Starbucks loyalty change brews anger, filters out value of experience
Woe to the super-brand with recognition so generous it is soon mistaken for entitlement. For Starbucks, the revelation apparently was not evident in its data.
The $16 billion coffee chain has apparently done the unforgivable and announced pending changes to the earnings structure of its rewards program — basing them on money spent rather than the number of visits. The changes take effect in April, but members are incensed now.
"Wow @Starbucks your new #StarbucksRewards isn't very rewarding. 20 visits v 12 to unlock freebies? Time to give my @DunkinDonuts app a try."
"Dear @Starbucks: time to say, "good-bye." Your new #StarbucksRewards program doesn't work for me. It is you, not me."
"They've been watering down the program for a while. Don't think customer loyalty is a priority any more."
What I find interesting is that in voicing their outrage about the change, members reveal a preoccupation with receiving free stuff in return for their spending, but not for their data. It is a curious turn, since data is at the root of loyalty programs' very existence and is essential to maximizing the customer experience.
The shift in how My Starbucks Rewards members earn their stars may be a test of loyalty, but with its mobile payment features fast expanding, it also underscores the unrecognized importance of data use for its members. Starbucks is building expansive methods for capturing broader insights about its most regular customers, both in its stores and outside of them. These insights are gold, yet customers are concerned about trips.
Starbucks can use this marketing opportunity to turn those expectations toward experiences, not stuff.
125, not 12
Granted, I can sympathize with a longtime gold-level member who will now have to spend more in order to get those free drinks she might have gotten, like clockwork, every other week.
The most controversial change to the Starbucks program is not that members will earn for money spent rather than for visits (two stars for every $1 instead of one star for each purchase). The real blowback stems from the planned rise of the program's earnings plateau.
Under the new My Starbucks, a member will have to earn 125 points before earning a free drink or other reward, rather than earn a reward after 12 visits. That breaks down to a required $62.50 in spending. A member who is a basic coffee drinker would require 21 or more visits before earning her reward.
The new program also will increase the number of stars required to reach gold level — to 300 from 30 — while eliminating its green, or welcome, tier.
Not often mentioned, however, is a new perk: Starbucks is adding monthly double-star days, so a member who buys a $3 coffee would earn 12 stars, rather than six.
Doubling down on data – 6 million mobile a month
The anger over Starbucks' planned change is likely the result of conditioning. Just as coupons and constant sales train consumers to expect discounts at nearly every turn, rewards programs might have accustomed shoppers to expect freebies in return for their spending — and quick.
Starbucks said the planned program changes are based on feedback from its most frequent customers. With so many people watching, and expecting a response, the coffee maker is peering through a narrow window of opportunity to further capitalize on these customer insights.
Specifically, it can show how it is using the same customer data to deliver intangible benefits of membership, such as tailored communications, time saving and experiences. Starbucks has a sizeable community of members from which to appeal in this way, and its mobile payments strategy may be the key.
Mobile by the millions
Starbucks is processing more than 6 million transactions a month on its Mobile Order & Pay app, the digital order-ahead service it launched in mid-2015. Overall, the My Starbucks Rewards program counts north of 11 million members, up 23 percent from a year ago, company executives told analysts in a January conference call.
That's a lot of habit-forming. Starbucks customers need to be program members to use Mobile Order & Pay and mobile payment, so once they are in, they may tend to spend more, and it is likely hard to break that highly convenient routine. (Non-members can still sign up and use the app but do not have access to mobile pay features.)
To further establish its relevance among members, Starbucks is in the process of extending Mobile Order & Pay, company executives said in the conference call. It is looking into a delivery option for customers — pilots are underway in Seattle and New York. It also is investing in technology to better personalize offers to its loyalty program members.
Thanks a latte
The onus is now on Starbucks to communicate these benefits. If the chain can turn pumpkin into a national hot-drink phenomenon, I imagine it can handle that. But being in the loyalty-marketing game, here are some of my suggestions that any company could use:
Put time on your side: The single most important gift Starbucks gives its members, through its Mobile Order & Pay feature, is time. Time is the most-valued luxury few of us have, and Starbucks is giving it away for free, with every order. That is time to give the wife an extra hug, pack an extra note in the kids' lunch boxes or get a jump on that morning deadline.
Use choice words: Mobile apps often mean first choice. A Starbucks customer can review the offerings at the nearest store on her app, reserve what she wants and pick it up before it runs out. Starbucks can, in fact, use prior purchase data to alert regular customers if a frequent purchase is running low. She can get the last vanilla bean scone, while the guy who has been waiting 10 minutes in line will watch it walk out the door.
Have a little bird tell them: News reports have focused on My Starbucks members who feel jilted by its planned changes. Starbucks should appeal to social media followers who are defending its change and brand to explain these non-cash benefits and spread the word.
Lastly, Starbucks should dial back any references to customer demand for the change. The customers it needs to win over aren't hearing it. They want the response to which they feel entitled.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.
Bryan Pearson Bryan Pearson is President and CEO of LoyaltyOne Inc. and the author of the best-selling book The Loyalty Leap: Turning Customer Information into Customer Intimacy. www