Dunkin' Donuts - doing digital, but mostly donuts

Profile picture for user slauchlan By Stuart Lauchlan October 30, 2017
Summary:
The donut business has room for digital enablement, but the firm's US President reminds that the core business is the donuts themselves.

dunkindonut
When looking at the fast food sector, one of the companies that has most surprised in terms of its digital strategy has been Dunkin' Donuts. The delivery-based business models of the pizza firms and the burger joints were ripe for digital disruption. It was less obvious for donuts for some reason.

But lesson learned - Dunkin' Donuts has a lot of digital action underway and it’s going to become more apparent as the firm learns to make decisions faster and more flexibly. That’s a lesson that has been learned from the hurricane devastation in parts of the US, says CEO Nigel Evans:

The hurricanes have taught us to be flexible. I think that's learning…we’ll make decisions down the road fairly quickly, how we can move our digital framework forward with more speed, things like advanced Perks and On-The-Go mobile ordering.

As CEO, Evans intends to take an increasingly hands-on role in the digital and technology strategies:

I have the opportunity to stand back from day-to-day operations and analyze our progress from a high-level perspective. This includes thinking about the next evolution of our digital platform and how we can use our data science skills to make the customer experience easier, faster and more personalized, not just here in the US, but globally.

Given my previous experience at other companies, I have long been an advocate of using data to drive business results by capitalizing on one-to-one marketing. In today's environment, technology gives us access to tremendous amounts of data and the ability to analyze it faster than ever through Artificial Intelligence.

That’s an aspect that will be accentuated by the recent hiring of a new Chief Marketing Officer, Tony Weisman who was previously CEO of North America at digital agency network Digitas, where he led the work on the Dunkin' Donuts account. Evans says:

When I came here, I think I was a bit alone of being absolutely seduced by the benefits of one-to-one marketing. Thank God, Tony's here because I think he's even more seduced by it than I am and he talks about it nonstop. This is a true differentiator. I think we're a leader in the field. We will continue to take the competition to task.

The Perks loyalty scheme is a big success story, according to  David Hoffman, US President for Dunkin' Donuts:

We now have more than 7.5 million Perks members, which represents a 40% increase in membership versus last year. Those members were responsible for 11% of sales in Q3. We're focused, relentlessly focused on increasing these numbers by running successful promotions like Team Wins, You Win and continuing to partner with great brands like Visa and T-Mobile.

Go mobile

Mobile ordering is another development that is paying off, he adds:

July marked the one-year anniversary of On-The-Go mobile ordering. Since the launch, we've been continually improving the On-The-Go experience for our guests. This quarter, we began testing designated mobile order pickup areas and optimized several operational processes that will enable the growth of the platform.

One year into this, we are pleased that our guests continue to respond favorably to mobile ordering. Our internal data shows that it has a re-trial rate north of 70%, which speaks to the quality of the user experience. On-The-Go orders, mobile orders reached 3% of total transactions during the [past] quarter, and many of our urban and high-volume locations are seeing nearly 20% of their transactions go through mobile ordering. We continue to believe this is the future of how many of our guests will interact with our brand.

Delivery channels are also a priority for tech enablement, says Evans:

On the global scale, we’re using new technologies and consumer insights to serve guests in new ways like delivery, which we believe will be a real game changer for the industry. We're having great success in the Middle East with delivery and we're off to an excellent start in Baskin-Robbins U.S. with our delivery partnership with DoorDash…Delivery with our partner DoorDash launched at the end of June and sn now available to guests in one third of the system. Although it's still early, our franchisees who are offering delivery are experiencing incremental sales.

On the competitive front, Evans adds that in his view there’s more to exploiting digital than just upping the spend - firms have to develop their own experience, noting that that the Dunkin' Donuts app first appeared in 2012:

I was recently asked by an investor if digital is becoming so ubiquitous that it will no longer be a competitive advantage. While everyone has access to new technologies, it's the companies like Dunkin' that use it to forge an even closer relationship with their guests, the way we're doing it with our Perks loyalty program that will have the competitive advantage… I think our digital initiatives really are truly differentiating.

But for all this digital talk, Hoffman is keen not to go down the route of, for example, Uber or Ocado which claim to be tech companies not a cab firm and a grocery store respectively. Dunkin Donuts is a donut shop, he states:

While digital's going to play a big role for us, of course, none of us on the table are food executives who say that we're a tech company. We still believe taste is king, and we're focused on our great quality, and we think our great quality stacks up to anybody and we've got the third-party people to say so. So, that's all part of our strategy of transforming the brand for the next 65 years. We're focused on quality offerings, new innovation with digital leadership, all at the speed of Dunkin', with an amazing compelling price wrapped around that. So that's our equation.

My take

I like Hoffman’s ‘sticking to the knitting’ when it comes to the corporate identity. Too many firms across multiple sectors end up regarding ‘being digital’ as an end in itself rather than as an enabler to re-imagine or extend existing business models.