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Digital sprinkles speed up customer transactions at Dunkin' Donuts

Stuart Lauchlan Profile picture for user slauchlan May 7, 2017
Summary:
Dunkin' Donuts isn't the kind of coffee and donuts shop you go to to write your first novel. Digital and cloud investments are going to help the firm get customers in and out as quickly as possible.

dunkin
We’ve done burgers, coffee and two lots of pizza vendors in the past couple of weeks, so moving on to donuts and ice cream is an easy next step in looking at digital transformation in the fast food market.

When you think donuts, you think Dunkin' Donuts. It’s s global brand that, as the cliche goes, does what it says on the tin.

But there’s a lot more going on, with a commitment to be “a leader in digital”, according to Nigel Travis, CEO of parent company Dunkin' Brands, with a major emphasis on “the importance of utliizing technolology, a key element of our six-part plan to differentiate ourselves”.

The most recent manifestation of this technology focus came last month when the firm announced it has shifted its e-commerce, mobile and digital services across to Amazon Web Services from an in-house on premises infrastructure. Baskin Robbins - part of the Dunkin' Brands Group - has also migrated its applications.

A key benefit cited here is the ability to scale up to meet increases in demand, something that the existing infrastucture wasn’t always able to deal with. By its own admission, Dunkin’ Brands had found it increasingly difficult to predict and manage the on-premises capacity needed to provide an optimal digital experience during ‘events’, such as National Donut Day, as well as the likes of the holiday season.

That additional agility is crucial right now and likely to be all the more so going forward. The industry is undergoing transformation, says Travis, and Dunkin' Donuts is not immune from its pressures:

The consumer is demanding higher-quality products more quickly and at lower prices, a phenomenon known as the Amazon effect. It's pushing grocery stores to lower food prices to compete and is resulting in a greater than three-point gap between food-at-home and food-away-from-home indices.

Additionally, while US unemployment is extremely low, in fact less than three percent in some states, and with wage growth rising, inflation is rising more rapidly. Stronger inflation is translating into slightly lower real income, which means less disposable income and consumers are becoming more selective with how they spend those extra dollars.

So to win a share of this disposable income, brand differentiation is critical, he adds:

A large part of this differentiation for Dunkin' will be using industry-leading digital technologies to deliver a more convenient experience for our guests. Digital is going to continue to evolve as the key platform for us on everyday value, in addition to being a recruiting tool as well.

This has been on the Dunkin' Brands agenda for some time, says Travis:

I recognized when I joined the company back in 2009 that we needed one-to-one marketing and a treasure trove of data that comes with it. This kicked off a series of strategic, pre-planned events…the rollout of an unified POS system in 2011, the introduction of our app in 2012, the launch of the Perks loyalty program three years later, and then last year, the rollout of On-the-Go mobile ordering. I believe our industry-leading digital platforms will continue to bolster our top-line sales for years to come.

Progress

There are some decent proof points that Dunkin' Brands management can point to as indicators of ROI on the digital strategic spend. For example, there are now 6.5 million people signed up to the Perks loyalty scheme, which itself contributes to more than 10% of Dunkin' US sales.

But there’s room to do more and on the front line here is David Hoffman, President of Dunkin' Donuts, recruited from McDonald’s ‘high growth’ unit last year, who sees digital investment as top priority for growth at his new employer.

He points to On-The-Go ordering as a case in point. This facility currently accountgs for 2% of total transactions, but Dunkin' Brands wants to expand that, arguing that 30% to 40% of transaction time is taken up the ordering aspect in store. Get rid of that and more customers can be pushed through in a shorter period of time.

In fact, getting customers in and out as quickly as possible is a priority objective for Dunkin' Brands. This is not about creating a destination space for wasting away the hours, says Hoffman:

Our consumer research last summer showed that guests want to use Dunkin' as a place to take five minutes, not 50 minutes. And as we jokingly say around here, there are other coffee houses where you can go to write your screenplay. That’s just not us. It's not who our customers want us to be. Our goal is to be the most beloved beverage-led to-go brand in the country.

So getting mobile ordering right is a potentially transformational achievement. One glitch that needs to be avoided is the problem that Starbucks ran into, where its mobile ordering led to bottlenecks in-store when customers turned up to collect the drinks that had been ordered on-the-go.

To that end, Dunkin' Brands has partnered with Waze, developer of a real-time, crowd-sourced traffic and navigation app, to use its order-ahead option. Users of the Dunkin' Donuts app who are registered for Perks can then use the Waze functionality to find a Dunkin’ Donuts location in the general vicinity, place an order, and then pick up said order from the location selected.

Other initiatives to encourage faster customer throughput have included cutting down the number of items on the menu, eliminating some decision-making time, as well as looking at customer feedback on the design of the Dunkin' real estate of drive-thru facilities. Hoffman says:

More than half of our restaurants included drive-thru, and with our customers need for a fast transaction, improving our drive-thrus with new designs and technologies offers us a significant competitive advantage and a real opportunity to optimize how we will serve not only today's guests, but future guests as well.

In the end, while all this is about transformation, the other t-word - transition - comes into play a great deal. Hoffman explains:

It's about ensuring that the Dunkin' experience is not one that can be replicated elsewhere. We want to be a place of positive transition in peoples' lives, whether it's from home to the office, from dropping the kids at school to hitting the gym, there are endless transitions that people go through every day, and we want to be the brand that people turn to, to help set the tone for their day.

My take

Donuts and digital might seem an unikely combo at first, but Dunkin' Brands knows that it’s a strategic imperative to revisit its business model. Store traffic is flat year-on-year and while the brand has near universal name recognition, the coffee and donuts sector is as vulnerable to disruptive transformation as any other. Like McDonalds in the burger market. Dunkin' is a gorilla in its space, but needs to shore up it defences against rivals. Digital needs to be crucial ingredient in that, not just sprinkled on top.

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