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December 10, 2004

Will Speed Win?

Dunkin

Fast Company has a web-exclusive article, It's Not About the Doughnuts, on Dunkin’ Donuts' strategy to siphon business away from Starbucks . (It’s a way worthy read.)

Dunkin's strategy? Be faster and cheaper than Starbucks.

If you're going to take on Starbucks, the leviathan of the coffee business, you need an edge. And Dunkin' Donuts, the 54-year-old New England chain famous for its Boston Creme doughnuts and award-winning beans, thinks it's found the key to being a contender: speed and price. So this, then, is the new management team's new strategy: be the faster, cheaper, user-friendlier alternative to Starbucks -- the average Joe's average joe.

In an unofficial 'speed and price' test, the author, Linda Tischler, visited a Dunkin’ Donuts in the Tribeca area and received her ‘small, skim milk, vanilla latte’ in 2 minutes, 4 seconds for a price of $2.16. And at Starbucks, Linda’s ‘tall non-fat, vanilla latte’ was prepared in 2 minutes, 55 seconds and it cost $3.69.

Clearly, Dunkin' Donuts beats Starbucks on speed and price. And that is exactly why Dunkin' is betting younger consumers, who have grown up drinking Starbucks, will eventually choose waiting a little over 2 minutes and paying $2.16 for their latte.

Will Dunkin' Donuts' speed and price strategy work? I don’t think so. Taste will always trump speed and price.

And Starbucks makes a better cup of coffee than does Dunkin’. Just as Dunkin’ makes a better donut than does Starbucks.

Speed and price is an important aspect to a great customer experience but is it more important than a clean store? A friendly staff? Great coffee taste/flavor/quality?

Be it a glazed donut or a cup of coffee, I’ll gladly pay a little extra for something that is higher-quality, has more taste and flavor, and is served by a friendly employee in a clean store. How about you?

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On a relevant side note … read Laura Ries’ blog entry taking Starbucks to task for violating a branding law known as 'The Law of Contraction.' In the blog, Laura offers her opinions on why Starbucks is risking brand dilution by selling oven-heated sandwiches. It’s a classic Al & Laura Ries branding strategy lesson. Good stuff.

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Comments

John, you are right. Taste is the real issue. All of those as yet young customers of Starbucks that DD is after already know how long their Starbucks run will take them. They plan around it. The fact that Dunkin' may be faster is offset by two factors. 1)Location - DD maybe closer or further from where the customer is or is going. 2)Experience - the two are night and day in the experience realm. If you are going to the drive thru then there isn't much difference but if you are going inside. Wow, are they different. I don't think the majority of Starbucks customers can be lured out of their comfy chairs, cool music, great smells, etc. for plastic furniture, harsh lights and the smell of chemical infused donut batter.

Taste and experience built Starbucks and it will keep them out front.

As part-owner of a coffee shop and former New Englander (where there's a DD, not an SBUX on every corner), I think FC missed a couple of important points.

1) Profit margin. Whether DD gets SBUX customers may not matter. The margins for the espresso drinks - assuming DD is like the rest of us - are higher than for the standard cup o' joe. If they can upsell their own customer base, they're ahead.

2) SBUX will get faster. SBUX already has a number of stores where everything is automated and the barista a mere ornament (although they still LOOK like they're doing something important).

As for your observation about taste, SBUX isn't about taste. If it were, most indies wouldn't be concerned about SBUX unchecked growth. It's about brand, the ordering system and most of all, about "have it your way" with the absurd number of combinations people create for their "personal drink".

Another thing to note: you will be seeing a trend toward co-marketing, where indies begin promoting specific brands, not unlike bars that advertise specific beers or delis promoting they only serve a specific brand of lunch meat. Intelligensia out of Chicago is a front-runner in this regard. This trend is a necessary evolution to get taste back into the picture as a competitive advantage.

Is speed something you can rely on for a long time? Or is price something you can base your marketing on? I don´t think so. When I want good coffee, I go to Starbucks. I don´t care if it takes 30 seconds more to get the coffee or if it´s a little more expensive, because when I get my latte, I know it was worthwhile.

In my cirlce of friends it's not real cool showing up with a Dunkin Donuts cup in your hand. But a Starbucks... now that will generate some envy (not that I would know first-hand having never aquired the taste for coffee).

I choose taste over cheaper any day. Dunkin donuts cant compete.

I'm a grad student in cambridge, Mass. We just had a discussion in one of my classes about the difference between Starbucks and DD. Many people thought that having a starbucks coffee made you some kind of an elites. I just like good strong coffee. One person said starbucks won't let any of their employees speak any other language than english. does anyone know if this is true

I've had both. I grew up in Cambridge and work in Boston now. I think that both speak to different consumers. Starbucks (sometimes viewed as the other evil empire) is a place where you want to sit down and enjoy your coffee. The decor is more comfortable. The food is more appetizing and the coffee is an experience. All of the Starbucks I have been in, even since this push for speed, are clean-including the bathrooms.
Sometimes however, the need for speed has sacrificed on the quality of service at certain Starbucks-most notably the one in the Marriott Hotel complex. We watched as the crew managed to mess up four consecutive orders that were not very large or unusual. The Starbucks on Newbury Street by contrast acts as a well oiled machine.

Dunkin is what I grew up with-the donuts more than the coffee. The problem I tend to have with them is that their staff is usually not trained on every product that they offer and will say that they don't have something that is clearly being offered on the menu. I gave up ordering the coffee coolattas and/or the vanilla chais at many locations because I am sure that if I asked for the iced coffees, I would be better off but I can go into any Starbucks and ask for anything on their menu and not get the "huh?" look. Cleanliness varies very much. The I never want to hang out in a Dunkin. They are very good when it comes to basic coffee with its cream and two sugars and when the rushes hit, the best move again like a well oiled machine. I guess I feel that if Starbucks focuses on matching the speed of Dunkin Donuts, they are missing the boat. I think that they should continue to focus on quality of product and quality of service, because that is why people will come back.

Starbucks coffee is not any better tasting than DD...it's just so much cooler to have that earth-toned cup in your hand than a pink-on-white one. In short, it's branding. How could you have missed that?

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