Starbucks and Dunkin’ use data to grow their brands and ensure they are giving their target audiences what they want. By looking at these examples, learn how to use data from your company in your referral source marketing. In episode 498, Dave Mastovich talks about how all types of leaders have something to learn from gathering systematic insights for their marketing efforts.
It’s the No Bullshit Marketing Show. I’m Dave Mastovich, CEO and founder of MASSolutions, the world’s only No Bullshit Marketing consultants. This episode is about what Starbucks and Dunkin’ teach us about referral marketing. You’ve probably consumed either Starbucks or Dunkin’ or both. And at the very least, you have heard about both of these monstrous brands. The story I want to talk about in this episode is how Starbucks and Dunkin’ use data to drill down their target audiences and to grow their brands, and how that applies to you, your company and your referral marketing.
Dunkin’ has been around a long time as Dunkin’ Donuts. And around 2010, 2011, they made a conscious decision as they realized that the health conscious nation was consuming less doughnuts. And they also thought that they had a potential competitive advantage with their coffee. So what Dunkin’ did was they took the time to systematically gather insights. They went out into a select number of markets. I’m assuming it was 10 to 12 markets. And in each of those markets, they went out to get qualitative insights, qualitative research to systematically gather insights. They decided in these 10 to 12 markets that they would go where Starbucks and Dunkin’ were nearby, either next door or across the street. And they stood in front of both. And they talked to people and said, ‘How about if I pay you a small amount and buy your coffee for this week? I’ll buy your coffee, and then on Friday, after we talk, I’ll pay you 50 bucks or give you a gift card or whatever.’ Most people said, ‘Sure.’ But then they said, ‘You’re going to drink the other one for a week.’
They first said they wanted someone that went there at least three times a week. So they’re looking at some behavioral segmentation, behavioral segmentation is segmenting by behavior. And going three times or more a week makes you a frequent user. So they decided to talk to people that were frequent users of Starbucks and talk to people that were frequent users of Dunkin’ and then convince them for a week to try the other one, and then to talk to them after the week about what they thought about the two brands because this person would know their loyal brand very well. And then they would experience the other brand. I think that’s fantastic, and a great way to systematically gather insights. And what it showed was really there are two tribes. And this helped Dunkin’ to realize that they could make a push to focus on one of these major target markets of the two tribes.
Starbucks people knew their barista, and their barista knew them by name, whereas Dunkin’ people said, ‘I’m going to get in and get out.’ Starbucks people felt the experience of Starbucks, whereas Dunkin’ people said, ‘Why not just small, medium and large? Or if I want to have coffee sitting on a couch, I’ll stay home.’ So they looked at these target markets at Starbucks and Dunkin’ and Dunkin’ realized that their market was a regular Joe who wants a cup of Joe. They were someone that went there at least three times a week, that’s behavioral segmentation. They knew that their income was a certain level, and it was middle class level. They knew that they were not into trends, and they wanted something that felt at home. And they knew that they were loyal and wanted to get in and get out. And they saw it as two different tribes.
This then enabled them to go look at their own data and see how many people looked like this. And they saw what percentage of their base it was, and they thought that they could market to that group. Starbucks, on the other hand, actually has the lifetime value of a customer carved out in multiple different ways so they can see how much they get over the lifetime when they land a new person. And so they know how much they can spend to try to land that new person and open that new store and get more new people to have a lifetime value. I tell you this because it’s something relatable, whether you drink coffee or not, you can relate to Starbucks and Dunkin’. You can relate to the two tribes being so dramatically different. One that was cost conscious, one that wanted to be treated like an individual, another one that was not trend conscious, and they wanted to be part of a group, they wanted to get in and out. This one was trend conscious, wasn’t as worried about price, they wanted to be treated like an individual. And both of those companies know the value of that segment, and what both companies have done over the course of their lifetime is evolved to the marketplace. Both have done well with digital, particularly Dunkin’ spending a great deal of time with their digital marketing and their campaigns.
So they both adjusted their marketing based on data, they’ve adjusted their story based on data. How does this apply to you and your company as far as your referral marketing? Whether you’re in professional services, whether you’re in health care, whether you’re in manufacturing, pure B2B, business-to-business type, here’s how. Your data is gold. And what you need to do with that data is study it to see where your tribe is and what that target market is. But then you go a step further, and you look at who referred someone to you. And this is referral source marketing at its finest. So you want to look at who referred to you based on data. I found that many companies in the business-to-business realm, they sell to other businesses, have referral sources and centers of influence, but they don’t do much to track it. And they don’t have a systematic way to follow up with those referral sources. Healthcare, I might argue, is even worse, because healthcare lives and breathes by referrals. And they also don’t dig into their data enough to learn more about the referrals from a dollars and cents standpoint, with sense being cents and sense, because you have to make sense of why they’re referring to you and who they are, and then figure out, who are people that look like that and are just like this profile of this referral source that’s referring well to us? Who are they? And who else is out there? And what is the way we’re going to reach, connect and engage with additional referral sources?
So the Starbucks/Dunkin’ example is they took data, and they used the data to drive their marketing plan. And they used the data to craft their storytelling. I’m saying that you need to use your data around referral sources, so that your referral marketing is actually a system. And you have a process, you know who you’re trying to get more referrals from, who’s referring to currently, you know who’s not referring to you that looks like someone who’s referring to you, and you have ways to show them why they benefit from referring to you. It’s there in your data. It’s about systematically gathering insights on your referrals, tracking it, who’s referring to you? Don’t just say we landed this piece of business, then two months later, someone says, ‘Yeah, that was because so and so connected us.’ No, you need to have that systematically tracking it, then you need to study it. And then you did look at who are the people that are giving the referrals today? And who else is similar to them that’s not giving referrals today?
We had one company that their largest referral sources, their top 10, actually had a lower per case average from a dollar standpoint than some of their less frequent referrals. So referral source A referred 100 times at, say, $1,000. Referral source B referred 25 times but at $1,800. Two different strategies there, but both are designed to get market penetration in those two referral sources to get them to refer differently. The first one is why are they referring more at such a lower case rate? If we get them to refer at the average case rate, we’ve increased revenue. So we need to communicate, educate, and motivate that we can handle those more difficult cases, and it helps the referral source and the patient. On the other one, they’re already referring what we want, the complex cases at a high dollar amount, but they’re only referring a few. So now when we communicate, educate, and motivate with that referral source, it’s different. It’s about how we’ve helped them. It’s the success rate. It shows them that they could refer more.
This is how you can be like Starbucks and Dunkin’. And this is what Starbucks and Dunkin’ teach you about your referral marketing. It’s tracking the data, which many companies aren’t. It’s then reviewing the data and using the insights gleaned from that data to build plans with different segments, different groups that are doing different things currently. Having a plan of what you want them to do differently, then having within that plan how you’re going to convince them that doing that different behavior benefits them and their patient, or them, and the person they refer to you if you’re a professional services law firm, or if you’re a B2B manufacturer. It’s all about systematically tracking referral sources, analyzing them to gather insights, building a plan to act on those insights, and then telling the story within that plan again and again.
So the next time you stop at Starbucks or Dunkin’ to have your coffee, your iced coffee, your hot coffee, your latte, think about what they teach you and me about referral marketing and how you can apply it to improve your top and bottom line.
Thanks for listening to another episode of the No Bullshit Marketing Show recorded here in MASSolutions studio in bold, beautiful, downtown Pittsburgh, Pennsylvania. Remember, ask yourself, what’s the big idea? And build your story around the answer. It’s all about bold solutions. No BS.