Cafe Dulce App PDF

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app assignment for cafe dulce...

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Company Overview In 2011, co-founder and owner James Choi left his stable accounting job at Ernst & Young to help create the cafe of his mother’s dreams. After selling her chocolate boutique up in Palo Alto, CA, Choi’s mother wished to open up a new venture in Little Tokyo, Los Angeles. When her partner quit three weeks before opening day, Choi put in his two week notice and figured out how to operate a bakery and coffee store from scratch. By learning from local baristas, popular coffee shops and with the help of a family friend, Choi was able to capitalize on the trend of specialty coffee shops in LA to create Cafe Dulce. Since 2011, it’s been 8 years of sweet successes. Cafe Dulce opened its first cafe in 2011 in Little Tokyo, serving special coffees, creative donuts and hand-tossed salads. In 2015 came Dulce Dos in Downtown LA, and 2018 brought the addition of the USC location. At every location, this USC alum aims to serve its community and people. Everything, from choosing a specialty coffee to experimenting with new donuts, is done with the notion of serving their guests. Now with a full menu, guests can sip on gourmet 18-hr cold brew or masala chai tea, munch on a pesto chicken sandwich, or indulge in a dino egg donut. Whether a guest is looking for a quick treat or spending time in good company, Cafe Dulce has become a staple in each of the communities it serves. Target Demographic In order to best personalize our strategies to a target demographic with unique needs and desires, we chose to focus on acquiring, developing and retaining USC undergraduate students. All of our strategies revolve around reaching 18 to 24 year old males and females who currently frequent Cafe Dulce and also those who do not already do so. With two subsets of USC students we hope to reach, these students have a wide range of attributes. They live in or around the USC area, are digitally connected to their friends through apps and social media, and view cafes as a place to grab a treat, study or meet up with friends. They don’t like to wait for their services when it comes to food delivery, transportation and even their laundry. These students may be on a budget but are willing to spend a few extra dollars on something special, unique or simply delicious. Overall, our target demographic includes segments with different lifestyles, shopping behaviors and monetary constraints, but they are all USC students who- at the least- have heard of Cafe Dulce in the Village. As shown by our survey’s results, indeed, all the respondents knew Dulce and 62% of them are regular customers, while 21% have never gone. The latter are exactly the potential new customers we want to reach through the acquisition strategies we propose in the following paragraphs. 2

QUESTION 1 Customer Retention For the Cafe Dulce at USC, customer retention is one of its main cornerstones for pulling ahead of the competition- especially with big players such as Starbucks and The Coffee Bean around. In order to increase customer retention, we will use our new app to employ two strategies: Starting a loyalty program (based on a point system) and adding a poll that allows users to vote on flavors that will become available to the public. Loyalty Program Through App Our first strategy will be to use our app to set up a Cafe Dulce specific loyalty program. This loyalty program will be based on a point system, thus members will be awarded points on the dollar amount spent at per purchase. Each point will be called a Dulce Dollar. The conversion rate we will use for the program will be $1 for 10 Dulce Dollars. Users will then be able to use these Dulce Dollars to redeem rewards (food and beverages). Additionally, to properly accommodate students, the loyalty program will be based on the academic calendar (school year). Therefore, the customized calendar year will begin in August and end in July. The accumulated Dulce Dollars (points) will stay but the tier statuses will reset at the beginning of each cycle. In order to regain a previously attained tier status, students must spend the specified amount. Since all students (regardless of class standing) will start at the same time, they can climb up the tier ladder together, promoting social interaction (around the app/brand) in the process. It is important to use a point system because it inherently dissuades free riders. Free riders go around searching for opportunities to find discounts and leave as soon as they do, destroying loyalty. However, since our system gives out Dulce Dollars based on purchase volume, free riders can’t take advantage of the system, thus also lowering churn rate. Instead, the program is designed to reward high spending customers since they will earn substantially more Dulce Dollars than the average customer. This will incentivize them to continue using the app as well as come back to redeem/earn more rewards. Our program will offer three tiers: Dulce Creme, Dulce Black, and Dulce Elite. All tier statuses will include birthday freebies, exclusive updates/push notifications, and access to the monthly poll that gives app users the exclusive chance to vote on new food and drink items each month. The Dulce Creme status will be the entry level tier. Once you join the program, you’re instantly Dulce Creme status (without spending any money). It’s important to keep the first tier free to get everyone started and acclimated to the loyalty program. Creme will be extremely crucial to the success of the program as it will be the start to the gamification process that hooks users. It also opens up users to voting in the monthly poll system which will promote both retention and community engagement. On top of that, Creme members will receive exclusive updates and push notifications to remind them to vote, let them 3

