As Tombstone Pizza expanded, its founders discovered that the key to future success was hidden in the company's own past.
In 1966, Ron and Joe ("Pep") Simek wrested a $5,600 loan from a local banker and bought a Chevy freezer truck that was big enough to carry 1,800 frozen pizzas to taverns, gas stations, resorts, bowling alleys, and other retail outlets. In the next four years, the Simek brothers transformed a tavern that sold dime brews into a producer of frozen pizza that folks around Medford, Wis., said tasted pretty good.
Today, more than 140 commission route salesmen in the drivers' seats of Tombstone Pizza's fleet of trucks deliver, store-to-store, hundreds of thousands of frozen pizzas and a companion line of beefsticks. Many competitors regard such a delivery system as a relic of the horse-and-buggy days, but the Simeks stick to their way of doing business, saying that the control it gives them over their product's quality is worth it. Last year the family-owned company increased its sales 27%, from $49 million to $62 million, in line with a five-year compound annual growth rate of 27% to 37%. The numbers speak for themselves in a volatile industry that has been hurt by price wars and an influx of low-cost brands that promise, but don't always deliver quality.
In the race to slice up the frozen-pizza market in the Upper Midwest Tombstone Pizza Corp., 250 miles northwest of Milwaukee, continues to win market share over such major corporate contenders as Pillsbury Co. and General Mills Inc. Like the tortoise in its race against the hare, Tombstone's success is based not on size but on singleness of purpose: to continue companies treat as a plain commodity -- as something special. "We're basically a single-product company," says D. David ("Dewey") Sebold, Tombstone's exectitive vice-president and general manager. "We don't have the luxury of bringing out a new specialty product each week, and we can't compete with larger companies by cutting prices."
Robert Davis, a marketing professor at the Stanford University Graduate School of Business, sees Tombstone's marketing approach as an example of his "bent-arrow theory" at work. "The life of a product can be thought of as an arrow moving from left to right," says Davis. "The product begins as a specialty and evolves into a commodity. While customers generally perceive value in a specialty product for reasons other than price -- say service or image -- they are more likely to choose a commodity simply because it is less expensive than another."
To "bend the arrow back," to inhibit the evolution of a product from a specialty into a commodity, says Davis, companies must develop effective strategies. They might, for example, introduce a more service-oriented delivery system, enhance their reputation in the marketplace through advertising and promotion, raise rather than lower prices, or produce a higher-quality product. The key to Tombstone's success is a combination of these strategies, including a commitment to producing a high-quality, higher-price specialty item and then selling this product through a tightly controlled sales network staffed with Tombstone's own salaried managers.
In the early 1960s Ron and Pep Simek had no such vision of success. They had just opened a tavern in Medford, Wis., and named it the Tombstone Tap, after the graveyard across the narrow tar road. Beer, the only alcoholic beverage the tavern was licensed to sell, went for a dime a glass. Because the business barely provided a livelihood for the two Simek families, Ron and Pep and their wives, Joan and Fran, broadened their offering by serving pizza, which they baked in the stove in the Tap's cramped six-foot-by-six-foot kitchen
Pep virtually stumbled on the well-kept secret formula that is the basis of Tombstone's eight varieties of pizza. Dancing to the music of the "Peppermint Twist" one night in the Tap, he slipped and broke his leg, an injury that relieved him of tending bar for several months but allowed him the time to experiment with spices in the kitchen. Before long, the Simeks were freezing a dozcn pizzas on request, then several dozen, and selling them wholesale to other taverns.
Brisk sales provided profits for personnel and capital expansion. In 1972, the Simeks began construction on their current 162,000-square-foot plant where they make their own sausage and pepperoni and maintain a fleet of freezer trucks and trailers. As Robert Davis explains, "One of the best ways a company can provide a specialty product is to execute the manufacturing process better than anybody else in the business." To ensure quality pizza crusts, Tombstone moved its bakery operation in-house instead of relying on an outside supplier.
During the early '70s Ron and Pep supervised every aspect of Tombstone's daily operations, down to making sure that the trucks were tuned and that just the right amount of tomato sauce was applied to the pizza crust. But, while they bird-dogged operational details in Medford, they lost their ability to oversee the growing sales operation, which included 24 commission route salesmen and more than a dozen distributors that they had signed on for expansion purposes. The specialty was turning into a commodity; the arrow was taking flight.
Without adequate supervision, the route salesmen built up profitable new accounts while neglecting established ones. Some salesmen and distributors fell behind in their payments to Tombstone. When Ron told one salesman to get his receipts in on time, the man replied, "It will ruin my credit rating." Many of the men, it turned out, were keeping $6,000 to $7,000 of Tombstone's receipts in their bank accounts. "If someone had to buy a car or a boat," says Pep, "he'd use three weeks of Tombstone receipts to pay for it. When we'd ask him to pay up, he'd get goddamned insulting. "
