Dunkin' Donuts to target Starbucks customers after loyalty scheme shake-up

Fri Mar 4, 2016 7:16am EST
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By Maria Sheahan

FRANKFURT (Reuters) - Dunkin' Donuts is on a drive to win customers from Starbucks after the rival coffee and snacks chain changed its loyalty scheme to favor higher spending customers over frequent buyers.

Nigel Travis, chief executive of Dunkin' Brands Group Inc (DNKN.O: Quote), told Reuters he expected some Starbucks (SBUX.O: Quote) customers to be angered by the move, creating an opportunity for his company's doughnut and coffee shops to win them over.

"We feel excited about the change to Starbucks' loyalty program," he said in an interview during a trip to Frankfurt.

"We've been targeting customers with $5 gift cards," he added, while declining to quantify the possible impact on the Dunkin' Donuts business.

Under Starbucks' previous rewards program, customers earned redeemable points for every purchase, whereas the new program awards points for every dollar spent, putting customers who buy cheaper items at a disadvantage.

Maxim Group analyst Stephen Anderson said after Starbucks' announcement last month that its customers would have to spend $62.50 to receive their first beverage reward, compared with $40 under Dunkin' Donuts' loyalty program.

He estimates customer defections from Starbucks could add roughly 0.25 to 0.4 percentage points to sales growth at Dunkin' Donuts, excluding new outlets.

That would be a welcome boost for Dunkin' Donuts, which saw same-store sales in the United States slip by 0.8 percent last quarter, as the launch of all-day breakfast by McDonald's (MCD.N: Quote) and value-meal offers by rivals lured customers away.   Continued...

A drink and a doughnut are seen at a Dunkin' Donuts location in the Chicago suburb of Niles, Illinois, February 4, 2015. REUTERS/Jim Young