know about new and exclusive drinks/food, inform them about upcoming events, and more. This will raise retention by promoting interaction between the app and the user more frequently. The next status tier, Dulce Black, will require 1000 accumulated Dulce Dollars or in other words $100. The main benefit for Dulce Black will be that the conversion rate for Dulce Dollars will change. The new rate for Dulce Black members will be $1 for 12 Dulce Dollars. Thus, the user will be incentivized to spend more to accumulate even more points. The highest status tier will be Dulce Elite which will require 5000 accumulated Dulce Dollars or about an additional $333 (given that user already has Dulce Black with new conversion rate). We felt that this dollar amount would be attainable since Dulce customers are more price insensitive as Cafe Dulce is more on the expensive end. Additionally, Dulce is located at USC where the median family income of a student is $161,400 with 63% of students coming from the top 20% of the country (New York Times). The main perk for being a Dulce Elite member is now the conversion rate on Dulce Dollars will go up to $1 for 15 Dulce Dollars. Since 5000 Dulce Dollars seems like a steep number outright, we will also include checkpoints between Black and Elite every 1000 accumulated Dulce Dollars. The checkpoints will mainly be there for gamification and engagement purposes, but otherwise will not give any extra reward. Becoming a member of Dulce Elite would also be a soft benefit to users as they will become a part of a very exclusive status at Cafe Dulce. Aside from the soft benefits and gamification perks, the loyalty program will also create high switching costs for users, thus increasing the retention rate. Additionally, it will keep users away from competition like Starbucks and The Coffee Bean because they will want to redeem free food and drinks In each tier, users will be able to redeem their Dulce Dollars for any menu item. Each menu item will be assigned Dulce Dollar values according to how expensive they are. As you earn more Dulce Dollars, higher valued items will become available for redemption. As you spend Dulce Dollars, a user can only buy within their Dollar amount. Interactive, Monthly Poll for New Menu Items In addition to racking up Dulce Dollars, all app users will have access to a monthly poll to vote on flavors that will become available to the public. As it results from the survey we conducted on current Dulce’s customers, 80% of them claim to be interested in voting for new food and drink offerings for the Cafe, therefore making this a retention strategy worth pursuing. This poll will promote customer engagement as it will keep users on the app, reducing churn rate as a result. Additionally, users will keep checking back on the app on the results (push notifications will also remind them). Not only will this increase the retention rate, but it will also drive sales since users invested in the process will be more inclined to purchase. This cycle will repeat every month, keeping users constantly engaged on the app as well as always being introduced to something new. It will also create a lot of engagement on 4

