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Revamped Rewards Program of Pizza Chain Positively Impacts Stock, BTIG Reports

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Domino's Revamped Loyalty Program Boosts Stock Outlook, Reports BTIG

BTIG reports that Domino's updated loyalty program provides additional reasons to be optimistic about the pizza chain's stock. Analyst Peter Saleh reaffirms his buy rating and top pick call for Domino's, with a price target of $465, indicating a potential 18.1% rally from Tuesday's closing price. Saleh notes that the changes to the loyalty program, announced in conjunction with the start of the fall season and 4Q23, are viewed as sales catalysts that can reignite the company's previous momentum.

Improved Tiers and Rewards

Domino's revamped loyalty program introduces new tiers and rewards designed to appeal to a broader customer base. Saleh highlights that the updated program offers faster redemption and more options for customers. Under the new plan, customers earn 10 points for every order of at least $5, compared to the previous minimum spend requirement of $10. While the value per dollar spent may seem lower than the previous version, Saleh suggests that this could modestly benefit store margins, depending on how customers choose to redeem their points. The new system features three reward tiers with nine different options, a significant expansion from the previous single reward offering.

Building on Business Improvements

Saleh believes that the loyalty program update will complement other positive developments in Domino's business, including menu innovations and an upcoming partnership with Uber Eats. He notes that Domino's has been a secular market-share gainer in the pizza category, benefiting from its competitive advantages in digital ordering, marketing, and value. These advantages have contributed to significant improvements in sales, market share, and unit economics in recent years. Saleh also mentions that recent pricing efforts should support margin expansion and enhance the company's ability to attract drivers.

Considerations and Outlook

While Saleh maintains a bullish thesis, he acknowledges that factors such as moderating commodity inflation, menu pricing, and labor market improvements also contribute to the positive outlook. However, he cautions that competition and potential delays in international development could impact performance. Overall, Domino's loyalty program update, coupled with its existing strengths, positions the company for continued success in the pizza market. (Note: This report includes insights from CNBC's Michael Bloom.)

Conclusion: Key Takeaways for New Businesses from Domino's Strategy

Domino's revamped loyalty program and its potential impact on the company's stock provide critical insights for new businesses.

Value of Customer Loyalty Programs

The updated loyalty program, with its faster redemption and more options, underlines the importance of customer-centered strategies in boosting business. New businesses can learn from this and consider implementing or enhancing their own loyalty programs to attract and retain customers.

Adaptation and Innovation

Domino's ability to adapt, as seen in its menu innovations and partnership with Uber Eats, emphasizes the need for businesses to stay agile and innovative. This is a crucial lesson for startups, which need to continuously evolve to stay competitive.

Market Positioning and Outlook

Domino's success in gaining market share and improving unit economics highlights the importance of leveraging digital ordering, marketing, and value. New businesses can take note of these strategies to strengthen their market positioning. In conclusion, Domino's strategy offers valuable lessons for new businesses. By focusing on customer loyalty, innovation, and strong market positioning, companies can enhance their prospects for success. However, they should also be aware of potential challenges such as competition and market fluctuations.
Story First Published at: https://www.cnbc.com/2023/09/13/this-pizza-chains-revamped-rewards-program-could-be-good-news-for-its-stock-btig-says.html
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