Dunkin’ Donuts and Starbucks…Coffee anyone?
Posted by Scott Dunn on January 24, 2008
I came across a couple of interesting articles yesterday. The first is that Dunkin’ Donuts has launched an on-line customer loyalty program that offers a cash back program and company news. My first reaction is: WOW- a customer loyalty program….what a novel idea. This is truly a cutting edge, out of the box idea on how to connect with your customers to keep them coming back. NOT!!!! Second, I read that Starbucks is offering FREE refills in certain stores and coffee for only a buck($1.00). The company spokesperson for Starbucks says they too are looking for ways to connect with the customer. Um-mm, I don’t feel a better connection with you Starbucks. It is going to take more than free refills and a buck for that.
Let me get this straight. Two established brands want to connect or re-connect with customers and this is the best they can come up with? An on-line rewards program and $1.00 cups of coffee. In my opinion, this is a knee-jerk reaction when revenue tapers off and the company does not want to invest (spend) money back in itself.
While I applaud the fact that Dunkin’ Donuts realizes (after all these years) the need for a customer loyalty program, how does a customer loyalty program drive NEW customers? When Starbucks decided to offer free itunes cards to it customers, how many NEW customers came into the stores because of that program? My guess is not many. Why offer $1.00 coffees one month later? Our existing customers are the life blood of all of our business, I understand that. However our existing customers can only purchase/consume so much. I am not going to drink 10 cups of coffee in a day when I normally drink 2. An increase in sales must come from NEW customers. See where I am going with this?
As for Starbucks, you are playing with Pandora’s box when you go from a position of a market leader to just another Joe. Do you really want to compete with McDonald’s for coffee sales? So what they are putting coffee bars in their restaurants. Step up to the plate and create something of value for your customers. What message are you sending your TARGET market? That after all these years of paying $2.00 for a cup of coffee, the coffee is really only worth a $1.00? How much money has Starbucks spent developing their brand and does $1 coffee fit it? (I think you get my drift here.)
In my opinion, both companies need to go back to their Unique Selling Proposition, define their target market and create a message that their target market understands. Their current customers already identify with the message and NEW customers can too if they are exposed to it.
Lessons: First, EVERY BUSINESS MUST HAVE A CUSTOMER LOYALTY PROGRAM. If you do not have one, stop reading this now and make one. (If you need help, give me a call. I have helped other businesses with this). Second, knee-jerk reactions can have long, long, long lasting effects on your business. Lastly, when you have a down turn in business ALWAYS, ALWAYS, ALWAYS revert back to your Unique Selling Proposition. It is the reason why you started the business in the first place….right? Playing into your competitions hand almost never works.
Dunkin’ Donuts, if you are reading this, please click play below and listen to the message. It is what built your brand.
Fran Travis said
Hi Scott, I am in complete agreement
when in comes to Starbucks.They built the company targeting the customer who wanted the latte. I have seen too many retailer go under when they tried to be all things to all people.
From another perspective, It really disturbs me when I go into my bank and see a promotion for new customers and I am not eligible because I have been a loyal client for 14 years.
JReid said
Unique selling proposition, eh? Is that the clicking on a keyboard for another blog topic I hear?
David Bradley said
Scott, I also agree with your take on Starbucks and Dunkin’ Donuts. I have experienced the true power of brand recognition. I have been in The Original Pancake House business for 13 years and this is all I really get from my franchisor – is the brand.
I moved my restaurant to Alpharetta almost exactly one year ago and I am ahead of the growing curve because of my reputation in this business, my customer base that I brought with me, and my BRAND recognition.
When people see my logo, just like Starbucks, they know that they are going to get the highest quality breakfast on the market, and they are willing to pay high dollar for it. Because of my experience in this business I would never devalue my product by cutting the price or adding a bunch of stuff to the menu. I know that those things would kill my business. People try to tell me all the time to add a bunch of lunch items to my menu to attract more of the lunch crowd. NO WAY! I serve made from scratch pancakes and that is what my brand says to people. The more people that realize what my brand is, the more people I will have eating made from scratch pancakes at lunch time.
One more thing. My franchisor has never been big on rewarding regular customers because they feel that we are serving such a unique product that our customers don’t need to be rewarded, they will be repeat customers anyway. I HAVE SEEN THE LIGHT ON THIS SUBJECT! You are right, and they are wrong. I am in the process of putting together a huge customer rewards program. I realize, thanks in part to your expert marketing advice, that this is very important, especially in my business, because such a high percentage of my sales is from repeat business. Yes, grow your business, but keeping the customers you have is the easy part.