Dunn Bros Coffee - The Non-Chain Chain

7/31/2019 Dunn Bros Coffee - The Non-Chain Chain

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May 2012

612-747-4021

[email protected]

Twitter: @jimtincher

Dunn Bros: The Non-Chain Chain

Jim Tincher, Principal Consultant
http://www.heartofthecustomer.com/http://www.heartofthecustomer.com/mailto:[email protected]:[email protected]:[email protected]://www.heartofthecustomer.com/


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Overview

Dunn Bros Coffee co-CEO Chris Eilers

tells me while we drink light roasts and bluesmusic plays overhead.

Rather than conducting the interview at his

office, Chris recommended we walk the block to

his closest coffee shop. It is one of three

corporate locations, housed in a building that

once served trains distributing Minneapolis flour

to the world. Its a location that perfectly

matches Dunn Bros an interesting location

with funky dcor.

This interview discusses the Dunn Bros Coffee

history, how they use their franchisees to develop

their unique customer experience, and how the

company uses market research and social

networking to learn more about their customers.

It concludes with an analysis on how they do in

creating a customer-inspired experience, as

measured through the Heart of the Customer

model.

About Dunn BrosDunn Brothers is a popular Midwestern coffee

chain with most of its locations in the Twin Cities.

The company was started by Ed Dunn and now

boasts 83 locations. Whereas Starbucks and

Caribou (another Minnesota-grown coffee shop)

have primarily corporate-owned locations, Dunn

Bros focuses on attracting franchisees, who

typically run and work at only one location.

Chris and partner Skip Fay were the first DunnBros franchisees, opening four locations before

buying the rights to franchise the brand. His

history as a local owner shows in his approach

towards the company. No corporate campus

here! Instead, the 18 corporate employees share

a small space in the historic Mill Place building.

As we drank our coffee, Chris told me I visit this

store almost every day. Indeed, as we came in

he compared notes with the barista on several

items obviously part of a continuing

conversation.

Dunn Bros offers a unique experience. You could

never confuse one of their shops with another

national coffee chain. You might even think it

was an independent but a Dunn Bros fan

would definitely recognize it by the in-house

roaster and overall atmosphere.

As Chris tells me, We like to think of ourselves as

the non-chain chain. Coffee by is very nature is

community-based, so we dont cookie cutter our

stores.

VP of Marketing Mark Christenson elaborated on

this theme. When we met, Mark (a fellow

Linchpin) immediately began talking about how

the brand leverages that local connection. His

passion for the customer experience was clear as

he discussed how he works very closely with the

franchisees.

If you look at the three elements of our brand:

distinctive, connected and real, he explains,

they are very important elements of the

customer experience. We emphasize that local

connectivity. Our franchisee/owners focus on

connecting with their neighborhoods and this is

something a larger corporately owned chain will

have difficulty doing.
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He gave more detail behind Dunn Bros hybrid

franchising model. Were not traditional

franchise command and control. Owners can

create the environment that connects with their

community, and hire the right people to do that.

I saw an example of this when I spoke with abarista at their Edina store. I live in Wisconsin,

she told me (30 miles away), and thought Id

work here for just a few weeks through the

holidays. But I love it so much I keep coming

back!

One example Mark gave of how this hybrid

system develops ideas was the Fruit Crema

Freeze. This half smoothie/half frappe came from

a franchisee. As is typical of the Dunn Bros

process, the franchisee shared the idea with theFranchise Product Committee, who tested it

before expanding it to the chain. Dunn Bros

encourages franchisees to talk, creating a real-

time ability to ask questions and give feedback.

They also bring all franchisees in to an annual

conference to showcase new ideas and hear

from them.

Two vivid examples of how Dunn Bros updates

their customer experience are the Barista

Throwdown and Dunn Bros new Provisions

Bakery Cafe.

Barista Throwdown

As Mark explains, Two years ago we had what

we called a Barista Throwdown, a system-wide

contest that allowed baristas to compete to

develop our line of holiday beverages. The

baristas developed their drinks, then presented

them to a panel of customer judges who selected

the winning recipe from each store. Thosewinners went on to a regional judging and then

ultimately to a final judging and selection by our

Franchisee Product Committee. While the

throwdown idea was developed at corporate, its

refinement and execution relied on the

franchisees and creativity of the baristas.

