Marketing Plan for Dunkin’ Donuts to double its number of stores in the US by 2020
1. Executive summary
The three year marketing plan for Dunkin’ Donuts has been created by its founders to secure additional funding for growth and to inform the employees of the current status of the company and the direction it is aiming for its future. Although Dunkin’ Donuts have rivals like Starbucks next to it, since it was first set up in 1950 it had continued to expand across the US, with now serving more than 3 million customers everyday. According to market research analysts Dunkin’ Donuts has experienced greater than anticipated demands for its coffee and menu items as the company builds itself on serving simple fare at a reasonable price to working class customers and people across all age, race and income demographics. Dunkin’ Donuts has ambitious plans to expand into a national coffee powerhouse and to differentiate its products from rivals since it has its own clear vision and knows the type of customers it should be targeting and how to position itself on a competitive market. By 2020, Dunkin’ Donuts intends to increase its number of stores to more than 8600 in around 45 states altogether. The long-term objective is to hit 17,000 restaurants (Mccue, 2017). This marketing plan gives an overview of the company’s plans for an initial expansion of doubling its number of restaurant outlets across the US, with illustration of the current market and financial situation it is facing.
2. Company overview
Dunkin’ Donuts is one of the world’s leading baked goods and coffee chain founded in 1950 by Bill Rosenberg who set up the first Dunkin’ Donuts shop and Quincy MA. Five years later the company became franchise legacy. It grew from its values that lie in believing in the needs of its customers and to provide the best food, beverages and the best of everything that goes beyond a cup of coffee to make the communities better off. To date it has served more than 3 million customers across the US while supplying more than 50 varieties of premium beverages, breakfast, sandwiches and baked foods. It has 12,000 restaurants worldwide, and that is 8600 restaurants in 41 states across the USA, and over 3200 restaurants across 36 countries. 30 cups of coffee are sold per second (Mccue, 2017). Dunkin’ Donuts is the subsidiary of the Dunkin Brands Inc.
Dunkin’ Donuts has a unique creation of its products with exciting flavours made by its chefs to satisfy its targeted customers, and above, to prioritise the needs and to remain loyal to the tastes and time of its customers. Dunkin’ Donuts originally created items, tastes, looks and shapes, all indirectly shows off the company’s slogans ‘America runs on Dunkin’’. Dunkin’ Donuts targets all class of the population while being careful not to alienate its traditional customer base. Dunkin’s customers are seen as ‘tribe’ that enabled it to sustain the waves of tougher economic crisis in 2009 when its rival coffee shop faced a fall in demands.
Dunkin’ Donuts is all about ‘going after the average Joe’ and for four consecutive years it has been ranked as the number one in the coffee category on the customer loyalty survey, that is, it is ahead of number-two Starbucks. It has been the top brand exceeding the customers’ expectations with respect to quality, taste and customer service. On the BrandIndex rating, Dunkin’ Donuts overall score is double than that of McDonalds and triple than that of Starbucks.
Dunkin’ Donuts is committed to contributing to the community welfare and since 2006, it has been deeply embedded in communities across the US and donated over $11 million to hundreds of national and local charities through ‘The Joy in Childhood Foundation’ (http://www.dunkinbrands.com/foundation).
The company also offers five hours volunteer time to its employees to perform community service, and that is over 3,000 hours per year to support great causes, such as filling bag-packs with nutritious food for children in need, blood donations and cleaning up local parks. The Dunkin’ Brands believe in the culture for diversity and inclusion (Dunkin Community Involvement).
3. Situation Analysis (SWOT)
The marketing environment for Dunkin’ Donuts represents an overwhelming array of opportunities for growth. Nevertheless, there are countless challenges that the company faces and still believes it can succeed in its mission to meet the needs of more people. The table A in the Appendix illustrates the SWOT analysis to highlight the strengths, weaknesses, opportunities and threats of Dunkin’ Donuts.
The SWOT analysis represents a sketch of the company’s position in the marketplace. Since its existence, Dunkin’ Donuts has built some impressive strengths while aiming forward to new expansion opportunities. Its dedicated founders, the Dunkin Brands Inc. and its loyalty towards its growing number of brand-loyal customers place the company in a strong position to sustain any market crisis. The recent strong positive financial performance for the 2016 has been promising for the company, with an operating income margin of over 50% for the year. This performance was driven by the highly ritualistic, high-margin coffee and beverage menu offerings throughout the franchises. The stores sales grew by 1.6% and the Earnings per Share (EPS) grew to 17% on a 53-week basis (Annual Report 2016). The sound financial performance places Dunkin in a good position to grow. However, while Dunkin’ Donuts considers expanding its products into new markets, it has to carefully assess the market entry criteria and be on guard against marketing myopia and failure to offer quality depending on the culture and tastes of the new targeted customer segment. Competitors may attempt to copy the products or duplicate the way it offers its products online. These are weaknesses and threats which Dunkin’ should pay attention to. Nevertheless, the strong relationships with customers and franchisers place Dunkin Donuts in a very strong position to thwart competitors.
