Restaurants Scramble to Court Loyal Breakfast Buyers

As McDonald's Prepares App Updates, Starbucks Says Loyalty Grows and Taco Bell Offers Bargains

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Starbucks Digital Ordering
Starbucks Digital Ordering Credit: Starbucks

Breakfast may truly be the most important meal of the day, at least when it comes to restaurant loyalty.

Major U.S. quick-serve chains are doing what they can to keep up with and ahead of the breakfast-related changes from their rivals. Taco Bell brought out breakfast items in 2014 and this week began offering 10 breakfast items for $1 each. McDonald's may add some coffee-related loyalty components to its app later this year or in early 2017 on the heels of the strong results it is seeing from the October introduction of All Day breakfast. The Golden Arches is even testing a breakfast bowl including kale in Southern California as it tries to determine what people really want from the chain beyond top sellers such as the Egg McMuffin.

Meanwhile, Dunkin' Donuts has been bringing out a wider variety of breakfast sandwiches it is offering throughout the day, while Starbucks has been tinkering with its food as it tries to grab a bigger chunk of its customers' budgets.

Many consumers are craving such changes. According to a study released this week by AlixPartners, 51% of U.S. adults surveyed said more chains should offer breakfast all day. What's more, 50% said that even chains that do not already have a breakfast platform should offer all-day breakfast.

At a UBS conference this week, analyst Keith Siegner pointed out that he already has a buy five coffees, get one free offer in his McDonald's app and asked McDonald's U.S. President Mike Andres about the potential for a core loyalty program on coffee. Mr. Andres said in the future, a more robust loyalty offer may be linked to customers' purchases and may have a limited redemption time to entice people to go to the restaurants and redeem them.

Speaking about loyalty programs in general, Mr. Andres said McDonald's knows it has "a lot of opportunity" to improve its mobile app, which he said had 7.5 million downloads at the end of 2015. "We're working on a very customer-designed loyalty program that we think will be as good as there is out in the marketplace. And we expect to have that in place by the end of this year, early next year. That's huge."

First, however, Starbucks will update its rewards program in April. The changes mean loyal Starbucks customers will be rewarded for how much they spend, rather than how often they visit. The upcoming tweaks to the Starbucks plan were announced in February and appeared to upset some customers, such as those who buy brewed coffee rather than pricier espresso-based beverages and therefore may not get rewards as often.

Starbucks' position is that the changes make the program more level for all, as everyone will earn two stars for each $1 spent. And it is seeing more people than usual sign up, even with the planned changes. Earlier this week Starbucks said it had 12.1 million total active members in its rewards program, up 1 million from late December. More than 170,000 people signed up for Starbucks Rewards during a period of about 10 days following the announcement that the program would be changing, the company said. That is a 10% increase in sign ups versus the same timeframe in 2015 and 2014, Starbucks said.

Meanwhile, Yum Brands' Taco Bell chain is having a bit of fun with its latest breakfast announcement. On Thursday, it issued a release that proclaimed: "THIS JUST IN: A breakthrough new study conducted on behalf of Taco Bell reveals that consumers actually prefer spending less money than more money."

The 10 items on the chain's $1 Morning Value Menu include a Mini Skillet Bowl with potatoes, scrambled eggs, cheese and pico de gallo; a sausage flatbread quesadilla with cheese, sausage, and scrambled eggs; and Mountain Dew Kickstart Orange Citrus. Taco Bell's marketing plans for the $1 breakfast menu include television, radio, digital, mobile, social and PR. It hinted the plans with its first post on the app Wishbone.

Hear more from McDonald's in person at Ad Age's Brand Summit. CMO Deborah Wahl will be speaking at the event, set for May 5 in Chicago. More details here: adage.com/brandsummit

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