4 Keys to Price Optimization
Who says that successful businesses are born in a boardroom? Papa John’s (www.papajohns.com), the pizza giant that now boasts 5000+ locations in 44 countries across the globe, is the brainchild of CEO & founder, John Schnatter, who began the empire in a closet in his father’s bar.
In a 2017 second quarter financial statement, Papa John’s reported its 27th consecutive quarter of positive North American sales and 29th consecutive quarter of positive international sales. Schnatter attributes the company’s success to its “industry-leading quality and digital platforms,” calling out its launch of Facebook instant ordering saying that the innovative strategies “will continue to drive the consistent growth of the Papa John’s brand globally.”
Papa John’s has laid claim to many “digital firsts,” going back to 2001 when it was the first to offer digital ordering at all of its U.S. delivery restaurants. It was also the first to surpass 60% of total U.S. sales being via digital channels, a distinction that Mike Nettles, who was named senior vice president/chief information & digital officer in February 2017, explains often causes more challenges when trying to move the needle in further innovation. “When digital is already 60 to 65 percent of your sales you have to be very careful where you innovate,” he says. “You have to find ways to really differentiate your product offering. I have to deliver a much better experience overall than any of my competitors can. For me, that means looking for opportunities to listen to what the customer is telling me and finding ways to solve the problems they have.”
Nettles, the former VP of architecture & IT strategy, at Panera, and with a career spent in the restaurant industry, understands the unique and rapidly evolving dynamic of providing digital experiences that offer solutions to customers’ issues and to use Nettles own words “meet them where they are.” In this exclusive interview with HT, Nettles offers a peek at how Papa John’s continues to develop its business and IT strategies to do just this, while enabling rapid innovation and maintaining its competitive edge.
International growth continues to be a focus for Papa John’s. How does that impact the digital nature of the company as you look to go global?
NETTLES: The brand is still the brand, whether it’s in the U.S. or Russia, and the brand has always stood for a high degree of consistency and a high quality product. All restaurant categories have unique points of differentiation, often around menu items, so changes are necessary to grow internationally. We found ways to be locally standardized but to keep decision-making federated where necessary so that we can maintain consistency and quality. This works for ingredient and product control as well as how we approach technology and digital as a business opportunity. In the U.S., Papa John’s has a very large branded web and mobile presence that we’ve invested heavily in over the last decade, with digital making up 60% of sales. In international markets, that transformational story is taken one market at a time. Third party aggregators and digital delivery service providers are leveraged whenever possible and tied together to represent the Papa John’s brand.
You matriculated from the fast casual space, which is increasingly competitive in online ordering and delivery. Quick service and full-service concepts are also rapidly adopting digital and delivery. Has your background helped to crystallize goals for Papa John’s to remain a leader in its category while still edging out new competitors?
NETTLES: You have to find ways to differentiate product offering. I am not the only game in town for delivery, which means I have to deliver a better experience overall than just about any of my competitors can. I look for opportunities to listen to what the customer tells me and expand our digital reach in channels where customers are spending time. Today, we offer options from Facebook ordering to the Papa John’s app for customers to quickly and easily order and get pizza, but we want to be in whatever digital forum diners happen to be — like Hulu or Netflix. We are looking for ways to prompt diners to order at set intervals, think at the halfway point of a movie when people might want to get up and stretch. There are many opportunities to solve problems for guests based on data available on when they interact with us digitally. All of those data points tie into what makes the Papa John’s experience more valuable to guests than a competitor’s does.
How do you view partnering with third party technology?
NETTLES: If the customer chooses to interact with our product through somebody else’s platform or an order aggregator, there are ways I can still differentiate my service offering by making sure they have access to the same promotions or coupons that they would if they came to my site. They’re still my customer and they’re still choosing my food over other food products. If anything, the competition is higher and they’ve chosen me, so I should treat them as best I possibly can so that they continue to do so. Otherwise, you just become another commodity and they’ll just order a pizza — not a Papa John’s pizza. I can control a lot more if it is happening inside my ordering engines, but that just challenges me to build a stronger technical framework and a strong partner to API approach so if a guest wants to inject orders into my system from a different platform, it is seamless. I will still want to remain competitive by offering a premium experience for guests who order from Papa John’s directly.
What do you think is important for technology executives to be a part of the overall business strategy?
NETTLES: I think if you asked anybody in the CEO space, for the last decade, the push has been for tech people to act more like business people. I actually look at things inversely: business people need to start thinking a lot more about technology. I have obliterated the line between technology and business voices at the table. I push the team to consider what technology can do efficiently and effectively to drive sales numbers accordingly. Our current CMO and I are in each other’s offices almost every day because we are both focused on the same thing: how to drive sales. What he and I both realize is that when 60% of your sales are digital — you are an e-commerce company. You have to act and behave like an e-commerce company. It has changed the playing field dramatically and we have to look at things strategically in order to make those decisions that allow us to continue growing the business.
