Article
Starbucks, loyalty experts defend changes to rewards program
Many Starbucks fans are angry about the changes and sharing their rage via Twitter, but loyalty platform experts agree that the move was smart for the coffee chain.
February 24, 2016 by Cherryh Cansler — Editor, FastCasual.com
Starbucks is garnering a lot of attention this week — good and bad —after announcing changes to the way customers earn points through the chain's mobile loyalty program. Currently, customers earn a star for each transaction, regardless of how much they spend, and when they earn 12 stars, they get a free food or item of their choice. That will change, however, in April when customers earn stars based on dollars spent.
That's bad news for customers who spend less than $5 at a time, according to an AP report published Tuesday which stated, "People will now have to earn 125 stars for a free item, with each dollar spent being worth two stars — meaning they have to spend $62.50 to get their free item. That means people who stick with options like plain coffee are losing out."
Starbucks disagrees, however, stating in an email to FastCasual.com that "By evolving its loyalty program to reward customers on both frequency of visit and total purchase — as well as unlock new ways in which customers can earn stars both inside and outside of Starbucks — we will increase the overall value of the program as customers will be able to earn stars just as fast, if not faster, than they currently do today."
The "old" system is flawed in that it now awards per transaction, which often leads to customers buying several things via separate transactions to rack up stars but also results in longer wait times for other customers, according to the coffee giant.
Many Starbucks fans are angry, however, and have been sharing their rage via Twitter. Here is just a sampling:
Orny Adams@Ornyadams
Can't find one positive tweet about @Starbucks and @starbucksgold new rewards program. I guess it starts with NOT blaming customer for greed
Anne Munition @AnneMunition
If you use @starbucksgold, they're changing their rewards system to benefit themselves. Looking forward to more time at my local coffeeshop!
Jackie Fernandez @JackieFern5
I am not happy with the new #StarbucksRewards one bit. First they take away free soy milk & now this. #SMH RT if you're with me.
Bill Binan @whitepants
Wow @Starbucks your new #StarbucksRewards isn't very rewarding. 20 visits v 12 to unlock freebies? Time to give my @DunkinDonuts app a try
Tak Landrock @TakLandrock
Dear @Starbucks: time to say, "good-bye" Your new #StarbucksRewards program doesn't work for me. It is you, not me.
Shawn Pavey @ShawnRecruiter
@Starbucks Forgive me, but your new "rewards" program will cost me twice as much. What am I missing? #StarbucksRewards
On the right path
Despite the angry Tweets, Starbucks is on the right track, according to data from FiveStars, a loyalty technology company that found "point per dollar" actually has the biggest impact when it comes to loyalty programs, driving revenue by as much as 25 percent.
"This is absolutely smart and a no-brainer move for Starbucks," said Chris Luo, VP of marketing at FiveStars. "Customers will be incentivized to spend more during their visits. With 30 percent of U.S. transactions going through their loyalty program, this could lift Starbucks U.S. revenue by 5 percent."
Rewards program, Luo said, generally have three areas of revenue impact. They include:
- Increasing visit frequency with loyal customers
- Increasing spend per transaction
- Winning back lost customers with promotions
"With only a point per visit program, Starbucks was only driving a driver that we call frequency compression," Luo said. "It's a powerful lever since we typically see that points and rewards can get loyal customers to return 20 percent more often or more. However, we have also seen powerful revenue impact from rewards programs that use point per dollar, which can increase the average spend per transaction by 10 to 25 percent.
"The final driver of value in rewards programs is winning back lost customers with promotions. Starbucks has not focused a lot on this, but you are starting to see it with periodic emails you get about key times where you can get double points. I predict that they will start to focus on this more in the future."
Jitendra Gupta, founder and VP of loyalty platform Punchh, said the move, which was obviously intended to incentivize food sales, is great for customers who spend more than average but bad for customers who spend less.
About Cherryh Cansler
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