Competitor Analysis: Starbucks vs Dunkin' Donuts

The Future of Coffee Production Within the Grind Café

Executive summary

After the recent opening of six stores for the newest coffee establishment, known as the Grind Café, it has come to the attention of each of the franchise owners that the expected sales outcome has not been meant based on the preference of customers going to Starbucks and Dunkin Donuts. In an effort to find a solution before the problem becomes too serious, each of the six franchises have been asked to establish possible new marketing techniques to lure customers away from the bigger name brand companies.

Findings and conclusions.

Research revealed the following:

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• Two areas must be addressed when considering customer satisfaction and familiarity with the company.
• Customer retention, in relation to the service in store and the subsequent treatment following the purchase of a product.
• Product wait times, the efficiency of production of said products will determine whether the customer returns.
• • Customer retention rates can vary based on many factors and it is important for the people analyzing said performance to take the time to understand that as well as how that relates to norms of the coffee industry and the standards put in place by that.
• • There are various techniques already in place to measure if customers will become regular visitors to the Grind Café and this up and coming company also has the technology to perform such a ask in-store with things like paper surveys available or web-based ones.

After research (from surveys), the conclusion is:

• Creating a “1, 2, 3’s” system for the Grind Café will allow for customer retention to be a number one priority within the company and have each of the business decisions be oriented to the retention and have strategic planning to achieve these goals.
• There are countless resources that were implemented in the original business plan of the Grind Café to give the customers a voice in order for the wants and needs of the customers be effectively communicated early and often. The gaps from the original survey show executives that the customer retention problem and be an inexpensive fix by partnering with other companies and focusing on advertisements.

Recommendations.

We recommend the following:

• Enhance our current QC efforts by adding a customer feedback loop to identify strengths and weaknesses in our coffee shop performance. The benefits are increased credibility of our quality story by providing objective measurement and a unique selling point to help retain and attract clients.
• In order to further control the quality and retention of customers, it is important to implement this into everyday practices within the Grind Café. Simple benefits of this system will be to establish a sort of direct accountability and measurement of the goals of the coffee shop and show how easy it is to build a credible business. Attached is a simple picture of a system used in a coffee shop similar to the Grind Cafe:

Figure 1 Source

• Estimated Cost to THE GRIND CAFE: $1,000 pilot program $5,000 - $7,000 annually
• Included in the cost along with the technology and screens, is a staged system, similar to the “1, 2, 3’s” stated previously, that will allow for a simple understanding of customer needs and wants. The program will have the basic one through 5-star rating as well as more analytical system that will be used according to sales for each month.

Estimated Cost to THE GRIND CAFE: Varies based on sales of the 6 locations.

Introduction & methodology

Introduction & rationale.

Customers of The Grind Café visit our locations instead of Starbucks and Dunkin Donuts because we provide the “homey” feel of how coffee should be. We use more simplistic flavors that provide a better connection with the customer with less confusion. The use of technology and expertly trained staff allows for the Café to implement better customer satisfaction and an employee-customer relationship. A problem that has been faced in recent months is that sales have reached a plateau without any growth in the near future predicted. The current customers are very satisfied and do not understand why customers still prefer the overpriced competitors. A path towards increased sales will first start with understanding the source of the current customer satisfaction and retention. Trying to answer these questions will increase the satisfaction of future customers and create more competition with the bigger competitors.

Methodology and objectives.

The customer retention inquiry was undertaken by an internal investigation in order to fully understand the situation. The marketing team at headquarters was commissioned by Spencer McCloskey, the Franchise director, to understand if this was a marketing issue or something a long those lines. In addition to looking into the lack of growth in sales, spencer and the team will continue to analyze precedents of already well-established competitors of Starbucks and Dunkin Donuts. In previous months the department that has been commissioned for this situation has provided vital information on services within the competitive coffee market that have allowed the Grind Café to stay able to compete. This shows the capabilities of this team as well as the past success showing that this problem has a great possibility of being solved.

The detailed intentions in said investigation are to deliver:

• Simple factors that eventually lead to retention of customers.
• Understanding what tools are at hand to measure said retention.
• Implement a plan and have this reflect the goals of the company

In order to lay a groundwork for the goals, the marketing team has concluded that these are the key factors:

• the influences that determine customer retention.
• the practices used by leaders in the customer retention field
• the availability of quarterly sales information

Background

Importance of consumer retention.

What is the retention of customers? Do customers continue to use the same establishments for the quality of product or is it more based on how the customer is treated and how they feel after they visit the restaurant? There is no book of answers for these tough questions that all restaurants and other establishment owners want and need to know. All we can do is have educated guesses based on life and business experiences. According to NG data, customer retention is a goal for many owners. “The goal of customer retention programs is to help companies retain as many customers as possible, often through customer loyalty and brand loyalty initiatives” (Galetto, p. 1). The problem that many companies face though, is that they are too focused on retaining their customers that they do not focus enough on bringing in new ones. Companies that tend to find the balance of customer retention and bringing in new ones are the ones that are able to be successful and are able to outperform their competitors.

Customer retention versus sacrifcing profit.

According to Forbes, companies tend to sacrifice long term good business practices in order to make fast cash. These companies are not worried about securing healthy business practices to have a solid future with the company. “You need long-term, favorable relationships with your customers in order to build a successful business. Securing future sales is as important as current sales” (Weinberger P. 3) This is why most times customer retention takes a hit and leads to stagnant sales without any growth. Companies must understand that marketing is vital for an important and successful tenure as a company trying to make a profit.