social media with people sharing the current poll or a new flavor that came as the result of a poll. Thus, people with high social value will help with customer acquisition as a byproduct (for free). Another byproduct of this will be that Cafe Dulce will get data on customer preferences which they can use to add new, permanent menu items that will drive future sales. Customer Development For Dulce, producing loyal and enthusiastic customers is paramount when competing in a cluttered and corporate-infested market. In conjunction with Dulce’s unique and tasty products, it must provide equally as distinctive service. Dulce, having accommodations in a prime location, must take advantage of the hustle and bustle that occurs in USC’s new Village. People come to Dulce to quickly pick up a matcha iced latte before class or eat a delicious green tea donut while studying for their next midterm. These unique and college-specific occurrences are something that Dulce should take notice of and capitalize on. College students are almost always in a hurry or are (hopefully) doing some kind of studying or assignment. With these habits in mind, we want Dulce to introduce two new tactics that will increase the profitability of current Dulce-loyal USC students. Pre-order System Our first idea is a drink pre-order system. As comes out from the survey, indeed, 63% of the respondents would find it useful to have a Tapingo-like ordering system to help them speed up the buying process. First, the user would enter their credit card information so there is seamless paying with each order. The app would have the entire menu of drinks, pastries, and meals in which the user could select from. Once the user has completed their order, the app will send a notification to Dulce so they can prepare the drink and food before the customer arrives. When the customer arrives, they will simply say their name and the order number, pick up their food, and be on their way. Additionally, after a few orders, the app will detect favorite drinks or food of the customer and have them ready at the top of the menu for easy access. This will just further the ease of submitting orders. Ordering through this system will also easily incorporate the app’s point system so tracking of the Dulce Dollars through payment is effortless. The main opportunity with this system is to cater to students who are always on the go. Dulce definitely has rush periods and the line can sometimes be upwards of ten people long. For those students who think waiting in a line is wasting time, this addition to the app will be incredibly beneficial and only increase use of it. Furthermore, this system will aid Dulce in combating rush hours and long lines. In being able to have more time to prepare orders, Dulce can be more efficient in moving customers in and out. Those few minutes of additional time can make a difference in the preparation of food and in the customers’ perceived waiting time. Customers’ happiness will increase if they are able to pick up their food immediately with zero perceived waiting time. 5

College-centric Approach Our second tactic is one that specifically caters to USC students and their hectic student life. The life of a USC student is one of highs and lows - there’s midterms, finals, study days, syllabus week, yet also spring break, Conquest, Spring Fest, graduation, Welcome Week, etc. These are all wonderful, specifically USC occasions for Dulce to capitalize on; therefore, Dulce should schedule specific promotions that coincide with USC’s academic/recreational schedule. Firstly, students would enter their USC ID number into the app to verify that they are a USC student. At the beginning of each event, Dulce would send out a notification alerting everyone of a promotion that compliments the event taking place. For examples, half off all espresso drinks during Finals Week to get them through those long study nights, a free pastry with any purchase to any new freshman or transfer during Welcome Week to show them how sweet USC is, or half off all salads the week before Spring Break to get that “beach body” ready, given that almost 90% of the respondents to our customer research claims to try to eat healthy right before Spring Break. Regardless, the promotion should be good enough to entice people to actually come while complimentary enough to make sense timing-wise. This tactic will not only drive more traffic to Dulce through good deals, but will also showcase an understanding of the student lifestyle, ultimately gaining brand affinity from the USC population. Customer Acquisition Customer acquisition is crucial to any new business: using appropriate customer acquisition strategies helps companies to grow and targeted programs help them acquire the right customers in a cost effective way. In the case of Cafe Dulce, located at the center of USC Village and therefore surrounded by tons of other cafes and competitors, acquiring new customers is crucial. The focus is on convincing students to try out Dulce’s products. Once done that, the high-quality and variety of the cafe’s offerings will be enough to satisfy customers’ expectations and convince them to pass the word, enhancing the cafe’s reputation among students. In order to do so, we will use our new app in two ways. Free drinks for New Subscribers First, we will provide current customers who have already downloaded the app with a promotional code. If these customers invite a friend to download the app and give him/her their code, they will both receive a free drink or any other monetary equivalent at Dulce. This kind of referral program, coupled with the high quality of the service offered, would fuel the business’s growth by giving frequent customers the incentives they need to convert their friends and family into Dulce’s customers while giving new customers the perfect introduction to the service. A free drink is valuable to current customers as they know they will actually consume it and these customers are also the most qualified to promote Dulce’s products as they have the most experience with it. Providing these clients with a 6

