Counting Stars: A Coffee House Breaks Ground in Loyalty

January 21, 2014CCG Retail Marketing Blog

Customer Communications Group 2014

Is the coffee just that good? Or is something else driving the wild success of Starbucks’ loyalty program?

Imagine if the active membership in your loyalty program doubled over the course of a year. That’s precisely what Adam Brotman, chief digital officer at Starbucks, expected to see at his company: a boom from 4.5 million active members in October 2012 to 9 million by the end of fiscal year 2013.1 And he’s not just having a caffeine-infused dream. Program membership already grew 86 percent during 2012.1

What’s the secret? And is it something your store could leverage? Let’ s take a look.

A Little History
Starbucks entered the loyalty game with its Gold program. Customers paid a $25 membership fee and received a 10 percent in-store discount. But when sales began fading, the coffee house began looking for a refresh.2 Enter today’s My Starbucks Rewards,™ a free, three-tier loyalty program. Here’s the gist (based on the Starbucks website):

  • Customers earn “Stars” by paying with a registered Starbucks card or the Starbucks mobile app, or by entering Star codes; one transaction equals one Star
  • Welcome level — just register your card and get a birthday freebie, plus 15 percent off a purchase at starbucksstore.com
  • Green level — earn five stars to add free in-store refills to your Welcome perks
  • Gold level — earn 30 stars in 12 months to get all of the above benefits, plus a free drink or food item after every 12 Stars, special email or text offers, and a Starbucks gold card

Cracks in the Coffee Mug
Despite its success, the program isn’t perfect. First, note that Stars are doled out on a per-transaction basis. Buy a coffee for yourself and your boss? Too bad, that’s just one Star. At the highest level, it’s essentially a buy 12/get one free strategy, with a few other benefits. Good, but not enough to explain the program’s stellar success.

Next, although Starbucks will notify members when they’ve earned a reward or reached a new level, they don’t provide members with Star updates. And baristas can’t tell members their status or if they have a reward waiting. Members must track their earnings themselves, by either logging on to the website or downloading the mobile app.

And here’s a connected fault: Members aren’t told when they’re in danger of losing their Green or Gold status. Instead, they simply get an email once the demotion has happened. And, adding insult to injury, their Star totals are set back to zero, making the climb back up the tiers that much harder — and more frustrating.3

Why It’s Grande, Anyway
Why then, with these notable flaws, has the revamped program taken off like a cheetah on espresso?

Sure, the chain dominates its market. In fact, in one 2012 study by Mintel, twice as many respondents (40 percent) visited Starbucks over smaller chains or independent coffee shops.4 But a major reason for the loyalty triumph comes from the store’s willingness and ability to experiment, innovate, play with tech and evolve their program. Often, that leads to greater member convenience, which in turn feeds loyalty.

Here’s a sample of what we mean:

  • The program is well integrated across mobile, web and in-store channels.
  • The mobile app itself is an integration of mobile payment technology and the rewards program. With 1 million downloads at last count, the app allows members to use their smartphones to pay, check their loyalty account in real-time, get promotions and locate stores.2
  • Members can earn Stars outside Starbucks itself, including in La Boulange®, Teavana® and Evolution Fresh stores. In addition, members can now earn Stars for purchasing select products in grocery stores, by entering Star codes from the packaging.1

One other essential element has been Starbucks’ ability to train its baristas to explain the somewhat complicated program — and upsell it.

Your To-Go Cup
What can your store take away from Starbucks’ example? For one thing, prepare diligently. There’s no way Starbucks could have scored big with its tech innovations if the company didn’t put in the time and effort upfront to map it out and build the infrastructure.

Second, get creative! With its loyalty program updates, Starbucks recorded some historic firsts — and won. So don’t be afraid to tread new ground, as long as it makes sense for your company and isn’t just trendy.

Finally, remember that if your staff can’t sell the program, it’s going to be dead in the water. So invest in initial training as well as recurring refreshers.

Ready to wake up your loyalty program? Then take a swig of your favorite caffeinated beverage and get going!


Whether you have an official “loyalty program” or not, you want to keep customers coming back and shopping your store. We get it. And we can help. It’s what we’ve been doing for over three decades. So let’s get together and see how to build your customer relationships and your profits. Call 800.525.0313 or email us today.

Customer Communications Group, Inc., is not responsible for products or services offered by third parties or websites mentioned and provides such information and sites solely for your convenience.

 

1. “How Far Can Starbucks’ Loyalty Program Reach?” by George Anderson, RetailWire, March 21, 2013, http://www.retailwire.com/discussion/16656/how-far-can-starbuck, accessed Dec. 3, 2013

2. “Why Starbucks’ Loyalty Program Is so Successful,” LoyalMark, http://www.loyalmark.com/631/why-starbucks-loyalty-program-is-so-successful, accessed Nov. 14, 2013

3. “Starbucks: Loyalty Program Misfire,” by Roger Dooley, Forbes, July 23, 2013, http://www.forbes.com/sites/rogerdooley/2013/07/23/starbucks-gold/, accessed Dec. 3, 2013

4. “Starbucks Stretches Its Loyalty Program: What can you learn?,” by Ernie Smith, Associations Now, March 22, 2013, http://associationsnow.com/2013/03/starbucks-stretches-its-loyalty-what-can-you-learn/, accessed Dec. 3, 2013