Every organization goes through its fair share of heartaches: losing customers to competition, facing cash flow struggles, making poor strategic decisions, etc.
Some might say that the companies with the fewest transgressions have the brightest futures, and they may be right. But I’d venture to say that the real measure of a company’s life expectancy is the ability to recover from the most trying of circumstances. To stare death (or bankruptcy) in the face and live to talk about it.
Making mistakes is inevitable, and some mistakes may be graver than others. But failure isn’t final. We always have the opportunity to right the ship and find success again.
Whether or not you’re currently in a battle to revive your brand, these four stories of companies who made incredible comebacks will do more than just inspire you. These stories will offer valuable lessons to learn and apply to your own company both now and in the future.
When brothers Tom and James Monaghan took over a small Ypsilanti, MI pizzeria in 1960, they couldn’t have known how incredibly fast the business would grow. Seven years after starting the restaurant, Domino’s had already opened its first franchise location; by 1978 the company grew to 200 stores!
Domino’s expansion skyrocketed even further during the 1980’s with the introduction of its 30-minute delivery time guarantee. People loved getting their pizza fast, and Domino’s became famous for doing that better than anyone else.
But 1993 marked the beginning of the end for Domino’s growth when a St. Louis woman sued the pizza company after being struck by a delivery driver who was running a red light. In the eyes of the nation, the 30-minute delivery promise was to blame and as a result, Domino’s had no choice but to discontinue the iconic guarantee that had brought the organization so much success.
In response, Domino’s shifted focus to the Total Satisfaction Guarantee. If a customer is dissatisfied for any reason, Domino’s will remake the pizza or offer a refund.
Despite the new promise, the damage had already been done. Customers ordered Domino’s for its speed, not its quality. And without its reputation for speed, Domino’s began losing domestic market share to its competitors.
The 2000’s marked a very concerted, albeit desperate, campaign to keep up. Competitors’ menus had more variety, so over the span of 2001 to 2009 Domino’s adopted a copycat strategy and introduced eight new non-pizza items to its menu. But Domino’s was trying to fix the wrong thing. The problem wasn’t that the menu lacked variety; the problem was that the pizza lacked quality.
In 2009, then President of USA Operations Patrick Doyle took the lead role in launching Domino’s turnaround campaign to completely redo its 49-year old pizza recipe and revive the Domino’s brand.
Domino’s even created a website promoting this campaign: pizzaturnaround.com
And when Doyle became CEO in early 2010, he continued his efforts to improve Domino’s with the “Show Us Your Pizza” project:
I actually remember seeing these commercials and immediately preferring Domino’s simply because of the honesty and transparency. I appreciated the fact that a huge corporation wanted to hear from its customers and find ways to be better.
Unfortunately, touchy-feely emotions don’t change the bottom line, only an increase in sales does. But Domino’s had the sales, too. By the end of the first quarter of 2010, the pizza company saw amazing results: a 14.3% increase in revenue.
Now sometimes these sorts of marketing ploys provide nothing more than a short boost to brands and then fade away just as quickly as they came. Not such the case for Domino’s. Being more than 4 years removed allows us to look back at the company and see what kind of long-term impact the turnaround campaign had on its success. I think the following graph of Domino’s stock prices speaks for itself:
So, what can we learn from this?
Domino’s problem was its inferior product. Obviously, offering a competitive product is one valuable takeaway. But perhaps the more important lesson that we can apply to our own brands is to engage in open dialogue with our customers. Ask questions. Incentivize feedback. Find out what your customers love and what they hate. Then listen to what they say and show them the steps you are taking to improve.
While we’re on the topic of amazing junk foods, Krispy Kreme also boasts quite a remarkable comeback story.
In 1937 founder Vernon Rudolph opened his Krispy Kreme shop in Winston-Salem, NC and primarily sold his doughnuts to local convenience stores. The amazing aroma of fried doughnuts lured passersby to visit the shop and request fresh doughnuts.
Recognizing the potential of selling doughnuts direct to consumers, Rudolph quickly pivoted his business model. In fact, Rudolph put a window in his shop so he could announce when hot doughnuts were available to customers out on the sidewalk – the origins of Krispy Kreme’s now famous hot light.