Analysis of customer retention

Overall objectives of retention measurement.

The use of these techniques to measure the retention of the customers who choose the Grind Cafés coffee is meant to provide the feedback from the eyes of the customers in order to ensure that these customers are receiving the service that is expected and wanted in order for them to return in the future. The type of research that this is referring to is used to identify what the weak points are whether it be the product itself, the service, or the ambiance of the café. Evaluations when compared against the big names reveal gaps in those companies and where the Grind Café can improve in those specific gaps in order to be better than the competition. The measurement of customer retention is what the main focus should be for the current state of the business so sales will increase and the process will continue to improve.

Preparation for retention inquiry.

ny program focused on retention of customers at a specific place must first have a concrete plan. There are steps that go along with said plan and they are as follows.

Step 1. Understand and communicate how the research will be used. THE GRIND CAFE has two possible sets of outcomes:

1. 1. Use the research to build upon to develop and determine how efficient the customer services provided:

• a. How are customers feeling the company is handling feedback?
• b. How do the Grind Cafes resources compare to that of other coffee competitors?
• c. What are certain areas that we can improve on? And what are areas that we are proficient in?

1. 2. Create a plan for each of the 6 cafes that specifies what is going to be and when to better understand the customers and their needs to have them return in the future.

• a. What is the general consensus for retention of customers?
• b. How does these techniques compare to competitors of Starbucks or Dunkin Donuts?
• c. Where do customers most generally want to see improvements?

Step 2. Understand resources needed to complete the goals. Examining the retention research can be simplified into analyzing business and economic trends that can bring said problems to the surface the actual causes for lack of retention of customers and preferences of bigger companies over the up and coming grind café. Another thing to make this process as simple as possible is to look at the business processes of Starbucks and Dunkin Donuts to look at how they run their business that seems to attract customers. Understanding these standards will allow the Grind Café to choose whether or not to spend more money on other resources or utilize the resources already within the company.

Step 3. Choose the correct tool to obtain opinions of customers. There are a variety of different ways to pinpoint what customers are feeling and how often. This feedback can be used by a simple press of button instore, a face-to-face feedback, or web-based survey.

Resources at hand (in-house Grind Café). Because of the foundations that the Grind Café has set, the company has resources at its disposal in order to look at the satisfaction of the customers and act accordingly if such a thing is an issue. So far, the Grind Café, has an online feedback as well as Telephone messaging system. However, the technology is not necessarily there and must be developed in order for the sales to continue to increase.

With the missing pieces that are with the resources of the Grind Café, there are other places that have the resources that can be implemented within these companies.

Conclusion & recommendations

It is advised that the marketing and research department of the Grind Café develop a new way 2-sided effort in order to avoid further plateaus of sales in the future.

1. 1. Add an in-house customer feedback option like the one shown previously in the report. Use the marketing teams tiered approach to providing customer retention numbers to improve.

• a. Tier 1 Use a survey that has a positive and negative option that discusses quality of product and quality of overall experience so it can specifically apply to the company.
• b. Tier 2 Have each of the collected surveys be categorized into a report that each employee can use in order to improve the company piece by piece.
• c. Tier 3 This would allow for tier 2 to be expanded on with the more analytical side. This will be more specific and sophisticated reports more for managers and executives for the more business-oriented decisions.

Sources consulted

1. “10 Factors That Affect Your Restaurant Profit.” Restaurant Engine, 8 June 2017, restaurantengine.com/10-factors-that-affect-your-restaurant-profit/.
2. “6 Best Customer Feedback Software for 2018.” Fit Small Business, 25 Jan. 2019, fitsmallbusiness.com/best-customer-feedback-software/.
3. Bhasin, Hitesh. “Marketing Strategy of Dunkin Donuts - Dunkin Donuts Marketing Strategy.” Marketing91, 3 Mar. 2018, www.marketing91.com/marketing-strategy-of-dunkin-donuts/.
4. Bloem, Craig. “84 Percent of People Trust Online Reviews As Much As Friends. Here's How to Manage What They See.” Inc.com, Inc., 31 July 2017, www.inc.com/craig-bloem/84-percent-of-people-trust-online-reviews-as-much-.html.
5. “Sales Lessons from Starbucks.” Sales Force Training, 18 Feb. 2011, www.salesforcetraining.com/sales-lessons-from-starbucks/.
6. Weinberger, Dr. Richard. “Business Owners: Don't Sacrifice Long-Term Success By Making Short-Sighted Decisions.” Forbes, Forbes Magazine, 9 Nov. 2017, www.forbes.com/sites/allbusiness/2017/11/09/business-owners-dont-sacrifice-long-term-success-by-making-short-sighted-decisions/#73e624fd1c4d.
7. “What Is Customer Retention? Definition and Metrics.” NGDATA, 3 July 2018, www.ngdata.com/what-is-customer-retention/.
8. Wholley, Meredith. “17 Mind-Blowing Statistics on Performance Reviews and Employee Engagement.” Talent Management Blog by ClearCompany, 25 Mar. 2019, blog.clearcompany.com/mind-blowing-statistics-performance-reviews-employee-engagement.