How do you think the pace of technological change impacts customers’ demands and how you must do business?
NETTLES: We are all gluttons for digital. We have several industry firsts that we are proud of, but often it was in reaction to what was available in the
market. There is a hockey analogy that says, “the trick isn’t to skate to where the puck is, but to skate to where the puck is going to be.” In our case, we have started strategically looking out more than just the next year so we can be proactive, rather
than reactive.
In looking “further out,” what impact do you see technology having on operations as it continues to evolve?
NETTLES: If voice ordering continues to take off, handheld devices will go away. Customers won’t even need to look at a device, they will just say what they want. All the investment in fancy user design will be useless because the whole user experience model is now voice-driven as opposed to graphically driven. My team will need to focus on the impact to ordering process. With voice-driven, conversational ordering, we will need to consider what the engine would ask in response to customers’ commands. It changes the entire ordering paradigm from how ordering systems are set up to how payment systems are integrated.
Thinking like a “business person,” what should IT execs communicate to business leadership to get buy-in?
NETTLES: In the past, tech was given a capital planning expenditure budget for the year. Now I have to lean much more heavily on R&D spending money that is OPEX, not CAPEX. It is not something you can capitalize, so it is a recurring cost of doing business that you may or may not actually see the returns for an extended period of time. Getting the company comfortable with an OPEX/R&D mindset is as important as getting teams comfortable with setting up proof of concepts just to burn them down and start over again.
How have you gone about shifting the focus to embrace R&D?
NETTLES: I have set up innovation days and hackathons where technology solutions providers are invited to meet with our leadership team about once every quarter. They come to us with solutions that we never would have thought had a place in the restaurant business, but I use it as an exercise to stretch the team to think about ways that emerging tech can change the business. The vendors show us ways their technology could be a game changer for us. Then we sponsor a hackathon and bring one technology company back in and set them up to do an implementation. Our developers present internal case problems for the solution provider to solve. We judge which ones made a difference or opened our eyes to a problem and then we take it to a true proof of concept stage. Some become part of our strategic plan moving forward. Learning how to collaborate, not just with your own team members, but with others that make up the digital economy and experience, will be the secret for success, because you can’t build everything yourself anymore.
How important is omni-channel for the Papa John’s strategy?
NETTLES: When your [in-store] point of sale makes up the minority of your transactions, omni-channel has to be top-of-mind. It is easy to separate the digital from the in-store experience, but you have to marry them to make it an omni-channel and consistent experience for customers. That does not mean you can’t offer them things that are uniquely suited for whatever channel on which they come to you. Using geo-fencing to send alerts makes sense if guests order via mobile phone. Loyalty needs to be the same across all those channels. If you accumulate points in one place you should be able to get a point balance and redeem them someplace else. Promotions and pricing need to be consistent across all channels. It doesn’t take much for a customer to feel friction and go elsewhere.
What emerging technology do you think has real potential in the nearer term?
NETTLES: The pizza business is very promotions-centric. I am very interested in how machine learning with artificial intelligence can segment out portions of the population. There are 27 million customers in Papa John’s loyalty program. There is great potential for machine learning and artificial intelligence to be used to sift through loyalty customers’ habits and tee up personalized promotions and do that millions of times per second. That takes the nature of the established promotions-based model and creates something far more personalized.
What operational opportunities lie in technology to help in quality and service?
NETTLES: We are already making heavy investment in driver technology to not only know where drivers are through GPS tracking, but how fast they are driving and taking corners. That information can be tracked in real-time, graded and compared against customer feedback. We are looking to systematize that to the point where data can be used as a coaching opportunity for drivers to help them realize that their job is to not only to deliver pizza, but to deliver total quality experience.
How would you recommend companies digitalize the entirety of their business?
NETTLES: I work hard to build a digital experience for my employees, associates, and decision makers, as much as I do for my consumers. I am going to spend just as much on the consumer side as I am on the digitalization of our enterprise in general. Employees need to get shift notifications on their phones and be able to trade shifts appropriately via mobile. They need to be able to interact with us at the digital level. Just like customers aren’t the same people that they were five or six years ago — employees are different too.
What technology excites you?
NETTLES: The advent of autonomous vehicles could be game changing on many levels. This might not only impact labor models — it might be harder to attract drivers and employees — but operations and service as well. Parking lots will look different; drive-up sales and drive-thrus might go away. There are so many different what-ifs. Restaurants are all battling for the now, and not realizing that the real game is still out there to be played.