Dunkin’ announced large scale changes to its rewards program in terms of both accruals and redemption, potentially frustrating loyal consumers while also showing a reaction to inflationary pressures that are especially difficult in the quick serve and fast-food industries. Mike Winters from CNBC reports on the changes from the DD Perks program to the new Dunkin’ Rewards program:
“As part of the revamped program, the company says that consumers can earn points twice as fast as they did with the old DD Perks program: Now they earn 10 points rather than five for every $1 spent. However, the redemption value for free drinks has increased. Previously, customers could redeem $40 worth of purchases for any drink, including premium items. Now, that same amount will only get you a shot of espresso or a tea.”
Loyal Customers React
Those changes, which add in new benefits for food redemption as well as the existing drink options, created an uproar on social media for consumers who feel like the program discounts their frequent visits and reduces the benefit of remaining brand loyal for coffee drinkers. Winters spoke with Dunkin’ customer Lou Balzani who had expressed his initial disappointment on Twitter:
“These perks don’t address the actual needs of Dunkin’s most loyal customers,” he said.
“I’ve been a regular customer for 10 to 12 years and the food was never a big selling point for me,” he added. “When what you actually buy gets rolled back with no real replacement or additional benefit, that’s where you start to feel taken advantage of.”
Prepaid Rewards
Dunkin’ is making a bet that the changes will be a long-term benefit, despite the initial reactions and will offer increased options to utilize rewards as a prepaid tool within the Dunkin’ app. This is a key selling point for many retailers looking to combat inflationary pressures and grow business as I explained in my recent Mercator Advisory Group viewpoint “Prepaid Cards Provide Benefit for Budgeting During Economic Turbulence.”
In combating economic uncertainty, its critical for brands to reward reliable customers, especially as prepaid reward purchases can be likely to result in additional spending and splurge purchases that offset the initial cost of the reward. The Dunkin’ program gives a 20%-point boost to customers who visit 12 or more times a month also highlights my analysis showing that the ability to earn faster rewards creates a message that the most loyal customers are most valued and can influence daily behavior.
Dunkin’ is also working to offset challenges of inflation both damaging profitability and reducing customer traffic, which had a significant decline in May and June as highlighted in July in QSR Magazine. Overall, the changes in the program, still underscore Dunkin’s commitment to utilizing rewards as a prepaid mechanism but could be a precursor of other brands reducing some value in points in order to broaden its programs and hedge against potential further macroeconomic struggles.
Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.
