28 Aug Who’s Chasing Who? Starbucks vs. Dunkin’ (Donuts)
Dunkin’ Donuts and Starbucks are two of the leading coffee chains in the country. Their current brand identities are so different however that they aren’t really direct competition with one another. At least that’s what you’d think… both companies have been featured in the news over the past year for actions that show they might be having an identity crisis. Starbucks was featured in many business news outlets for fears that their franchises were being hurt by cannibalization. In other words, there are now so many locations in close proximity that they are cutting into each other’s consumer base. Dunkin’ Donuts, on the other hand, was in the news recently for an experimental name change. The plan, which is being rolled out to a few locations on a trial basis is to drop Donuts from the name, instead going by Dunkin’ alone.
“People “Run on Dunkin’”; it’s implied that it is on the go.”
Let’s explore the issue further from a branding standpoint; what are the company’s brand goals?
Starbucks cannibalization issue has hurt their efforts to expand. New franchises just steal customers from those already existing, rather than expanding the base. This is a problem that has never affected Dunkin’ Donuts.
A quick google search of my area found 15 Dunkin’ Donuts franchises within a 15-minute drive. The same search for Starbucks found only 8 franchise locations. So why is this such a problem for the latter company and seemingly not an issue for the former?
It comes down to this; Starbucks is supposed to be a premium cafe, more about the experience than the convenience. The more locations they open, the less premium it feels.
Dunkin’ Donuts has never felt that way, in fact, one of it’s greatest strengths is how convenient it is. People “Run on Dunkin’”; it’s implied that it is on the go. More stores equal more convenience; thereby strengthening their brand value.
“…the renaming isn’t all that radical; it’s the motives behind the change that could carry more risk.”
Logically, it would seem that Starbucks would be better served by limiting the number of franchises in a given area; rather than trying to keep up with their “competitor” (Dunkin’ Donuts). This places the brand focus back on Starbucks being a neighborhood destination. Running contrary to this opinion is how successful their mobile app has been, making up 10% of their transactions in 2017. Implying that people are enjoying the convenience factor as well as the atmosphere. It will be interesting to watch whether Starbucks chooses to embrace the convenience angle with more stores or instead focus on strengthening their traditional brand values of premium coffee at a neighborhood cafe.
This brings us to Dunkin’ Donuts; why are they considering dropping the Donuts from their name and is it smart? Many people, including the company itself, have referred to the franchise as Dunkin’ since the beginning of its successful “America Runs on Dunkin’” campaign began. With this in mind, the renaming isn’t all that radical; it’s the motives behind the change that could carry more risk.
“The danger is that potentially strong ideas get lost in the myriad of options.”
Along with the name, the company is remodeling stores to influence people to think of it as a coffee destination. This carries risk from a branding standpoint. “Coffee destination” sounds a lot more like Starbucks. That isn’t to say millions don’t drink Dunkin’ coffee each day, the key word is destination. Dunkin’ has never been that, instead it has found a niche as the quick stop to fuel busy Americans on their way to a destination.
In January of this year, one of the revamped Dunkin’ establishments opened in Quincy, Mass. and there’s a lot going on.
The new location has specialty counters, to go snacks and a separate “mobile order” drive-through lane to add to the ease of experience. They also have coffee “taps” that wouldn’t look out of place at a craft brewery. To paraphrase president Dave Hoffman in his Boston Globe interview, they see themselves more as the blue-collar bartender than sommelier. Some of the changes mirror things we have seen used successfully at Starbucks, others are completely new.
Rolling out so many new initiatives at once seems overwhelming, and it would appear that the trial locations are meant to weed out what doesn’t catch on. The danger is that potentially strong ideas get lost in the myriad of options. By choosing to try the name change and brand shift on a trial basis they somewhat mitigate the risk; provided the trial demographic speaks for the larger customer base.
“When a company makes a brand extension the thought process is to steal customers from competitors. Historically this doesn’t work.”
These two companies coexist extremely well in part because they have different brand identities. However, it seems that each company is now trying to compete in the other’s territory and simultaneously maintain their own. Starbucks emphasizing its mobile app and opening more locations to add convenience, Dunkin’ renaming and remodeling to become more premium. When a company makes a brand extension the thought process is to steal customers from competitors. Historically this doesn’t work. Starbucks consumers aren’t going to change over to Dunkin’ just because it has worked to improve its atmosphere. Just as having a Starbucks on every corner won’t change the habits of the person that swings by Dunkin’ on their drive to work. Neither company is struggling in their niche, which makes you wonder; who’s chasing who… and why?