Provisions Bakery

TheProvisions BakeryCafe is the newest concept

at Dunn Bros, rolling out at this months

franchisee meeting. Mark called Provisions a

grand scale test, involving a new operating

model and changing the nature of the store. As

Chris explains, The Achilles Heel of coffee has

always been food. Coffee is primarily a morningbusiness, and we wanted an opportunity to

extend the experience but only if we could

provide food at the same level as our coffee.

Provisions is a micro-bakery that utilizes a new-

technology oven, unlike the microwave used in

other coffeehouses. Also unique is that Provisions

locations make the sandwiches in the store,

often while you wait. Josh made a sandwich for

me, and it was quite good crispy bacon with

melted cheese. While the idea was developed atcorporate, the test franchises played a major role

in its development and refinement.

By starting with five very different test locations,

Dunn Bros was able to learn as they went.

Whereas the core menu stayed fairly consistent,

how the food was prepared and even the specific

ingredients changed as the test went on.

Promoter as the Lifeblood

VP of Marketing Mark Christenson explained

Dunn Bros market research approach and its

comprehensive nature. He listed their focus

groups, online surveys, etc. He focused

extensively on their online community, where

they learn the most about their customers.
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Research speaks to the type of consumer they

attract independent and free-thinking. They

are often professionals who like the adventure of

a new coffee variety each day.

He also discussed Dunn Bros use of the Net

Promoter score. They live and die by the referral,

which is why they chose NPS. They use an annual

brand measurement, and are heading into their

second year. Our Net Promoter Score was so

high, and we were unsure. What do we do with

this? That did not surprise me. The entire Dunn

Bros brand favors emotional connection over

efficiency, so I expect them to have a high

percentage of promoters.

They do not restrict themselves to the single NPSquestion. The meat of their survey is in

additional questions about products, experience,

store environment, and even competitors. The

surprising part of their approach is that they do

not measure the NPS by store. Instead, they do a

brand-level study, and report an overall number.

While their larger competitors can be in

stadiums and on TV, Dunn Bros puts their

marketing dollars in the local owners hands to

reach out to their communities. Mark sharedstories of how coffeehouses partnered with their

communities, including schools, non-profits and

the business community. It is not as easy as

using large media, but it certainly reinforces that

neighborhood connection central to the brand.

Advice on the Dunn Bros Way

Mark offered his advice for people wanting to

create the strong local customer experience of a

Dunn Bros. First, understand what your

customers want. Not just on the surface level, but

peel it back and go 2-3 levels deep. The easy

things are the rational connections like great

coffee. The ones you want to uncover are the

emotional ones, because those are going to drive

people to come back and keep you top of mind.

So once you understand that, then you figure out

how you meet the need both rationally and

emotionally, and do that day in and day out. Its

weird for somebody like me in this brand to talk

about consistency, and it doesnt have to be the

same from store to store. But the experience inthe store that the customer visits every day has

to be consistently good. You have to re-earn the

right to serve your customer every day.

My TakeDunn Bros uses a very different approach than I

am used to. Much of my work has been targeted

towards corporate staff members. At most

companies, employees fall into the trap of

staying at the office too much, failing to stayfresh with the current state of the customer.

Dunn Bros avoids this problem by severely

limiting the size of their corporate office. Rather

than requiring a large staff to go out and stay

fresh with customers, Dunn Bros uses a team

that interacts with their customers every single

day their franchisees. While every franchisor

values their owners customer knowledge, Dunn

Bros goes well beyond others by making them

the linchpin of their development strategy.


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Based on this strategy, applying the Heart of the

Customer model sees them as receiving a good

in Market Research, Great in Social Media

Listening, Developing in Analytics, and

Outstanding in both Customer Immersion and

Experimentation.

Market Research

Dunn Bros does a very effective job of using

Market Research to learn about their Customers,

but could use some improvement when it comes

to evaluating individual locations.

