THE CLARUS Blog

Why the Changes to Starbucks Rewards Will Increase Loyalty

Starbucks is one of the best examples of a customer-centric company because its willing to adapt.

True to form, company officials announced some very positive changes to its Starbucks Rewards loyalty program that will take effect on April 16, 2019.

Starbucks restructured its loyalty program that now includes tiers. The updated program will let customers use points to buy packaged coffee and select merchandise for the first time. 

Starbucks credit and debit card holders can accrue points forever with no expiration date.

The restructured program will eliminate the elite “Gold” status that customers achieved after spending $150 or earning 300 points.

According to the program changes, there will be one level and customer can start redeeming Stars (program currency) immediately after they are earned.

As of December 2018, Starbucks has 16 million active members of its loyalty program. That figure accounts for about 40 percent of the company’s U.S. transactions.

Here is the new program rewards structure:

25 Stars: Extra espresso shot, dairy substitute, or additional flavor

50 Stars: Brewed hot coffee, hot tea, or select bakery Items

150 Stars: Handcrafted drink, hot breakfast, or yogurt parfaits

200 Stars: Lunch sandwich, protein box, or salad

400 Stars: Select merchandise or packaged coffee

Why Starbucks Made The Right Call

The best thing a brand can do is to truly listen to its customers, address their pain points, and provide relevant and attractive benefits.

It’s about constantly adapting and a willingness to change the program over time to meet the changing needs of customers.

We believe that Starbucks accomplishes this quite nicely with these changes to its loyalty program.

These changes focus on the customer and offer more choices. The last thing a customer wants is to be in a loyalty program that seems like it takes an eternity to earn enough points, or Stars in the case of Starbucks, to redeem them for an enticing benefit.

Given the program changes set to become effective next month, Starbucks Rewards is now significantly more appealing because customers can redeem for benefits much sooner than before.

It’s All About The Customer

One of the key aspects of Starbucks’ success over the years has been its relentless focus on the customer and personalizing the experience.

Before he retired late last year, Scott Maw, former CFO and Executive Vice President at Starbucks, talked about the company’s keen focus on the customer and how personalization impacts its loyalty program.

“The big reason people don’t join the Rewards program is they don’t know about the benefits of the program,” Maw said. “We have done a lot of customer work on this. They don’t understand that when they engage with Starbucks and they bring their spend through the program, they basically get a 7 percent to 8 percent discount. It’s one of the best loyalty programs out there.”

Three years ago, Starbucks changed its loyalty from visit-based to spend-based.

Why?

Because it was the No. 1-requested change customers wanted.

At the time, Maw said: “We’ve increased our investment in 1-to-1 marketing and personalization to understand our customers better. That is associated with this program and is an important part of what these changes mean for us.”

Starbucks Rewards is a Powerful Enabler of Loyalty

Starbucks CEO Kevin Johnson said that Starbucks Rewards “continues to be a powerful enabler of loyalty.”

Successful loyalty programs need to evolve and remain relevant to their members.

They need to remain economically sound and perfectly aligned with company objectives.

Loyalty programs are ways for brands to build affinity and encourage continued engagement from consumers. The announced changes at Starbucks will now better align with program member expectations and be more practical and, therefore, more desirable.

We believe that the changes to Starbucks Rewards make for a win-win situation for the company and its program members.

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