Starbucks resuable cups: A redemption story

By Lisa Biank Fasig, JZMcBride and Associates.

Will a reusable cup get people thinking about their reusable cards? Starbucks may soon find out.

The Seattle-based coffee chain is introducing a reusable cup, one that looks just like its familiar paper cups, which it hopes will encourage consumers to be more green. The challenge, some experts say, is not merely convincing consumers to buy the $1 cups, but getting them to remember to bring the cups back into the store with them.

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Based on Starbucks' annual report, the point should be well taken. In the fiscal year ended Sept. 30, 2012, Starbucks said income on unredeemed stored value cards, primarily its Starbucks Cards, was more than $60 million. But that may represent a fraction of the total value of unredeemed cards.

This is how it works. Starbucks recognizes revenue from its cards when they are redeemed. Until then, the outstanding customer balances are included in deferred revenue on the consolidated balance sheet, which was $510 million in 2012. There are no expiration dates on the cards, and Starbucks continues to honor all cards presented for payment.

But, Starbucks states in its annual report, management may determine the likelihood of redemption on some cards to be remote, due to inactivity. When this happens, and when the law allows, those card balances may be recognized in its earnings report.

In 2012, such income recognized from unredeemed cards was $65.8 million. That is up from $46.9 million in 2011 and $31.2 million in 2010, though Starbucks said that in 2012 it recognized additional income due to a court ruling involving unclaimed property laws.

The point is that even Starbucks, a high-frequency merchant known for achieving a strong level of loyalty, occasionally needs to ping some of its customers to come around. Perhaps a reusable cup in the car's many cup holders will do the trick.

Lisa Biank Fasig develops and applies public relations and marketing strategies for new and existing clients at JZMcBride and Associates.

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