Today Starbucks announced that their loyalty program is shifting how it rewards members. No longer will they earn points for simply being in the store; now it’s going to be based on the amount they spend.
As it stands, members get a freebie for every 12 stars, earning a star per transaction. Starting in April, that threshold bumps up to 125 stars, with each $1 spent equaling two stars.
On a conference call, Starbucks CFO Scott Maw said the change was in response to customer demand. “We did an extensive amount of research and focus groups and surveys around different changes to the program. We’re pretty confident this is the right thing to do. A very small minority will be negatively impacted by this,” he was quoted by Loyalty360 as saying.
That small minority is the customer who sticks to low-dollar purchases like a small cup of drip coffee. That customer previously earned a freebie after spending less than $35 over twelve visits. Now, that same spending pace will earn them a freebie after 22 visits.
The beneficiary is the customer who shows up every day for a grande mocha soy non-fat latte with two espresso shots, three pumps of vanilla, and served at precisely 120 degrees.
Starbucks wants to develop more of those. Getting those people to their reward quicker is a good start. At $8 per purchase, those people used to spend $96 before seeing a reward. Now they’ll cash in after eight visits and around $64.
Starbucks isn’t alone in pursuing spend-based earning in loyalty programs. Several airlines, including Delta and United, have moved to points-per-dollar models. It’s a way to reward the heaviest of hitters, while also pushing others to the fringes. Either you spend more than that average transaction, or you’re just not going to benefit from the loyalty program.
In Starbucks’ case, the average transaction is $5. That’s the number they want to increase, even if it means that “plain black coffee” fans are going to get freebies once a quarter at best.
The Big Takeaways
While the results of these changes won’t be known for a while, there are some key takeaways that anyone with a loyalty program can grab right off the bat:
- Starbucks has done well to give members advance notice of the changes. By promoting any changes well in advance, you can at least minimize and manage blowback better.
- Starbucks can get away with a strict dollars-for-points program. Others should consider expanding earn options to include non-transactional behavior, such as social shares. Loyalty programs are as much about regular engagement as they are about recognizing purchases. The most “loyal” customers aren’t always those who spend the most. They deserve recognition as well.
- Starbucks is making these changes in response to member demands. While there are some who aren’t thrilled about the changes, Starbucks claims it’s the top request from members. Few businesses listen to customers. Starbucks should be applauded for doing so.
(Photo courtesy of uıɐɾ ʞ ʇɐɯɐs)