The Economics of Dunkin’ Rewards

by Mariana Reyes

Every Monday, my friends and I stop by Dunkin before school starts. Most of us eagerly track our rewards balance, excited to earn 100 bonus points for our visit. After a few weeks, we accumulate enough of a point balance to order a complimentary item off the menu. 

But are these reward items really a reward? In Dunkin’s system, every $1 a person spends translates to 10 points. A person can purchase 3 Munchkins for 150 points, a bakery item for 400 points, or a coffee for 600 points. But the equivalent price for each menu item amounts to far less than the points equivalent. 

Take a breakfast sandwich, for example. A simple sausage, egg, and cheese will run you 900 points, or the equivalent of $90 at the standard $1 to 10 points exchange rate. That same sandwich would only cost $5.19 cents at most Dunkin locations, meaning the coffee chain is heavily profiting off of getting people addicted to placing orders. Similarly, a coffee costs 600 points via the reward system, meaning customers need to spend $60 at Dunkin before earning the points necessary for a free drink. 

Recently, Dunkin has started trying to gamify the system. An app user can accumulate “badges” for various milestones, such as visiting 10, 25, 50, or 75+ times. The app also rewards status. For example, visiting 12 times per month will give a user “boosted status.” This means the customer will have access to exclusive offers and the ability to earn food and drink rewards wile be quicker. But even at a faster rate, it is clear that the reward equivalents still heavily benefit Dunkin’s bottom line. If one were to, for instance, accumulate enough points for a breakfast sandwich in, say, half the time, that same sandwich would still cost $45 instead of $5. 

Dunkin isn’t the only company playing the rewards game. Starbucks allows customers to earn stars for purchases (1 star per $1 spent when paying with the app, or 1 star for $2 spent when paying with a credit card or cash). A bakery treat generally costs 100 points, or the equivalent of having spent $50-$100, depending on the chosen payment method. Chipotle similarly rewards purchasing behavior, typically awarding 10 points per dollar. A basic entree costs 1,625 points, the result of having spent $162.50 at the chain before being eligible for the complimentary item. 

Thinking of purchasing something extra for bonus points on a loyalty app? It turns out it may be more economical to pay for that item without points instead.

Sources: 

1.     Chipotle Rewards. https://www.chipotle.com/rewards.

2.     Dunkin Rewards. https://www.dunkindonuts.com/en/dunkinrewards.

3.     Starbucks Rewards Program. https://www.starbucks.com/rewards/terms/.