Loyalty program a priority for Dunkin' Brands

by Keith Nunes
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NEW YORK — The Dunkin’ Brands Group will roll-out a loyalty program during the second half of 2013 in an effort to increase franchisee profitability and shape its customers’ behavior, said Paul Carbone, chief financial officer.

Mr. Carbone was speaking March 12 at the Bank of America Merrill Lynch Consumer and Retail Conference in New York. He said Dunkin’ Brands introduced an app in September and it has since been downloaded over a million times.

“What that has done for us is speed of service, so you can put your Dunkin’ card on there,” he said. “We can do location-based offers, so the offers that will come through here in New York will be different than if you are in (Las) Vegas. So it allows us to talk to the consumer more.”

Mr. Carbone said the effort will accomplish two goals for the company.

“The first is payment migration, so moving people from Visa MasterCard to My Dunkin’ card,” he said. “What that does is it lowers transaction costs, improves franchisee profitability and I get all the data.

“And then the second piece is behavior migration, so how do I take that data, and if I come in every day and I buy a breakfast sandwich, how do I do an offer to one-on-one marketing for a beverage? If someone only buys a beverage, how do I do an offer for a breakfast sandwich? So you will see that in 2013. I think there’s a lot of opportunity but there’s also challenges in the franchise model.”

Mr. Carbone said a key part of the loyalty program will be customer acquisition, but he added that under a franchisee business model such an effort may be challenging.

“So Starbucks offers $5 if you join their loyalty program, because they are a company-owned store chain,” he said. “It’s hard for me to do that because I can’t – at Dunkin’ Brands, I can’t pay that $5. Because off that sale, I’m going to make 25c, it’s 5.9% royalty and then how do I charge that to the franchisees? So we have to figure out that customer acquisition piece in a franchise and that’s probably why there are not a lot of franchise businesses that do loyalty programs, but we are actively working on it and we will launch something this year.”
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