Dunkin’ Donuts to Rollout Loyalty Rewards Program

Dunkin Donuts Logo

News hit today about the intentions of Dunkin Donuts to rollout a national customer loyalty program sometime in 2013. Here’s an excerpt from the Wall Street Journal:

Dunkin’ Brands Group Inc. (DNKN) plans to launch a loyalty-rewards program at Dunkin’ Donuts later this year, a few paces behind Starbucks Corp. (SBUX) and Panera Bread Co. (PNRA), which have seen significant sales boosts from offering frequency perks in the past couple years.

Last year, Dunkin’ came out with a mobile-payment application, allowing customers to pay with their Dunkin’ Donuts account using their smart phones. The app, which was intended to preface a new loyalty program, was a major step in Dunkin’s new digital-marketing strategy.

“The real power of mobile and loyalty is the one-to-one marketing that they can enable,” said Chief Executive Nigel Travis. “I believe they will be significant drivers of our growth in the next few years.”

Dunkin’ Brands, which also owns the Baskin-Robbins ice-cream chain, reported that sales at established U.S. locations of both chains exceeded expectations in the fourth quarter. The company’s shares rose 3% to $36.88, nearly double the stock’s price of its initial public offering in July 2011.

A few years ago, Dunkin’ offered various rewards for using a Dunkin’ prepaid card through a partnership with American Express, such as adding $5 to customers’ Dunkin’ cards for every $25 that they automatically loaded using their Amex cards.

In April 2011, that was replaced with Dunkin’s first national loyalty program that was a bit less enticing, giving customers $1 for every $20 they spent on a Dunkin’ Donuts prepaid card, and double the reward if the card was auto-recharged at least once a month.

That program was phased out at the end of 2011, in anticipation of launching one compatible with its new mobile app and the new sales technology that it put in its stores.

“While it’s too early for me to outline in detail what you’ll see from us, I can tell you we will have a robust loyalty program focused on driving changes in consumer behavior in frequency, ticket, loyalty and how they pay,” Mr. Travis said.

We know from our nationwide consumer study on attitudes and behavior relating to restaurant loyalty/rewards program (LoyaltyPulse) that effective restaurant rewards programs may generate incremental sales of 35%. But sales generated by a loyalty program are just one aspect of the benefits of loyalty marketing. The data derived from restaurant loyalty programs becomes a strategic advantage in understanding guest behavior and using that data to deliver promotions that are more relevant to each guest, making those promotions far more effective.

Note this statement from CEO Nigel Travis:

The real power of mobile and loyalty is the one-to-one marketing that they can enable. I believe they will be significant drivers of our growth in the next few years.

No surprise from our perspective. Our proprietary research shows that consumers seek relevant promotion with respect to restaurant loyalty/rewards programs. In our nationwide survey of 1,124 consumers about their attitudes about loyalty programs:

• 69% state they would like to receive e-mails with discount offers on specific food and beverage items they have ordered in the past.
• 66% state that they would like to receive e-mails with offers of value relating to a rewards program in which they participate.

Also, we’ve previously seen and reported on comments made by Panera regarding the impetus behind the MyPanera Rewards Card program. This is an excerpt from Panera’s 2011 annual report:

“Specifically in 2011, we benefitted from our investments in five key areas: the quality of our food, our increased marketing expenditures, the rollout of our MyPanera loyalty program, the growth of our catering business, and the quality of our operations and our people.”

“The real value of the loyalty program is the customer data that we have been able to collect. We have begun testing the use of this data to increase frequency and are beginning the journey of moving to true one-to-one marketing. For example, we are creating individual reward tracks for all 9.5 million members of our loyalty program, and expect to send to our customers more than 6.5 million unique e-mails each month with dynamic content that changes based on their interests and buying patterns.”

Watch for more developments in the restaurant loyalty/rewards space. Companies large and small will make the move, knowing restaurant rewards programs are not simply tactics, but strategies that, when approached properly and executive well, become ‘game changers’. Got game?

For more information, read the full article at the Wall Street Journal.