Dunkin vs Starbucks hinges on loyalty, rewards

Nov. 12, 2013 | by Jitendra Gupta
Dunkin vs Starbucks hinges on loyalty, rewards

Dunkin' Donuts is like many chains that see product innovation as key to sales increases. Its ever-evolving line of beverages, baked goods and hot sandwiches is widely credited with the company's newly accelerated growth.

But as John H. Costello, the chain's president of global marketing and innovation recently stated, great operations aren't just about sweet treats and Frappuccino. Smart marketing also is vital, especially targeted mobile efforts that engage customers on their always present smartphones.

Dunkin's own mobile app was launched in late 2012 for the purpose of offering payment. Like one of its chief competitors, Starbucks Coffee, customers using the payment app enjoyed the ease of completing a transaction on their phones — but that was about all it did.

Soon enough, Dunkin' figured out easy payment — which, while tech-sexy, actually wasn't any easier than swiping a credit card — provided little customer incentive to return, so it fortified the app with the DD Perks rewards program. It was a smart move not only because customers respond to rewards, it demonstrated Dunkin's ability to course correct by innovating gradually.

You see, being a leader is great, but being a fast follower can be equally as good. Especially when you learn from the segment leader's mistakes.

Starbucks was the first to bring a mobile offering to the coffee segment, but its customers don't appear nearly as crazy about it as they are for its coffee. To join its loyalty rewards program, they must use its prepaid, stored-value mobile app, and tellingly, they aren't rushing join. By my best estimate, only 3 percent of its customers have signed up for its rewards program: results that make me wonder about the overall effectiveness of its mobile program.

To be truly effective, mobile marketing must be customer focused and give them something they want or can't get elsewhere. At the very least it meets fans where they are (on their smartphones and tablets) and relieves them of engaging a brand through a website, opening a newspaper or clipping a coupon. At its optimum, it tells customers, essentially, "We have your favorite caramel coffee brewing right now at a store 1 mile from you. You can practically smell it!"

It rewards them for buying from those brands and draws them back with an enticement, not merely a promise of convenience. What's more alluring to you: a push message stating, "We've just iced four dozen of your favorite cream-filled long johns," or "You can pay here using your smartphone"?

Dunkin Donuts has proven it knows the answer.

Dunkin' also has shown it knows how to make mobile marketing personal. Its program is being integrated fully with its POS system, which allows every store operator to know exactly what each DD Rewards customer has purchased and when. Those customers no longer receive generic offers, they get custom offers based on their established preferences.

While Dunkin' Donuts isn't abandoning mobile payment, it has acknowledged its place in its mobile benefits lineup: a distant second to loyalty and rewards. Its skillful maneuvering is something I believe others in the segment should follow as they establish their mobile programs. There's great value in being a fast follower!

Jitendra Gupta
Jitendra Gupta is a Co-Founder and Head of Product at Punchh, a mobile engagement and actionable insights platform that includes branded mobile apps for campaigns, games, loyalty, online ordering, payments, referrals, reviews, gift cards, surveys, and integrates with social networks and operators’ POS systems to gather 360° customer insights. Punchh helps restaurants increase same store sales and profitability by driving repeat visits, word of mouth, new customer referrals, and higher returns from marketing campaigns. wwwView Jitendra Gupta's profile on LinkedIn

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