Mark articulated significant learnings from focus

groups and other market research, and also

shared internal documents showing how Dunn

Bros uses this information to change theirapproach to customers. This is a laudable use of

their research.

Where they need work is in their NPS

measurement. NPS is all about simplicity,

whereas the Dunn Bros brand is focused on

emotional connection.

It was no surprise that their promoter scores are

off the charts, as NPS is a better metric for

companies in the middle of the emotional

engagement spectrum. I generally diagram the

proper choice of metrics as follows:

Emotional Engagement questions better fit the

Dunn Bros philosophy. Mark has a keen

understanding of the differences between

rational and emotional connections with their

customers. In order to keep improving theircustomer relationships, Dunn Bros should

consider moving from an NPS to an Emotional

Engagement evaluation.

But a greater opportunity lies in their method of

collecting NPS measurements. By using an all-

brand measurement, Dunn Bros misses an

opportunity to assess individual stores

performance. Multi-location companies

experience variation between their branches. By

measuring the performance of each coffee shop,Dunn Bros can do a better job improving

performance and emotional connections by

understanding the current state of customer

engagement at each of their 80+ locations.

Social Media Listening

Here the company performs at a high level. Dunn

Bros uses their online communities to learn more

about their customers on an individual basis.

While preparing for this interview, I ran across

multiple bloggers referencing how somebody

from their local Dunn Bros read a post or a tweet

about enjoying a certain type of coffee, and how

they were rewarded with a surprise visit by a

local employee offering them a drink.


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Certainly, not every blogger gets free coffee

(although any deliveries to Heart of the Customer

would certainly be welcomed!), but by leveraging

their local franchisees, Dunn Bros gets serious

impact in social media, and further improves

their word of mouth success.

Analytics

The company is improving in this area. They

discontinued their card based loyalty program a

year ago, as it did not appear to change

behavior. At the time they did not have the

transaction data to fully utilize their loyalty

information. They have since moved to a new

real-time POS that is increasing their visibility to

key revenue data. Were they to re-institute theirloyalty program, the combination of loyalty data

with real-time POS may enable them to learn

more about customers behaviors. But given the

companys decentralized nature, this may not

warrant investment at this time.

Customer Immersion

From a strict evaluation, there is a temptation to

rate them low in this category. While they

regularly visit their local location, management

does not spend a great amount of time visitingvarious locations. Mark admits he does not

invest as much time in coffeehouses as he might

like, and said he has never served as a barista.

No undercover customer or boss here.

But this evaluation only holds if applied to the 18

members of the corporate team. The genius of

their organizational structure is its decentralized

nature. The corporate team does not have to

spend as much time in the field because they

rely on their local owners so heavily. The person

more qualified to make decisions than a field-

savvy corporate employee is a field employee

already immersed in the customer.

I remember my experience at a training

franchisor, where most programs were

developed at corporate and then pushed to the

field. There might be a pilot to fix some of the

kinks, but all of the thinking was complete

before the field was involved.

At Dunn Bros, this would never fly. The field is a

strong partner in development. Whenever Mark

considers a new idea, he walks over to Jan

Pithey, the VP of Operations, to get operational

feedback and then run it by franchisees. Their

close connection means they get feedback within

a few hours, and can be testing ideas within

weeks.

Dunn Bros has overcome the traditional inwardfocus of many franchisors by creating a lean

corporate staff. As a result, customer immersion

is more than satisfied by using engaged

franchisees who deliver coffee to their unique

customers every day.

Experimentation

As outlined earlier, Dunn Bros excels in this area.

All New ideas are run through their corporate-

owned locations and/or franchisees before

scaling. At one point they experimented with a

lab store, before deciding that their existing

locations served as a better testing ground.

While they do not have a rigorous process for

experimentation, their size does not require it.

Overall Analysis

Dunn Bros does an excellent job of building a

customer-inspired experience. By utilizing strong

market research and social media listening, they

supplement their continual franchise feedbackloops. And by building their culture around

continual experimentation, they keep their

customer experience fresh, building great loyalty

among their many fans.


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Dunn Bros Coffee - The Non-Chain Chain