When Dunkin’ announced the revamp of its rewards program in early October, there was fierce consumer backlash. One headline blared, “What idiot do you think I am?” But behind the scenes, Dunkin’s decisions come from years of menu growth, and exemplify how a carefully planned loyalty strategy pays off over the long term.
To get the full story, I went back to the start of Dunkin’ Rewards, originally called DD Perks. The program launched in 2014, when the Dunkin’ menu focused on hot and iced coffee, with very few specialty drinks in between. Back then, Dunkin customers earned 5 points for every dollar spent. After spending $40, a customer who redeemed points for a free Dunkin iced coffee ($2.69) enjoyed a 6.7% discount which was in keeping with the typical 6-7% discount rate for QSRs at the time.
But as Dunkin’s menu grew, their rewards program did not. Over time, Dunkin’ found customers were redeeming for more expensive drinks and enjoying a significant discount. As the modern Dunkin’ menu included much more expensive drinks ($6-7), customers were gaining redemption values of up to 15%, which exceeds Paytronix’s recommended range of 7-8% value for QSRs.
I suspect there were greater reasons for a revamp, driven by customer feedback. First, customers may have found the rewards limiting. DD Perks did not extend to Dunkin’s growing food menu, which would have left many food-buying customers dissatisfied. The program also lacked a recognition element – there was no way to recognize the most valuable customers. Lastly, Dunkin’ may have felt the pressure from its competitors to switch over to a the most popular loyalty model in the QSR space, bankable points.
So, what does the new Dunkin’ Rewards look like? The new bankable points program awards 10 points on every dollar spent to be redeemed on items of their choosing across the entire menu. To cover any point discrepancies, Dunkin’ awarded their customers 150 bonus points for participating in the new program.
The real innovation from Dunkin, however, comes in its boosted status. A great example of loyalty gamification, customers gain access to the boosted status once they visit 12 times in a calendar month. It’s the first time we’ve seen a restaurant concept use a visit challenge monthly, rather than by year. With an offer cadence you’d see in convenience stores, the boosted status is a new pathway for coffee QSRs to engage their most frequent customers.
The new Dunkin’ Rewards is producing impressive results. In its first full week, the program produced one of the best week-on-week loyalty sales increases ever for Dunkin. Additionally, 20% of active members have already earned the Boosted Status, indicating most of the brand’s high frequency members have stuck around.
But what about all the media backlash? You may ask. In short, this is typical. If a program conserves the rewards customers have earned and is designed to provide comparable, (if not better) value, your customers will love it.