بسم الله الرحمن الرحيم
Bismillahir Rahmanir Raheem..
Hello, readers :)
Today's post will be about Return On Investment (ROI).
ROI is a measurement used to evaluate or compare the efficiency of one more more investments. ROI allows you to know how much profit you get in relation to capital invested.
The formula to find ROI is by dividing Gain from Investment minus Cost of Investment with the Cost of Investment, then multiply it by 100% since ROI is represented in percentage.
The company I will utilize to for today's discussion is Pizza Hut.
Pizza Hut is a restaurant that offers different styles of pizza, found in Kansas, 1958. Besides pizza, it also offers side dishes like salad, pasta, breadsticks, garlic bread, etc. It is noted in 2012 that more than 5,000 Pizza Hut restaurants were located in 94 different countries and territories.
Being such a large company, Pizza Hut surely wants to increase their sales. In this era, the main tool of marketing is social media. Pizza Hut has been starting to use social media (making a website) since 2007.
Let's back to ROI.
Pizza Hut launched an app for iPhone, iPad, Android, and Windows that allows customers to customize the pizza on their own and order directly from the app.
According to Mobile Marketer , Pizza Hut achieved over $1 Million of sales within first three months since the launching of the app. 50% of overall orders came from the app.
The Gain from Investment is divided into two, which are tangible and intangible.
Tangible gain is the profit that can be measured or quantified. Pizza Hut's tangible gain is obviously the profits they get in form of money.
Intangible gain is the other way around. The benefit is difficult to be measured or seen. One of the benefits of it may be brand awareness. Because of this innovative idea, people may be more aware and attracted towards Pizza Hut. The customers may want to try and experience the fun of creating their own Pizza and order it directly from the App.
As for the bases of ROI, this case suits more to "Increased Connections between need and Knowledge".
It affects the decision making capabilities of the customers. Compared to ordering directly at the restaurant, using the app can give more time to customers to select which foods to order. They even can create their own pizza.
It also stimulates innovation. By making their own pizza, customer will have a fun experience. Pizza Hut will also be the first innovative pizza restaurant in providing this service.
Hi Della,
ReplyDeleteThanks for sharing this interesting post, it was very easy to read and follow. But can you explain more about "Intangible gain that Pizza Hut got can be from the brand awareness." what do you mean, I did not get it
Thanks
Mohammed
http://mohammedalnaqaa.wordpress.com/
Based on the lecture last week, there is an intangible gain which the gain that cannot be measured or quantified.
DeleteBrand awareness is like the ability of a brand company to catch the attention of customers. Because of this innovation that Pizza Hut had, it could be one advantage to catch customers' attention by giving them a fun experience in creating their own pizza. Plus, they can order it directly from the App.
I hope my explanation helps.
Thank you so much for your comment! :D
Hi Della, thanks for sharing this post.
ReplyDeleteIn my opinion pizza hut gain more tangible gain as they already have a huge brand awareness and this apps itself would not be successful without brand recognition. Do you think this app would be succesful if it is implemented into smaller pizza restaurant?
thanks
Please look at my blog in your free time
http://stamparade.wordpress.com/
Hi! :)
DeleteImplementing this app into smaller pizza restaurant might increasing their advertisement, but slowing down their sales. I can say this because Pizza Hut as the large restaurant has a better preparation in terms of investments and other financial issues. They also are well-recognized already, so the marketing will be easier than the smaller pizza restaurant.
Thanks for stopping by!
Hi Della
ReplyDeleteThanks for a nice read. Sounds like fun creating your own pizza with this app I like how you pointed to the difference of the tangible and intangible benefits. In terms of you graph I also think that “time saving” could be added as a possible gain. I mean now Pizza Hut does not have to spend nearly as many resources taking orders over the phone – or what do you think?
Mmmm I could go for a pizza now :-9
Hi Lise
DeleteThank you for your feedback. I agree that they also gain "time saving" with the same reason as yours. I don't know whether we can put two bases of ROI or not, so I only choose one of them.
So I guess my post brings your appetite ? Why don't you order one now? :D
hehehe
by the way thanks for the comment!
Thank you for sharing such an interesting post with us!
ReplyDeleteIt's great to see the amount of benefit Pizza-hut is generating from utilising social media. Just wondering if you know the investment cost of the enterprise 2.0 implementation (could include app development cost, employee training cost and etc), so an actual ROI figure can be worked out that way.
Furthermore, even 50% of sales come from the app one month after the launch date, it is still pretty difficult to determine whether new customers and orders have been attracted because of the new mobile app tool, or whether they are just customers who used to order over the phone or online but now decided to order via the mobile app.
In summary, ROI for social media is a tricky topic and there are many professionals disagree with the act of calculating ROI for social media implementation. What is your thought on this?
Thank you and keep up with the good work!!!
Hi! :)
DeleteAbout your question, I think social media implementation acts more on the intangible gain. People get more attracted, in this case, Pizza Hut's App, and cause them to take a look at it. Tangible gain, which is when customers decide to purchase, comes after it. So, ROI for social media implementation might be applicable because of increasing sales after the successful marketing.or intangible gain.
Anyway, thanks for commenting! :)
Hi Dela! A nice look into how a simple service can create value in both intangible and tangible ways. The app would go along way to improving customer service, ease of use and accessibility, whilst pushing pizza hut as a web savvy company.
ReplyDeleteDo you think this app will improve their ordering system? If as you said, 50% of current orders are being made this way, do you think they could leverage the knowledge and use of this app in other areas of the business?
sammacgregor.wordpress.com
Hi Sam!
DeleteI think it is best to say that they MUST improve their ordering system, instead of WILL. Because with this App, it definitely involves more software. Not just for ordering, but also ensuring that the system display the exact pizza style the customer created (if the customer choose to have their own pizza style). Related to this, of course Pizza Hut needs to leverage the knowledge and use of this App.
For other business areas, besides for customizing and ordering, I think this App would be perfect if it enables customers to purchase the pizza from the App, so they don't have to pick it up at the restaurant. As a start-up,this could be done by credit card (like other online shop does).
Thank you for your comment! :)
Hi Della, Thanks for sharing this post! I find it interesting how one application can spike such a boom in profits at pizza hut! Do you think this application could work for other companies within the food industry eg. McDonalds?
ReplyDeletePlease look at my blog in your free time
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Hi Cassie, thanks for your comment :D
DeleteThis App is surely an innovative way to gain profit, right?
I think McDonalds could apply this, as long as they provide customization of their products. It would be a little difficult for them though. Can they customize their burgers or meal packets like the customers want? If they have this capability, then it might be suitable for them to use this App :D
Param pam pam pa wait... that's not the right one...
ReplyDeleteGreat post there della about the Pizza Hut app.
I do have to agree with you on two benefits where you can get Tangible and Intangible benefits. I personally think that they are not the first to get an ordering application, but they are very innovative in terms of enabling customization for their menus. In addition, i do believe this is perfect for Pizza Hut as pizzas has a lot of customization that can be done towards it which i personally think cannot be done in some other food retailers such as McDonalds or KFC.
I want to ask about the 50% order are coming from the app though. Do you think that because of the launch of the ordering application, people is much more likely to order via the app and not manually via phone or come straight? What are the consequences that they have to face because of this app?
Thanks a lot for this post della. Very informative.
- Michael