Executive Summary

Dunkin’ Donuts is the world’s largest coffee and baked goods chain and alongside Starbucks, controls well over half of the coffee market in the United States. Dunkin’ Donuts garnered attention as the go-to donuts store with an offering of nearly 52 varieties of donuts. However, as competitors began to turn to product innovation, Dunkin’ Donuts wouldn’t be left behind. In the late 1990’s and early 2000, Dunkin’ Donuts began to put a greater emphasis on its coffee and was soon transformed into the place where the everyday man went for their coffee every morning. In 2013, Dunkin’ Donuts CFO Paul Carbone affirmed the shift by proclaiming, “We’re a beverage company”.

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However, competitors continued to target different market segments and lunch was the next big thing. Dunkin’ Donuts did what was inevitable and launched its line of bakery sandwiches in 2012. The management at the chain retailer recognized that an extended menu offering a wider variety of options throughout the day would help boost sales. The launch of bakery sandwiches came as a stint to keep customers coming back throughout the day after they have had breakfast.

Deep disconnects between consumer preferences and market offerings began to surface, however, when senior management declared that the high calorie bakery sandwiches were meant for consumption as snacks and not lunch. This declaration sent both consumers and dieticians into a flurry to redefine snacks versus lunch.

This research proposal aims to explore why there was such a huge disconnect between consumer preferences and marketing offerings and how it can be amended. This paper proposes a research design to collect primary data from consumers about their perceptions of Dunkin’ Donuts offerings and how those can be altered so as to best align with consumer demands in an increasingly competitive market. 

Background

Dunkin’ Donuts is the “world’s largest coffee and baked goods chain” and was established in 1948 by William Rosenberg (New York Times 2002). Rosenberg opened Open Kettle in Quincy, Massachusetts in 1948, which later become the much acclaimed Dunkin’ Donuts in 1950 (New York Times 2002).  The predominantly breakfast retailer had 10,083 stores worldwide at the end of 2011 which cater to more than 3 million customers a day (Company Snapshot 2011). There are more than 3,000 stores located outside of the United States in 32 countries (Company Snapshot 2011).

Literature Review

Dunkin’ Donuts, a chain known primarily for its namesake and coffee, underwent a “significant repositioning effort” in 2006 (Sanburn 2013). The transition towards offering a wider variety of coffees began in 1995, following the establishment of Starbucks in Boston, when Dunkin’ Donuts introduced its first line of flavored coffees (Sanburn 2013). Over the years there has been a conscious shift from selling 52 varieties of donuts to selling an equally variable line of coffees. In 2013, Dunkin’ Donuts CFO Paul Carbone affirmed the shift by proclaiming, “We’re a beverage company” (Sanburn 2013). The shift from donuts to coffees was met with astounding success. In 2012, “espressos, Dunkacinnos, sweet teas, and its two dozen other beverages accounted for 58% of all sales” in its United States locations (Sanburn 2013).

However, as competition continues to thrust forward and keep customers coming in for lunch and snacks throughout the day, Dunkin’ Donuts did what was inevitable. The leading coffee chain introduced bakery sandwiches in January 2012 (Loria 2014). The management at the chain retailer recognized that an extended menu offering a wider variety of options throughout the day would help boost sales. Jeff Miller, executive chef and vice president of product innovation at Dunkin’ Donuts asserts, “While breakfast remains our core focus, today people are seeking all-day options, so we are committed to menu innovation, giving our guests even more choices” (Loria 2014). The stores’ extended product line now includes the enviable Glazed Donut Breakfast Sandwich along with a line of bakery sandwiches (Sanburn 2013). More than half sales revenue at Dunkin’ Donuts stores across the United States comes between 7 am and 11 am, with few consumers stopping by for other meals even though the stores remain open until 10 pm (Lee 2014).

Although the bakery sandwiches are served in compact, easy-to-carry sizes, the same cannot be said about their caloric count. Most bakery sandwiches at Dunkin’ Donuts have more than 400 calories (The AP 2014). The Tuna Salad Wrap, a seemingly healthier option has 520 calories. The chicken salad sandwich has 580 calories whereas the fried chicken sandwiches range from 590 to 660 calories (The AP 2014). The differences between consumer preferences and market offerings arise when these sandwiches, rich with calories are marketed as ‘snacks’ versus ‘lunch items’. CEO of Dunkin’ Brands, Nigel Travis asserts, “We’re not moving into lunch. We’re in snacking. We never talk about lunch”. On the contrary, however, Dunkin’ Donuts is finding it extremely challenging to attract brand loyal consumers after breakfast is over. Many competitors such as McDonald’s, Burger King and Wendy’s are exceptionally skilled in their lunchtime offerings and therefore pose an ominous threat to new entrants such as Dunkin’ Donuts (Coffee Concepts Can Target Lunch Guests 2014).

