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Dunkin Donuts - Video Case 2 Partnering to Build Customer...

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Unformatted text preview: Video Case 2 » Partnering to Build Customer Relationships Case in Point: Dunkin’ Donuts Company Strengths Lots of people love Dunkin’ Donuts. The company has almost 5,000 stores worldwide. Those little stores with fast traffic flows brought in some $3 billion in sales this year. Dunkin’ Donuts is a highly recognizable brand name. Its global presence. strong sales. and known brand name are qualities that many companies envy. Dunkin’ Donuts attracts customers in large part because of three key features of its offerings: quality, variety, and affordability. First, the company prides itself on quality, which translates to freshness in the doughnut business. Dunkin’ Donuts make doughnuts at least four times a day, and its coffee is considered stale and is tossed before it is 20 minutes old. Second, Dunkin’ Donuts offers variety—‘52 flavors of doughnuts. It’s also offered some innovations over the years, like doughnut holes, new tastes in coffee (flavored coffees, decaf), and bagels. Dunkin’ Donuts also offers convenience— good streetside locations for easy access. Finally, Dunkin’ Donuts is afiordable. Just about any con- sumer can afford the Dunkin’ Donuts doughnut experience. In addition, it appeals to just about everyone (the Mercedes and the pickup truck come together in an egalitarian Dunkin’ Donuts parking lot). What’s on the Horizon? Despite its strengths, Dunkin’ Donuts now faces some serious challenges. Think about the main products that Dunkin’ Donuts sells: the traditional combination of coffee and a doughnut. The coffee industry has become dominated by the coffeehouse expe— rience, a la Starbucks, and the doughnut business has welcomed a strong newcomer in Krispy Kreme doughnuts. So why should a consumer go to Dunkin’ Donuts rather than to Starbucks or Krispy Kreme? Dunkin’ Donuts offers coffee (which might or might not be as good as Starbucks coffee) and doughnuts (which might or might not be as good as Krispy Kreme doughnuts—and Krispy Kreme now enjoys a substantial "novelty” factor). Perhaps it’s the doughnut and coffee combo where Dunkin’ Donuts dominates. That is, Starbucks doesn’t offer doughnuts, and Krispy Kreme coffee is just coffee. Perhaps Dunkin’ Donuts can sell its combination as unique. Perhaps its traditional choices for convenient locations highlight that it’s the one—stop coffeeedoughnut shop. Dunkin’ Donuts might also leverage its value pricing. Although its doughnuts cost about the same as Krispy Kreme’s, its coffee is certainly less expensive than Starbucks’s. Whichever strategy or tactic Dunkin' Donuts wants to pursue to fight off the competition, it has to be consistent with the com- pany‘s corporate philosophies. Dunkinf Donuts likes to think of itself as a “fun" company. Think about its advertising: the sort of goofy—looking older fellow who says, “Time to make the dough- nuts.” This spokesman is usually shown rising from bed in his pajamas, emphasizing the strong work ethic of getting up early to go make a good, fresh product, just for you. The doughnut- maker helps personify the company. He gives the brand a real personality. The company seems happy projecting an image that it's sell- ing a straightforward product. It plays up the fact that the brand and the stores are “nothing fancy.” This may signal something good (less expensive) or bad (not high quality) to customers. For example, would an advertising tag line of “We‘re not as fancy as Starbucks” signal something good (not as expensive) or something had (not as high quality)? With competition nip- ping at both parts of its core business—doughnuts and coffee— Dunkin’ Donuts ought to consider repositioning itself to a com- petitive advantage that is more sustainable. Alternatively, it could just retrench, saying “This is who we are" and hoping that customers see it as dominating on at least one attribute—for example, doughnut flavor or selection, coffee flavor or selec- tion, price, or location. The company could hope that the Krispy Kreme movemefit is just a fad that will die down in a few years and that people will get tired of spending $3 to $4 for coffee at Starbucks when it’s less than half that price that at Dunkin’ Donuts. What Next? . Dunkin’ Donuts says it listens to its customers to get ideas about new doughnut flavors, which it then tries to create and test with other customers. How might customer feedback help Dunkin’ Donuts now? Business Partners You’ve probably also noticed that Dunkin’ Donuts stores have started branching with Baskin Robbins ice cream shops. (Let’s see: 52 varieties of doughnuts, times 31 ice creams—that’s 1,612 combinations!) More recently, retailers including 7-11 and Wal-Mart (anything Wal—Mart does, you should watch—— just by its sheer size, it will be influential) are housing small Dunkin’ Donuts shops within their own retail spaces. Dunkin' Donuts is “high profile” given its strong brand name. and coffee in particular is a high margin sale (retailers make tons of money on this alone). International Presence Dunkin’ Donuts does have a worldwide presence, but there is no question that it’s strongest in the United States. Right now, it’s having difficulties with franchisers in Canada who blame sales declines on poor advertising and marketing support and with consumers in the United Kingdom who simply don’t care that much for doughnuts. How might you adapt the basic coffee-doughnut experience to address different local tastes around the world? Questions for Discussion 1. Would you say that Dunkin’ Donuts is product-oriented or customer-oriented? Why? 2. What would you guess is Dunkin’ Donuts’ mission state- ment? What are its corporate goals? 3. How would you tackle the issues of Starbucks and Krispy Kreme invading Dunkin’ Donuts’ turf? ...
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