During the 1950’s and 60’s Krispy Kreme exploded throughout the Southeast, opening dozens of corporate and franchise locations. But Krispy Kreme’s success suffered a major setback in 1973 when Rudolph died and Beatrice Foods, a Chicago-based food processing company, acquired the doughnut business. Beatrice Foods immediately began making several changes to cut costs, including modifying the original doughnut recipe.
Customers and franchise owners hated the changes and the brand floundered under Beatrice Foods’ ownership. In 1981, a group of franchisees purchased Krispy Kreme to return the brand to its former glory and set in motion another period of rapid expansion in the 90’s. While stepping away from Beatrice Foods positioned the brand for resurgence, it was actually the new ownership’s effort to manufacture a second expansion that nearly dismantled Krispy Kreme once and for all.
Krispy Kreme began saturating the market with lesser versions of its quality product through broad licensing deals with supermarkets, convenience stores, and gas stations. At the same time, Krispy Kreme opened shops along the West Coast and debuted on the New York Stock Exchange in 2001. By 2003 Krispy Kreme had locations in 43 states and the brand’s ubiquity was thought to be one in the same with market dominance; investors poured in and the stock reached an all-time high of $49.37.
But in 2004 the reality that Krispy Kreme over expanded and saturated the market with lesser versions of its quality product became all too evident. Chief Strategy Officer Cliff Courtney at Zimmerman Advertising, a national brand builder responsible for the successes of Papa John’s, White Castle, Firehouse Subs, and Boston Market, expounds on Krispy Kreme’s licensing blunder:
[Krispy Kreme] built a brand on a core pillar of ‘hot doughnuts now’ in the magical stores that had the same kind of magical pixie dust that an In-N-Out Burger has. Sort of, ‘Wow, I wonder if there will be one in my town some day.’
But then, all of a sudden, they took that brand, and without understanding what the values are of that brand, like the hotness and freshness that built the brand, they started selling them in grocery stores, cold. And selling them in outlets where they didn’t even make the doughnut. They really just sold the doughnut out of these smaller spaces. And so they lost sight of the values that made the brand great.
So what happened?
In 2004, Krispy Kreme’s stock, valued at almost $40 a share, dived all the way down to $8.51 in just one year. Over the next five years, Krispy Kreme locations all across the country shut down, and stock dipped even further, reaching as low as $1.01 in 2009 when the SEC determined Krispy Kreme’s accountants had cooked the books.
Rumors of bankruptcy spread and it appeared as if Krispy Kreme would completely collapse, but new leadership in 2009 and 2010 set out to save the doughnut company.
Krispy Kreme curtailed its aggressive expansion efforts, scaled back its distribution channels, and began righting its finances. The goal was to get back to the unique value proposition that made the brand so popular in the first place: hot, quality doughnuts.
And here’s how that’s been working out for stock value:
The story of Krispy Kreme’s rise, fall, and rise offers a tremendous lesson from which the rest of us can learn: know your niche.
As our brands find success, it can be tempting to expand too quickly or move into new areas that aren’t consistent with our brand values and identities. Any strategic decision you consider must always be measured against your brand – who it is and what it stands for.
Krispy Kreme built itself on fresh doughnuts that customers couldn’t find anywhere else. Unfortunately, the doughnut company was blinded by the prospect of increasing revenue at the expense of the very product that customers truly wanted.
Don’t make the same mistake. Know what makes your brand unique and stick to it.
AT&T has one of the most interesting company histories that you’ll ever come across. To make a long story short, AT&T’s growth is mostly attributable to two things: intellectual rights and government relations. In fact, it would seem as if the company was really run by a bunch of lawyers and politicians (even more so than usual). When the government finally disbanded AT&T’s telephone monopoly once and for all in 1982, the telecommunications juggernaut split into seven independent regional companies:
- Bell Atlantic
- Pacific Telesis
- Southwestern Bell
- US West
AT&T struggled mightily after its breakup. A failed attempt at entering the computer market and several uneventful technology company acquisitions left AT&T crippled. In an interesting turn of fate, one of AT&T’s offshoots, Southwestern Bell, had flourished in telecommunications and actually acquired AT&T in 2005. Southwestern Bell assumed AT&T’s name and branding; this is the company known as AT&T today.