valuable referral reward is the definition of a win-win situation. On the other side, giving a free drink to new clients makes sense because these ones are usually reluctant to try new places and this strategy tears down any objections they may have because it makes the trial risk-free. In this way, the referral program seems like the perfect way to balance the two opposite factors of customer acquisition cost and customer lifetime value. As a matter of fact, our survey shows that 96% of the respondents would download Dulce’s app if they were given a free drink for that. Rewards for Sharing Second, we will provide current customers and app users with the possibility of logging into the app through Instagram so that they can get Dulce Dollars and rewards for posting or uploading Instagram stories with a hashtag referring to Dulce. Using #Dulce once will give users 3 Dulce Dollars, which are proportionate to the fact that they can receive 10 Dulce Dollars for spending 1$ at the cafe. In this way, current customers will be incentivized to share their experience and their posts will advertise the place and hopefully induce users’ followers to visit Dulce. This kind of customer acquisition strategy is particularly suitable to Dulce’s target customers, college students, who tend to use Instagram a lot and value the other users’ advices the most. One of the pitfalls of this strategy could be that customers may end up over-posting with #Dulce just to rack up as many points and rewards as possible. For this reason, Dulce may want to put a limit to the number of times customers can use this promotion through the app. We considered fair to allow customers to get rewards for up to one post/instagram story a day and for a maximum of 5 posts/stories overall. The risk of this strategy is also that customers decide to upload the post and then delete it immediately after, just to get the immediate reward, and therefore nullifying the purpose of the whole promotion. Nonetheless, we consider the value of the scope of the plan higher than the risk of these pitfalls and then worth to be pursued. Indeed, our research revealed that more than 60% of the interviewed would be willing to share an Instagram story of upload a post with #Dulce if they were awarded points of discounts for that, making it a strategy worth pursuing. QUESTION 2 We advise the owner of the business to launch a new loyalty program with special offerings for customers that purchase via the app over 10 times. With this program, we plan to build a long-term relationship with the customer and adapt the product to the consumer. Instead of implementing a blanket 10 percent discount on all app purchases, our program will tailor to the needs of each individual customer through targeted special offerings. This program will make the business’ app operations more efficient, concentrating on mostly profitable customers instead of one-time purchasers. Pros - The goal of creating a loyalty program in a business is to increase customer acquisition through the app and encourage more frequent purchases from the current customer base. The loyalty program will stimulate repeat purchases because the program requires a customer to purchase 7

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via the app over 10 times in order to redeem rewards. This system will turn new customers into repeat customers, increasing customer lifetime value, or the prediction of the net profit attributed to the entire future relationship with a customer. Requiring repeat purchases will incentivize the customer to habitually use the app to order. This method builds loyalty instead of merely incentivizing a one-time payment. Apart from the discounted purchases, the strategy can and should be coupled by sales of non-discounted items to the new customers so that, even if the shop cannot increase its margins from the discounted items, it can at least increase its profit for transaction. The discount offer would potentially reach mainly new customers, increasing the chances that the coffee shop entices new sales without losing out on the margins of sales that would have happened anyway, regardless of the discount. One-off discounts can force customers to use the discount and never order again while this kind of strategy would help preventing customer cannibalization. In addition to saving money, this kind of loyalty program would help customers by making their personal supply more predictable, that is important for people who buy products that they rely on every day (ex. coffee)

Cons - One potential con of this program is that customers have to put in a lot of work (purchasing 10 times via the app) in order to reap rewards. There is no immediate benefit to the customer who simply downloads the app and purchases one or two times. The customer might “migrate” amongst other brands that reward customers earlier in the buyer’s journey. This program must ensure that the customer is not “lost for good,” so that the probability of retention is favorable. - Another potential con for customer development is that it would be cumbersome to sort the purchasing data of different customers. In order to delegate customized rewards t...