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Dunkin' sees growth from digital tech

Dunkin' celebrates progress on digital initiatives, but using digital tech to deliver customer value is no slam dunk, says Forrester's Nigel Fenwick. Read which factors matter.

Dunkin' Brands Inc. Chairman and CEO Nigel Travis today credited the company's use of digital tech in solidifying...

its position as "a to-go, coffee beverages brand."

While "much work remains, we made considerable progress with our plan, in particular with utilizing digital technology to drive customer loyalty and store traffic," Travis said in a statement on the Canton, Mass., fast-food chain's fourth-quarter and 2016 fiscal year results.

"We now have more than 6 million Perks members, have launched On-the-Go Ordering nationally, have grown mobile payments by nearly 70%, and had nearly $1 billion in systemwide sales on the Dunkin' Gift Card, the backbone of our digital ecosystem, as a form of payment," Travis said.

On-the-Go Ordering, launched nationwide in June 2016, is the company's mobile app that lets DD Perks loyalty customers place an order 24 hours in advance for pickup inside the restaurant or at the drive-thru window.

Dunkin' Brands' push on digital initiatives is both laudable and necessary, said Forrester Research analyst Nigel Fenwick, who covers digital business strategy for the research firm. Companies, in particular, traditional consumer-facing businesses, have come to understand over the past few years that the use of digital tech by "digitally progressive" companies has reset customer expectations for customer service and value.

"Dunkin' was initially well behind Starbucks in terms of the digital experience," said Fenwick, who recently moderated a panel featuring Dunkin' Chief Digital Officer Scott Hudler.

"One of the interesting things Dunkin' Donuts has done to catch up is recognize they didn't need to do everything in-house. They don't need to become the software development center of the universe. They can partner with other companies that bring digital expertise to help them accelerate that digital journey," Fenwick said. 

Chief digital officer + CEO backing

Hudler, a marketing executive with Dunkin' Brands for the past eight years, was appointed to the chief digital position in April 2016. But, bringing in a chief digital officer "can be a blessing or a curse for companies," Fenwick said.

"It's really about how you integrate that role into the rest of the community -- with the technology team and with business units -- and making sure the entire company moves forward on delivering value to the customer," he said. Indeed, companies should not underestimate how hard it is to use digital tech to add customer value, he said, pointing to the plethora of "cool apps" out there that nobody uses. 

"I think this is something that Dunkin' gets. And though they may have come to the party a little bit late, they certainly understand the enormity of the challenge that companies face today, and they stepped up and [are] really getting behind it," he said. The fact that the CEO is calling out digital tech in an earnings call is also noteworthy.

"One of the things we have seen as a factor for success in digital transformation is the CEO of a company understanding this is fundamentally changing the way the company creates value for the customer," Fenwick said. "CEOs need to understand that in order to be able to prioritize investments for the company and get the rest of the organization to move behind these digital initiatives."

Q4 earnings results and 2017 outlook

The company reported a profit for the fourth quarter of $56.1 million, or 61 cents a share, compared with a loss of $8.9 million, or 10 cents a share, a year earlier. The results got a boost from increased royalty fees and franchise fees. The outlook going forward is less rosy. The company projected adjusted per-share earnings this year of $2.34 to $2.37, shy of the $2.41 per-share earnings projected by analysts.

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