Brand Keys specializes in brand and measures brand loyalty. And as sure as the Margherita is the mother of all pizzas, we know positive consumer behavior toward a brand and the axiomatic increase in sales and profits, can be predicted by accurately measuring a brand’s customer loyalty levels. But you don’t need an MBA to grasp the fact that market conditions and a brand’s financial management have a lot to do with whether or not a brand ends up in Chapter 11. This thought visited itself upon us when we read that Chuck E. Cheese, the pizza chain party venue, is in talks with its lenders looking to avoid bankruptcy.
By Robert Passikoff
The talks have to do with a $1.9 million quarterly payment on loans currently due the end of June. Apparently, the brand is $1 billion in debt, which is a lot of dough for any sector, but genuinely surprising for the pizza category.
Why surprising? Well, Americans eat a lot of pizza. 8 billion pies a year. About 48 slices per person. 350 slices per second. 100 acres of pizza a day, which works out to 133 football fields of pizza. So, a lot of pizza. And sure, customer loyalty levels have their direct effect on how brands will do, but the recent COVID-19 pandemic produced market pandemonium not experienced since, well, ever.
One might have reasonably presumed that the pizza category was exceptionally well-positioned for the coronavirus crisis. It was already structured – albeit at different levels of expertise – for delivery and carry out. Far better than other restaurant sectors which had to invent new paradigms to deal with the shutdown and the shut-ins.
So how well are the pizza brands doing? Brand Keys’ customer loyalty rankings correlated 100% with current brand shares-of-market (#s in parentheses) for the pizza category, and look like this:
- Domino’s (23%)
- Pizza Hut (15%)
- Little Caesars (10%)
- Papa John’s (8%)
- Chuck E. Cheese (2%)
Chuck E. Cheese’s 2019 same-store sales were on, what one might charitably call, a “relaxed rise” (about 2.7%) after flat-to-negative sales the 2 years prior. Then COVID-19 forced the brand to shut their doors, so the combination of low customer loyalty levels and the pandemic and an apparent lack of preparedness put them in a position where they are desperate for cash.
From a consumer perspective, customers look for comfort during chaotic times. Comfort food can help. And it turns out pizza is the top comfort food in the United States. In an earlier COVID-19 survey, co-sponsored with The Customer, we found a 15% increase in people who sheltered-in and ordered out. In a more recent Brand Keys survey, 65% of consumers indicated they sought out pizza when they ordered in during the current pandemic.
From a marketing perspective, brands can find comfort – bigger shares and bigger profits – from increased levels of loyalty.
It turns out customer loyalty metrics also deliver.
Robert Passikoff is founder and CEO of Brand Keys and is a regular contributor to TheCustomer. He has received several awards for research innovation including the prestigious Gold Ogilvy Award and is the author of 3 marketing and branding books including the best-seller, Predicting Market Success.
Photo by Foad Roshan on Unsplash.