Besides all other objectives of Dunkin’ Donuts, its more pressing objective is to expand its restaurant outlets on a much wider geography on both local and international grounds. Therefore, the company has embarked on an aggressive outlet expansion to benefit the growing demand for coffee.
The objective of Dunkin Donuts is to open 148 new franchises in international markets in the medium term to more than triple its international growth from the previous year.
5. Strategy & Segmentation, Targeting and Positioning
This section consists of the core aspects of the marketing plan. It outlines details regarding the customer segment, which the company will be serving, and how it will create value for these customers. Its market positioning will be based the design and quality of its products that will be created according to its marketing mix that is, the product, price, place and promotion. In order succeed, Dunkin’ Donuts will follow its market entry strategy which it has been following since its existence, that is, franchising within the US. On international level, it will enter new market via joint venture and country or territorial licensing arrangements with master franchisees. Currently Dunkin’ has franchisees across Asia, Middle East In a competitive market place, Dunkin’ will follow its customer-driven strategy of understanding the customers’ needs and to win over the market by offering great differentiated product and value.
The target market analysis revealed the gaps that Dunkin’ Donuts will be filling, that is, to grab the market where no other rivals have yet explored and where the demand for coffee will be high. Dunkin’ Donuts aims at targeting the groups of customers from all classes, even from the corporate high-class environment, including the average class of customers. The target segment of customers ranges from all ages, starting from teenagers to older people. Also, as Dunkin’ Donuts becomes innovative, it will be target the market with related segments of customers who prefer to be served in an innovative way, that through online purchasing, rather than the traditional way. As for the customers who prefer to meet around a table to sip coffees, Dunkin’ Donuts attempts to create more inviting cosy environments to attract customers to linger. Its positioning statement through advertising, design of its product and the development of a new slogan ‘‘America rise on Dunkin’ is intended to reach as much of the target market as possible. The advert is expected to attract the attention of young generation of all classes, not only the average across America.
Dunkin’ Donuts strong brand of its beverages, donuts, bagels and variety of goods make it strong to compete with other brands along with the built up customer loyalty legacy the company has since over the last 68 years of existence. Dunkin Donuts competes primarily on the Quick Service Restaurant (QSR) segment of the restaurant industry. Competition is mainly based on the product, quality, restaurant concept, service, convenience, value perception and price. Competition intensifies as rivals increase the breadth and depth of their product offering, particularly, during breakfast, daytime and open new units (Annual Report 2016).
6. Tactics & Action
In attempt to accelerate its expansion, Dunkin’ Donuts intends to offer wide range of incentives to its franchises. Among others, these include reduced royalty fees for three years and up to $5000 for stores that meet the opening goals. Dunkin’ Donuts aims at transforming the marketing strategy into action through the marketing mix that is, the four broad groups of P’s: Product, Price, Place and Promotion.
In order to deliver its value proposition, Dunkin’ Donuts already have the product to offer to the new market, which is the existing portfolio of products and also new products to fit into new countries and the respective cultures. Dunkin Donuts will set new strategies in respect to the place where it will be offering its products, that is, to consider its new upmarket blends of espresso-based coffee, including the Pumpkin Latte and Vanilla Spice, ice coffees.
The company already has an effective pricing strategy that targets the average customers. Dunkin’ intends to offer its products to sell on its high street restaurants, on supermarkets for its packed coffees and online to satisfy a wide range of customers. One-way to differentiate its service from other competitors, Dunkin’ Donuts strive to add the unique style in presenting its product and also to focus on a variety of donuts especially design for diabetics and obese customers. This implies that Dunkin’ will be competing on the quality of its products, which it relates to value pricing with one segment of customers being able buy these products at affordable prices.
As part of its promotional strategy, Dunkin’ Donut has decided to created new advertisements to attract more customers along with a new slogan: ‘America rise on Dunkin’ ‘. The reason for changing the slogan and making it more resonating is to attract a new group of customers from other locations through an emotional connection and also through the premium coffees. As it has been doing in the past, it will continue to invest largely in advertisements to attract its new customers. It will also invest in improving on its online marketing campaigns to drive both the average and classy customers to order its products online, as being a digital leader (Cooper, 2017).
The company intends to launch a huge campaign in every location where it will be opening an outlet. Such campaign will have the impact of attracting the mass customers in addition to Dunkin’ offering free coffee and donuts for the first 100 customers. In the years to come, Dunkin’ Donuts plans to sponsor international games such as the Olympics and to contribute further in the needs for poor children and welfare of the communities.
In 2016 Dunkin’ Donuts generated $608 million from its US segment and $22.9 million from the international segment. As at 31 December 2016, Dunkin’ Donuts had 12,258 distribution points of which 5,284 were international and 2,538 were in the US. Revenues are generated mainly from royalty income associated with franchised restaurants; rental income from restaurant properties that are leased to franchisees; sales of ice-cream or other products to franchisees in certain international market and; other income from licensing or transfer fees. According to The NPD Group/CREST the US restaurant accounted for approximately $282 billion in sales for the ending 31 December 2016 (Annual Report 2016).
The overall performance of Dunkin Donuts have been favourable over teh period 2011 to 2016 as shown in the graph B in the Appendix.
