Starbucks Rewards Case Study – What Makes It Work?
Coffee helps us to kick start our day or helps us take the best breaks when we need one! Coffee gives us the much-needed boost of energy. The coffee market is growing at a CAGR of 5.5% during the forecast period (2019 – 2024). The number of Americans who drink a cup of coffee daily has been the highest in six years. This highlights the massive potential of this market segment. One of the key players in the coffee market is Starbucks, a common name to the coffee cravings! Starbucks has 30,184 stores worldwide, making a consistent coffee experience available in different countries throughout the world.
Starbucks offers one of the most sought-after loyalty programs ‘Starbucks Rewards’ program that offers freebies and discounts to members giving them plenty of reasons to choose Starbucks over other players. ‘Starbucks Rewards’ program represents a significant portion of the coffee chain’s recent fiscal growth. Starbucks has reported an increased revenue of $2.65 billion, attributing their rewards program for most of the increase. Over the last two years, membership has grown more than 25%, loyal customers use Starbucks’ membership program (16 million members) for about 40% of sales at the company’s US stores. Revenue rose 4.6% to $6.31 billion during the quarter from the previous year.
How does Starbucks Rewards Program work?
Starbucks has enabled customers to check their gift card balance, points, and mobile orders via phone, website, in-store, or on their user-friendly app. Real time correspondence of different channels eliminates the possibility of a lapse in communication. This omnichannel capability is attractive to customers, encouraging engagement at many levels. Customers earn birthday rewards, free in-store refills and double-star days- these are limited-time promotions during which members earn twice the points for purchases made.
Mobile app makes online ordering and payment easy. The mobile ordering system acts as a digital marketing tool, allowing customers to see new items much in advance of launch. The Starbucks app provides users an inviting and innovative personalized experience, just like the coffee chain itself. The convenience of using an app acts as a powerful driver of loyalty. The simple layout of the app makes it appealing to users.
Starbucks gathers information on customers habits, interests etc. thus empowering them to offer more relevant perks & communication to customers. According to a survey by Manifest, a technology survey data company in 2018, Starbucks has the most regularly used loyalty rewards app (48%). Launched in 2015, the mobile order and pay feature helped customers to order via the app & skip the line. The app offers customers convenience while clearly communicating how customers can earn rewards points (stars) and what they will get with them. A strong gamification strategy fueled by exclusive customized offers, has helped the brand stay top of mind for customers.
Changes & enhancements to the ‘Starbucks Rewards’ programs are on the leading edge of customer loyalty. They have recently revamped their rewards program in North America to offer occasional customers greater access to freebies. With the aim to provide more flexibility in the program to bring in greater value to more people.
Few highlights of the new rewards program-
- Customers have multiple benchmarks to cash in their stars for rewards. They can get rewards faster, option to make minor customizations for free in exchange for 25 stars. Some of the most popular rewards like Macchiatos, Starbucks’ lattes and other drinks will now require 150 stars, an increase from the previous program.
- Members can redeem smaller amounts of stars for lower value buys
- Starbucks rewards will form a single-level program, where all members can begin to earn stars toward free rewards from the day they join.
- Points will not expire for customers, who attach the loyalty program membership to their Starbucks rewards visa credit card or a prepaid card. In the previous program, any gold level points would expire six months after the calendar month they are earned in.
- When a customer walks in a Starbucks store, any purchase they make can be used towards rewards.
Starbucks used to give a free drink of customers choice after $62.50 in spend; now, customer must spend $75. Customers were upset with this change, as there were initial hiccups in the communication of the new program benefits. However, Starbucks was fast to address customer concerns on social media.
What has not changed in Starbucks program?
- Free Starbucks birthday drink, this could be a complimentary handcrafted beverage, or one complimentary ready-to-drink bottled beverage or one complimentary food item.
- Opportunity to earn bonus stars on monthly double stars days.
How does the rewards work in the new program?
New redemption options-
- 25 stars: an espresso shot, dairy substitute or additional flavor
- 50 stars: brewed hot coffee, hot tea or bakery item
- 150 stars: handcrafted drink, hot breakfast or parfait
- 200 stars: lunch sandwich, protein box or salad
- 400 stars: select merchandise or at-home coffee
The move to revamp the program is to offer customers more flexibility and options.
Starbucks is continuously revamping its loyalty program to offer more value to customers. Further enhancements will help make the program more enjoyable to customers.
Originally written Apr 12, 2017. Last updated May 30, 2019
Image courtesy of Starbucks