Dunkin's loyalty program driving frequency and ticket

March 13, 2014 | by Alicia Kelso

Executives from Dunkin' Brands hosted a Q&A session today during the JPMorgan Gaming, Lodging, Restaurant and Leisure Management Access Forum in Las Vegas. Among them were Paul Carbone, CFO, and Scott Murphy, SVP, Chief Supply Officer.

Carbone provided an overview of the new mobile app program that includes the DD Perks Rewards Program. He said the initiative has driven frequency and ticket, and there has been "significant franchisee profitability" from the shift to debit/credit cards to the DD Card.

"We're pleased with what we saw in the four pilot markets in November and we used that to make sure consumers were going to adopt the program, which we saw. And it hit the metrics we wanted, such as frequency and spend," he said. "We're really pleased, but this is a long build. This isn't an LTO that comes in and shows a spike. These are early days and we're in it for the long haul."

Carbone said Dunkin's loyalty program is a bit different from other brands, in that it's based on spend versus visits. Customers receive five perks for every dollar spent and, for every 200 points, they'll receive a free medium beverage reward. The guests don't accumulate points after that, but rather the program sets back to zero. Rewards are triggered through a QR code on the receipt.

Carbone said the company is able to use this app for location-based marketing initiatives and other data collection.

"We'll know the exact restaurant that transaction is taking place, and what time of day. We're gaining some fantastic individualized data. We built our program so we can send targeted offers based on behavior," he said. "Once we build this up, we'll have some really robust data."

Push notification offers — for customers who are close to a Dunkin' location — are not part of Dunkin's current strategy, but they are worthy of exploration, Carbone said.

"There's a (thin) line of engagement to annoyance. In Boston, with 1,100 locations in the DMA, it can trigger and alert frequently," he said.

Dunkin' is also "exploring and interested in" pre-order and pre-pay through the mobile app as a way to improve throughput in restaurants.

Other topics approached by the executive team included in-store operations with an increasingly complex menu, expansion and retail competition.

  • Operations. Executives discussed how Dunkin's operators are able to keep in-store operations flowing despite a busy LTO strategy of one launch every four weeks.

"It's a balancing act to get new LTOs out quickly, but to make sure there is consistent quality and it doesn't affect speed of service," Murphy said.

To do that, Dunkin' holds cross-functional meetings every week. Each new product is scored on a 10-point complexity metric, and something as simple as spreading cream cheese is evaluated, Murphy said.

"We watch the crew and time it and we make sure we're not impacting operations in the store in a negative way," he said.

  • Retail. Although Tim Hortons just announced its retail expansion via its single-serve coffee platform, Dunkin's executives said the brand won't be jumping in anytime soon.

"We have talked about originally just keeping K-Cups in the stores, but that line in the sand has changed a little bit. We never said we'd never go into the channel. K-Cups are moving faster than we thought and are becoming more price competitive faster than we thought," Carbone said. "If we go into grocery, we're going to do it with our franchisees. We don't go into the channel if we think it will hurt our economics in the restaurants."

  • Expansion. Finally, healthy cash on cash returns in the East and emerging West markets are driving Dunkin' Donuts' development. Carbone said there are huge opportunities, particularly in Florida and Atlanta, east of the Mississippi, and California and Texas on the west.

The brand initially announced the sale of California in January 2013, and now the entire state is available. Executives said the state will be a "significant driver of restaurant development and profitability" in the future. Texas is also a big opportunity: Executives said Dunkin' could open 1,000 units in the Lone Star State. There are now 40.

Murphy said the brand doesn't want to move faster than 400 openings a year because it is picky with real estate site selection.

"The first thing you loosen the reins on when you want to go faster is real estate site selection and if you have bad real estate, you're done," he said. "We approve 100-percent of the sites. It is about getting the right sites where we want them."

Topics: Franchising & Growth , Loyalty Programs , Marketing / Branding / Promotion , Online / Mobile / Social , Operations Management

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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