Based on the financial performance of the company over last five years 2012-2016, the company’s net income has been increasing with favourable year on year earnings per share, as indicated at Appendix C.
With the setting up of new franchises, Dunkin’ Donuts sales is expected to increases by an estimated 20% in the US market and by 15% on the international market if the company opens one new outlet on international level, These figures can be achieved as Dunkin’ would focus on a larger market segment. The table D in the Appendix gives an overview of the estimated forecast figures of doubling its number of outlets in the US, based on the results of the years 2016.
However, the marketing plan is subject to adjustments following proper control and monitoring of analysis, surveys and customer feedback on campaigns.
The sales can be monitored through the number units sold and the profits generated. Where the actual sales is lower than the forecasted sales, then further market research, promotion and campaigns will be required to attract sales.
The external environment is ever competitive with rivals like Starbucks and McDonalds, however, based on the company’s strengths and opportunities it is recommended that Dunkin’ Donuts can go forward with expanding its outlets across other regions of the US and internationally. The customers benefit from competition and with the recent crisis that has led most Americans into unemployment and low income, Dunkin’ Donuts makes no difference in the class of customers and its vision to serve the average Joe and other groups of customers looks highly promising and achievable.
- COOPER, B., 2017. Dunkin’ Donuts Delivers Digital Signage Custoemr Experience. Retail Customer Experience. Com.
- MCCUE, M., 2017. Dunkin’ Donuts. Entrepreneur. 45(1).
- DUNKIN DONUTS, 2016. Annual Report [Online]. Available at: http://files.shareholder.com/downloads/ABEA-68SCR9/4357425295x0x934850/40E9878A-FEB4-44A9-A565-996CDFE165B6/DB_2016_Annual_Report_Final_.pdf [Accessed: 25 April 2017].
- Dunkin Community Involvement [Online]. Available at: http://www.dunkinbrands.com/careers/community-involvement [Accessed: 25 April 2017].
- Table A: SWOT Analysis of Dunkin’ Donuts
Facilitated by National DCP, LLC.
|OPPORTUNITIES ||THREATS |
- Dunkin’ Donuts Performance (S&P standard)
(Source: Annual Report 2016).
- Dunkin Donuts Financial Performance – Y2012-Y2016
(Source: Annual Report 2016)
- Budget Estimates based on financial data Year 2016:
TABLE – D
Sales Forecast Year 1 to Year 3
|Income Statement||Year 1||Year 2||Year 3|
|Net Operating Income||370,000||370,000||370,000|
America Rise on DUNKIN
Rational underlying the Poster on Dunkin’ Donuts strategy for doubling its number of restaurant across the US
Since it was first set up in 1950 it had continued to expand across the US, with now serving more than 3 million customers everyday. According to market research analysts Dunkin’ Donuts has experienced greater than anticipated demands for its coffee and menu items as the company builds itself on serving simple fare at a reasonable price to working class customers and people across all age, race and income demographics. Dunkin’ Donuts has ambitious plans to expand into a national coffee powerhouse and to differentiate its products from rivals since it has its own clear vision and knows the type of customers it should be targeting and how to position itself on a competitive market. By 2020, Dunkin’ Donuts intends to increase its number of stores to more than 8600 in around 45 states altogether.
Dunkin’ Donuts differentiates itself by targeting on a wider segment of the population and also by providing its products according to the needs of the average customers with modest income and in an environment that is welcoming to the majority of American, not made only for the high class business customers looking for couch and laptop tables.
The current rational supports the communication campaign in view of Dunkin’ Donuts expansion of its number of restaurants across the US. The poster as a communication tool constitutes part of the promotional mix, which is also, one ‘P’ among the four ‘P’s that have been used to analyse the market position of the company. The promotional mix contains the advertising, public relation, personal selling, and communication and sales promotion. These tools are mainly used to communicate to the target market and produce the expected sales goals and profits.
Promotion plays a key role in the communication function of the marketing mix and this is a critical part of any marketing plan. The components of the promotion mix are used to provide information to various groups of individuals with, which the company interacts. The aim of the communication is to influence the behaviour and attitudes of individuals towards the company in a favourable manner rather than in a competitive way (Shannon, 1996).
Promotional communication suggests a two-way exchange of information. These information as indicated in the poster, can be in form of words, images or symbols. The objectives are also to educate, persuade or simply to inform. The poster has been designed by the application of the acronym A.I.D.A , ie, to catch the Attention, to arouse Interest, to create a Desire, and to persuade the individual to take Action (Anon, 1999).
The targeted audience for the communication is mainly the customers that Dunkin’ Donuts would be attracting following the communication campaign. With the newly created slogan ‘ America rise on Dunkin’, the motive is to awaken and attract customers to enjoy Dunkin Donuts and make America rise from all its economic downturns. Dunkin also communicates its creation new range of donuts especially for customers who are diabetics and who wish to reduce their calories while at the same time enjoy an occasional donut with a premium coffee.
- ANON, 1999. Chapter four part 3: The marketing mix – Marketing communications and promotion. Mastering Marketing.
- SHANNON, J,R., 1996. The new promotions mix: A proposed paradigm, process and application. Journal of Marketing Theory and Practice.
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