Lee Barnes

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.

In a typical year, most full-service restaurants would find themselves completely booked up with New Year’s Eve reservations by Dec. 29. Today, most are facing capacity limits or full bans on on-premise dining as we head into one of the busiest nights of the year for the industry.

Fortunately, there is a bright spot. In lieu of reservations, guests are placing takeout orders – and further in advance than years’ past.

Leading up to the Christmas holiday, Paytronix data showed advance orders for New Year’s Eve had tripled over the same period in 2019. While it’s unlikely that overall takeout orders on Dec. 31 will triple, the data does indicate that guests were placing their orders much earlier than usual. This may be indicative of the shift from reservations to online orders.

This year’s advance orders, while more plentiful, are generally smaller in size than in years past, most likely due to fewer catering orders for large, private parties.

In 2019, relatively few orders were placed before Dec. 25, but those that were averaged high check totals. Orders placed more than 8 days in advance last year had check sizes between $500 and $3,000, while 2020 has seen smaller checks – from $40 to $400 – placed anywhere from two to eight days in advance.

This likely means that while there are few parties planned to ring in 2021, many guests still plan to keep up tradition and celebrate with a nice meal in small groups at home.

Last week we looked at how restaurants are seeing a renewed recovery, even if the upward trend is smaller than before. 

When it comes to convenience stores, the trend is very different. C-stores had a much shallower drop at the start of the pandemic, which amounted to about half that of restaurants. They were helped by the fact that in most states, c-stores were put in the “essential” category, meaning that they could stay open even as other retail companies had to close up shop. Still, with traditional commuting patterns disrupted, c-stores took a bit of a hit. 

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Since the COVID crisis hit back in March we on the data team at Paytronix have been tracking the restaurant recovery. After an initial crash that’s been well documented, we saw a relatively consistent level of growth of about 0.4% per day starting in late March and extending right into June. This was the time that restaurants adjusted to the crisis, shifting their business models away from on-premise and over to takeout and delivery. 

Around mid-June, however, something changed and the market simply flatlined for the next 30 days. 

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