In light of consumer insight data collected at CivicScience, “only 7 percent of consumers said they would be ‘very likely’ to try a lunch menu at Dunkin’ Donuts” (Coffee Concepts Can Target Lunch 2014). A large 68% of respondents claimed they are “not at all likely” to try lunch at the chain retailer (Coffee Concepts Can Target Lunch 2014).

According to the above data, there is a wide divide between what the marketers at Dunkin’ Donuts wish to offer to consumers and the consumers’ willingness to acknowledge those offers. Although store sales growth in the second quarter of 2013 was driven by increased average ticket and higher traffic resulting from continued product and marketing innovation, consumers are still bewildered by the divergent definitions of ‘snacking’ and ‘lunch’ put forward by senior management at Dunkin’ Donuts (PRNewswire 2013).

 

Statement of Problem

Dunkin’ Donuts, once a strictly breakfast retailer, is now shifting focus towards providing meals to consumers throughout the day. In 2012, the chain began offering bakery sandwiches as well as breakfast sandwiches in a bid to innovate their product line and augment their bottom line. However, the bakery sandwiches by Dunkin’ Donuts are marketed as snacks whereas consumers associate them with complete meals. Many of the sandwiches contain more than 400 calories and have both consumers and dieticians confused about their ‘snack’ descriptions. There exists a substantial divide between consumer preferences and market offerings by the large food retailer. There is a significant need for management and marketing at the firm to align their goals and project product attributes as perceived by their consumers.

Since its inception in 1948, Dunkin’ Donuts has relied heavily on seeking consumer opinions and using those to shape product offerings. It is thus imperative for the organization to consult consumers in the form of focus groups and personal interviews to ascertain why bakery sandwiches aren’t flying off the shelves during the day as snacks. It is also important to understand how these sandwiches can be altered to better fit the ‘snack’ description. Alternately, consumers should also be consulted on how the food chain retailer can develop these sandwiches into suitable lunch options.

Management Decision Problem

How can the bakery sandwiches be altered so as to better fit the ‘snack’ category?

Should the bakery sandwiches be sold as part of an extensive lunch menu?

Marketing Research Problem

Why are consumers taking what we offer as a ‘snack’ and have it for lunch?

How can we better market the bakery sandwiches so that we keep bringing customers back throughout the day?

How are consumer preferences changing as regards to including healthier meals throughout the day?

Research Question

How can the bakery sandwiches be altered to better fit the ‘snack’ description?

Hypotheses

H1: People want healthier choices for snacks through the day even if they come from a donut shop.

H2: Consumers want some healthy components in the otherwise high caloric snacks, i.e. whole wheat breads, low fat toppings, etc.

H3: Regular customers who frequent the stores during breakfast hours may not come back until much later in the day for a snack.

Research Design

In an effort to determine why consumers are not purchasing the bakery sandwiches as snacks, we will conduct focus groups and in-depth interviews with consumers. The focus groups will be conducted with consumers who are not necessarily frequent visitors at Dunkin’ Donuts and do not possess remarkable brand loyalty. On the other hand, the in-depth interviews will be conducted with the ‘regulars’ or those individuals who grab their morning coffee from Dunkin’ Donuts on a fairly regular basis.

Focus groups

In the initial stages of research, we will be conducting focus group meetings with consumers who are not necessarily exclusively loyal to the brand. The focus groups will be held at leading local universities, offices and schools to facilitate involvement. Individuals willing to participate in the focus groups will be recruited online from social media websites including Facebook and Twitter. These groups will contain 8-12 members and there will be at least two focus groups for each region included in the research design.

A moderator will be selected in each group who will be responsible for fueling conversation about product innovation at Dunkin’ Donuts and how the perceptions of management and consumers regarding their bakery sandwiches as snacks are misaligned. Moderator will encourage contributors to share what they consider snacks and how those ideas can fit into Dunkin’ Donuts product innovation. Since these consumers are not frequent visitors at Dunkin’ Donuts, it is important to familiarize them with the offerings at the food chain retailer and then ask them for opinions.

A report will be drawn up at the end of each focus group and prominent key words and suggestions will be highlighted.

in-depth interviews

We will be conducting in-depth interviews with many consumers who are loyal to the Dunkin brand. These individuals will include those consumers who are always grabbing their cup of coffee from a nearby Dunkin’ Donuts outlet and who have tried every single donut the company has ever had to sell.

The in-depth interviews will be conducted on company grounds so to ensure that each interview is duly recorded and conducted by an expert interviewer. Consumers in the in-depth interviews will be asked a series of questions to understand demographics and product perceptions. Individuals will then be asked if they come back to Dunkin’ Donuts for a snack or lunch after they have already visited in the morning. This will aid in ascertaining prime times for return of morning coffee-drinkers and a detailed description of offerings that will lure them back to the store.