut came up with some new menu items, hoping to appeal to a more diverse customer but it did it without any fundamental knowledge of the customer. I bet that Pizza Hut will tell me it had all sorts of usage and attitude studies and countless focus groups that said the Flavor of Now is what people wanted yet it still failed. Why?

Pizza Hut should call us.

Understanding your consumer must go way beyond focus groups and usage & attitude studies. Aspirations, beliefs, and fears are what make brands, not balsamic drizzles. Are good ingredients important? Sure. Are a variety of menu options important? Sure. But tell me how that differentiates Pizza Hut from anyone in the pizza delivery business? Those are table stakes. Domino’s doesn’t even use pizza in its name anymore if that tells you anything about the importance of menu items.

At the core of all good brands is the fundamental understanding of the aspirations, beliefs and fears of the target audience and being that highly polished mirror that, when a customer sees your brand, they see themselves. Look in Pizza Hut’s mirror and what do you see? Cheap pizza delivered. Even with its rebrand, cheap pizza is still the only reason that Pizza Hut has given anyone to choose. If I want pizza delivered, I can choose from a dozen places, including pizzerias that can actually make decent pizza.

Since Pizza Hut has not given me any reason to choose, why would I choose differently?

Luckily for Pizza Hut, Flavor of Now has not damaged anything. It was just an expensive exercise in being unhelpful and non-resonate. All hope is not lost for Pizza Hut, but I am sure that its franchisees won’t tolerate too much more of corporate’s unproductive and expensive rebranding exercises. So I say to you Pizza Hut, it’s again time for a Pizza Hut rebrand. You may not get a third shot at it.

Enough’s enough, Pizza Hut

I did a double take when I heard this: Pizza Hut is offering pizza with a Doritos crust.

You’ve got to be kidding me.

Somewhere between a menu that can read customer’s thoughts by the motion of your eyes as read by a tableted menu, and this insane new tortilla crust concept, Pizza Hut has completely derailed.

Really though, had Pizza Hut been moving with any trajectory anyway? And what’s the fascination with Doritos?

This is now your new Pizza Hut crust.
This is now your new Pizza Hut crust.

I apologize for my cynicism.

You know what. I take that back. I believe businesses have an obligation to their customers to be sensible.

This all reminds me of a scene from the Werner Herzog documentary, Grizzly Man. In the film, Timothy Tredwell both explored and lived with Alaskan grizzlies. Tredwell would return to the habitat every year, until he broke his traditional staying pattern, and was eaten alive by an emaciated and hungry Grizzly. At one point in the film, Herzog narrated that the grizzlies had left Tredwell alone because they assumed he was mentally damaged. The grizzlies cognitively understood that a sane animal would not act in the way Tredwell was (attempting to live among a massive and carnivorous animal), and so they left him alone.

While a seemingly complex analogy, the connection here is simple: when one is clear minded, you seek to avoid those with damaged thought processes.

And so, with decisions like a bevy of Doritos acting as crust – and an idiotic soothsayer menu – Pizza Hut is looking more and more damaged by the day. I know I’ll be staying away. Just like those bears.

Pizza Hut is moving past the $10 pizza

I have blogged on the pizza QSR segment so many times that a listing of all the posts would fill more than a few pages. The reason I have had so much to say about the category is because it has been such a mess for so long. Despite all the chatter, little has changed. Domino’s is still trying to convince us that the pizza tastes good, Papa John’s still wants us to believe that its ingredients are better and Pizza Hut…well, I’m not really sure what it wants us to believe anymore.

It seems that Pizza Hut felt very much the same as I did and have commissioned a plan to rewrite its menu, freshen the decor, logo and packaging. To many, and I’m sure Pizza Hut would agree, this is a rebrand of sorts. I can’t comment on the new look and feel because they have not been released, but rebranding is a lot more than that. If Pizza Hut wants to grow market share, it will need to do a much better job of understanding the prospect. (Read more about the Quick Service Restaurant Market Here)

Is Pizza Hut just about the pizza? It shouldn't be.
Is Pizza Hut just about the pizza? It shouldn’t be.

The creative logo, menu and pizza boxes must fulfill that understanding. In the past, Pizza Hut has not seemed to grasp that importance. As a result, it has been stuck in the trenches of fighting for the loyalty of the $10 pizza hunter. Like everyone else in the category, it lives and dies by coupons, specials and sales offers.

Think about this category. It is so bad that one of the principle players has been able to separate itself from the crowd by claiming better ingredients. That’s akin to a bottled water company gaining preference by claiming its water is wet. This is actually embarrassing.

A few years back, I met with a few Pizza Hut executives who had interest in Stealing Share. We talked about brand anthropology and how to go about changing behavior and how that starts with a brand overhaul. I warned them that the kind of change needed to move a market was more than an ad campaign. However, they had, just prior to our meeting, hired the Martin Agency and they had misplaced confidence in the new agency. They believed that advertising would fix their problem. I asked them why agency tenure is 2.5 years, on average? Possibly the problem is not agency creative, but an attachment to internal culture.

I hope they succeed this time. My guess, however, is that, aside from new menu items, little will have changed and Pizza Hut NEEDS change. We challenged Pizza Hut and I think it wants agreement and not challenge. Maybe that has changed? Maybe Pizza Hut is ready for the kind of brand shift that changes everything. Or is this just about pizza?