But AT&T had a lot of catching up to do.
Earlier in 2000, Bell Atlantic (an AT&T offshoot) and GTE (the largest independent telephone company at the time) had merged to form Verizon Communications. In the same year, Verizon formed a joint venture with telecommunications company Vodafone, giving Verizon the firepower to beat its competitors on a national level.
Verizon’s advanced wireless network was edging AT&T out of the telecommunications market. To rival Verizon’s nationwide network, AT&T acquired the BellSouth offshoot in 2006 and BellSouth’s subsidiary Cingular Wireless.
The move helped AT&T to compete with Verizon’s network size, but at this point Verizon had already pulled ahead as the company to beat in the telecommunications industry. An arms race simply wouldn’t be enough.
Why switch from Verizon to AT&T when Verizon already offers the service I need? AT&T needed something to differentiate itself.
Surprisingly, Cingular Wireless, not BellSouth, was the key because in acquiring Cingular Wireless, AT&T also acquired the exclusive deal with Apple to develop the highly anticipated iPhone. The iPhone was exactly the differentiation that AT&T needed; the iPhone saved AT&T.
Now when I say saved I don’t mean that AT&T was saved from immediately going out of business so much as it was saved from suffering a long, slow death. The iPhone spared AT&T from entering into the same state of obsolescence and irrelevancy that plagues the likes of Toys “R” Us, Kodak, Research in Motion, and Kohl’s. Instead of trying to grow, these brands are simply trying to survive.
When Apple officially announced its iPhone to the public in January of 2007, droves of customers left other carriers and signed up with AT&T just to get their hands on the new device. AT&T’s stock was already on the rise thanks to its recent BellSouth/Cingular acquisition, but the iPhone bolstered it even more:
Success in telecommunications hinges on innovation and AT&T ran out of creative juices. Luckily, AT&T was able to tap Apple’s ingenuity and leverage the revolutionary iPhone to its benefit.
The big takeaway here is this: never rest on your laurels.
When AT&T began, the company was known for its remarkable breakthroughs in technology. But after the monopoly disbanded, AT&T and most of its offshoots weren’t developing new advancements in the industry anymore. Eventually, their competitors overtook them.
You may have a reputation for the best customer service in your industry, but if you aren’t continually hiring (and keeping) the best talent, creating (and improving) systems to enhance the customer experience, and investing in employee training, then don’t be surprised when you find your stellar reputation deteriorating.
In business, standing still is moving backward. If you want to keep or improve your market position, then you can’t rely on past successes to get you there. When you reach the top your work isn’t over, it’s just beginning.
For most companies, it takes years or even decades to reach the top. For Priceline, a well-financed Internet startup during the dot com boom, it only took a couple months.
Thanks to a quirky, William Shatner led advertising campaign and the catchy “Name Your Own Price” slogan, Priceline was able to bring in over 600,000 visits to the site on its first day and record 30,000+ airline ticket sales in just its first two months. Not too shabby, huh?
With so much success with airline tickets, Priceline quickly expanded its “Name Your Own Price” offerings to include hotel rooms, car sales, mortgages, long-distance phone service, groceries, gasoline sales, and even used goods (think early eBay).
Investors took notice of Priceline’s remarkable success and eagerly jumped on the dot com startup’s bandwagon, pushing the company’s stock prices up by 331% on the first day of the IPO!
But the high was short-lived. With the exception of hotel rooms, the business model simply wasn’t a fit with all the other markets Priceline was trying to penetrate. Priceline had to call it quits on all these other avenues, and consequently sucked the confidence out of consumers and investors alike. Priceline’s stock plummeted.
After some cost-cutting measures and a CEO change in May of 2001, Priceline was able to at least stop the bleeding. But right as Priceline was poised to make gains, the terrorist attacks of September 11 filled consumers with fear and led to a huge decrease in travel.
Priceline continued its struggles into 2002, and decided to hire Jeffrey Boyd as the new CEO in July of 2002. Despite the new CEO, many believe Priceline would suffer the same fate as the many other dot com busts that offered high hopes, but failed to deliver. Boyd had other plans.
Boyd’s first order of business was to focus solely on the travel industry, shedding all other distractions that still remained from Priceline’s early exploratory days: car rentals, hotel rooms, airline flights, and nothing else.
