Can Dunkin' Donuts rewards compete with Starbucks?
America may run on Dunkin' (as its slogan says), but it's unclear whether the brand's forthcoming loyalty program will alter allegiances in the competitive coffee market.
Dunkin' Brands CEO Nigel Travis said Monday that the company will officially announce its DD Perks loyalty program later this month. The program has been in testing since November in Texas; Orlando, Fla.; Portland, Maine; and Wilkes-Barre and Scranton, Penn.
Members earn five points per dollar spent on a linked DD reloadable card, according to DunkinDonuts.com. They get a free medium beverage when they join, every year on their birthday and for every 200 points earned.
Loyalty is "the next phase" in Dunkin's one-to-one marketing push, Travis told CNBC's Courtney Reagan on Tuesday at the ICR XChange retail investment conference in Orlando.
"I think we're actually one of the leaders in the QSR [quick-service restaurant] space," he said. "There are obviously a couple of other loyalty programs out there, but we're a franchise system, which means we had to get all the infrastructure in place. We got the same point-of-sale equipment so we could build loyalty on top."
A spokesman for Dunkin' Donuts declined to comment ahead of the official announcement, which is scheduled for Jan. 27.
The programs coincides with an expansion push by Dunkin' Brands. The company said Monday that it plans to open 380 to 410 more Dunkin' Donuts stores in the United States and 300 to 400 in international markets this year. New locations opened last year totaled 371 and 138, respectively.
A loyalty program could give Dunkin' a big advantage in the quick-service category, where rewards are not so common, according to R.J. Hottovy, a senior equity analyst at Morningstar. DD Perks customers can also pay by app, another feature not seen in many programs beyond Starbucks.
"That puts them ahead of a lot of their service peers," he said.
Depending on the order, DD Perks could be even more rewarding than My Starbucks Rewards.
(Read more: Trouble brewing at Starbucks?)
Starbucks awards members one star per transaction, regardless of the amount spent, with a free "drink or food reward" every 12 stars.
In contrast, a Dunkin' Donuts customer who regularly orders a breakfast sandwich and medium coffee combo ($4.89) would receive a free coffee in as few as nine visits. Members who order only a medium coffee ($1.79) won't get a freebie until 23 visits in, though.
The program is likely to be attractive even to occasional Dunkin' customers.
"Loyalty programs work really well, obviously, if it's something you buy pretty regularly," said Kit Yarrow, chair of the psychology department at Golden Gate University in San Francisco. "It'll definitely encourage people to go there."
But DD Perks may not be sweet enough to get coffee drinkers to switch from Starbucks, Seattle's Best or another chain.
"There probably is some overlap between audiences, but you definitely have your loyal followers for the different brands," Hottovy said. (For example, a devoted fan base has developed for Starbucks' pumpkin spice latte.)
(Read more: Here's why your coffee habit is making you fat)
Down the line, DD Perks could result in better deals for customers and better data for the brand, said Jeff Berry, research director for Colloquy. A program based on spending rather than visits gives Dunkin' a better sense of customer value and what members are buying.
That's likely to result in more targeted offers based on how you spend—which may not be a win for your wallet or waistline.