Second, Boyd added traditional pricing for flights to augment the “name your own price” option.
Airlines were still struggling to fill seats in the aftermath of 9/11 and their reduced prices made it nearly impossible for Priceline to turn a profit. Plus, flights through Priceline were subject to long layovers and inconvenient connecting flights – evils that were often necessary to match the price the customer wanted. Boyd saw an opportunity to earn business from customers who would otherwise turn to the airlines after unsuccessfully finding a “name your price” flight.
Third, Boyd invested heavily in improving its hotel service and acquired Travelweb, a hotel booking website owned by several of the largest hotel companies. As a result, Priceline’s hotel offerings drastically improved.
Only after Boyd refocused on the travel industry, added a standard airfare option, and improved its hotel portfolio did Priceline finally turn out its very first annual profit in 2003.
With things beginning to look up, Boyd wasted no time in carrying out the most impactful strategy of all: expanding Priceline into international markets. Priceline used its domestic sales to fund its international expansion, and became the turning point for the travel site’s success.
In 2004 and 2005, Priceline acquired several European hotel-booking websites, including booking.com, and infiltrated a European marketplace marked by longer vacations, spur of the moment travel, and weekend excursions. Only two years later, Europe was already accounting for over 50% of Priceline’s bookings.
And after Europe, Priceline continued its expansion in 2007 by acquiring agoda.com, a discount hotel booking site specifically for Asia, Australia, the Middle East, and Africa. By 2009, 61% of Priceline’s bookings came solely from international sales.
Priceline’s ubiquity in the major travel markets created a strong foundation for growth and projected the company well ahead of its competitors. From 2009 to present, Priceline’s stock has been nothing but uphill:
While on the surface it appears that CEO Jeffrey Boyd employed a string of several unique strategies to propel Priceline forward, there was actually a single thread of commonality amongst his decisions: flexibility.
Each step that Priceline took under Boyd’s leadership challenged the status quo of the organization. And Boyd was met with plenty of opposition; people inherently don’t like change.
Boyd had to show his team that his strategies were in direct response to the landscape of the market and not simply gut intuition or blind hope. The CEO was paying attention to the fluctuating dynamics of the marketplace and making corresponding adjustments to the business.
We can never know what political, social, economic, or environmental changes will come, but we certainly can build flexibility into our brand so that when the day for making adjustments comes, we will be ready.
Knowing what changes to make is all based on a deep understanding of your brand identity and the current marketplace. Pivot in ways that offer greater opportunities to earn new/more business while holding onto the core of your brand.
Now, you may be reading this and wondering, “If Krispy Kreme was right to reign things in, but Priceline was right to expand, then what am I supposed to do?”
Krispy Kreme was right to scale back because it was trying to be too many things to too many people. Krispy Kreme built its brand on hot, fresh doughnuts. Consumers lost sight of the true Krispy Kreme when the company started offering the exact opposite product: cold, packaged doughnuts. Furthermore, Krispy Kreme’s store expansion saturated the market until supply exceeded demand. Krispy Kreme was out of sync with what the market was telling them.
If you remember, the very first action Boyd took was to remove all the distracting industries that Priceline was pursuing and focus only on travel. Boyd knew that Priceline would be nothing to no one as long as it spread itself thin.
The decision to expand was based on the gaps in the international markets. Boyd recognized opportunities over seas to provide the same service to a new demographic that, at the time, was being underserved. Unlike Krispy Kreme, Priceline didn’t change anything about itself in order to expand.
As you consider taking steps to grow your business, find gaps in the marketplace that you can fill without sacrificing your brand identity.
Never, never, never give up – Winston Churchill
The biggest lesson of all is perseverance.
Use these case studies as proof that just because you’re down doesn’t mean you’re out. Learn from these brands that didn’t give up, so that if and when you’re facing seemingly insurmountable trials, you will be prepared to make a comeback yourself.
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Image Sources: Domino’s Pizza Box via miskan Flickr, Krispy Kreme Doughnuts via francois Flickr, Krispy Kreme Hot Light via tadsonbussey Flickr, AT&T Sign via wfryer Flickr, iPhone via mac users guide Flickr, William Shatner via swisschef Flickr