Starbucks can be addictive. Not only is it one of the best coffee you can get, but the customer experience is also certainly one of a kind. Besides, the company also has one of the most popular rewards programs in existence. The world’s largest coffee chain credits a large share of its phenomenal growth to its loyalty program, and rightly so.
According to Statista, the company’s pre-pandemic revenue was $26.51 billion in 2019, with more than 31,000 stores operating worldwide. Over the years, Starbucks has been making several changes to its rewards program, attracting the attention of competitors and admirers alike. Each change has been made after carefully weighing customer feedback.
Though Starbucks is a brick-and-mortar retail chain, there are several lessons for e-commerce brands. In the post-pandemic environment, it is clear that you cannot take customer loyalty for granted. Personalized rewards that add genuine value to customers are now the norm, and online stores have been catching up.
Evolution of the Starbucks Rewards Program:
For its part, Starbucks announced that it is moving away from a purely discounts-based reward structure to providing personalized benefits with the help of a wide variety of partner brands. This is because the company realized a few years ago that standard benefits like free customizations and drinks were failing to attract customers like they once did. Cleary, customers wanted something more. Starbucks also discovered that it was spending way too much on its rewards program for too little returns.
Since 2016, Starbucks has tweaked its rewards structure to provide a better customer experience and improve its financial viability. For example, points are awarded on every dollar spent rather than on how many visits a customer makes in a given period of time.
At the same time, it is easier for customers to earn rewards on the new program. Customers now get 2 points per dollar spent instead of one point per visit, as was the norm earlier. To be a Gold member, customers now need 300 points as against 30 points earlier. To qualify for free rewards, you would need to have 125 points in your kitty. The number of tiers has been pared down from three to two – Green and Gold – in the new format to drive sales. All of these changes reflect the company’s changing business priorities while taking into account customer feedback.
Key Customer Loyalty Lessons from the Starbucks Rewards Program
Here are a few of the key points in Starbucks’ rewards program that are worth learning from:
Benefits linked to customer spend:
Under the new rewards structure, customers get 2 points for every dollar spent at Starbucks. The number of points earned is thus directly related to how much a customer spends. The company hopes that this strategy will motivate average spenders to buy more. Starbucks has done away with the ‘Welcome’ tier of its rewards program. New customers are now directly added to the Green tier and upgraded to Gold once they have 300 points in their account.
Green customers can pay by phone through the Starbucks app and order ahead, but to qualify for the best benefits like monthly double-star days or additional free drinks, they must spend a minimum of $150 per year. Customers are spending more to qualify for Elite Gold status.
No more plastic membership cards
The Starbucks Rewards App is designed to provide an interactive experience to customers. It allows them to track the number of points earned, locate a store nearby, check gift card status, and more. It also reduces the cost of issuing and replacing plastic cards. For customers, it means one less card to carry in their wallets. The app comes with a prepaid limit which makes payments completely contactless- just perfect for the post-pandemic scenario where customers are wary of paying by cash or card.
It also communicates the various benefits of the program easily to customers. The app enables Starbucks to collect a vast amount of customer data that can be used to create exciting new offers for targeting high spenders. It should come as no surprise that the app accounted for 41% of all US sales in the first three quarters of 2019.
Customers only need 25 stars to start redeeming. They can qualify for benefits like free birthday drinks or free-refills even if they are Green members.
Earlier, customers needed 125 stars to claim free refills and participate in member events. However, points expire every six months, so customers need to use them as soon as possible.
The app makes it easy for them to know when the points collected are due to expire. It also provides automatic alerts when a customer has earned enough points to qualify for rewards. This strategy has enabled the company to deliver an improved user experience.
Since 2014, Starbucks has diversified its rewards offerings to include content-based rewards. It tied up with New York Times and iTunes to provide free music and news articles.
The company hopes that this will encourage more customers to download its rewards app while partners like NYT tap into a wider audience.
Starbucks uses customer data to come up with personalized offers that drive sales and revenues. The company has been aligning its rewards to further consolidate its hold over the market. For example, it was one of the first brands to introduce free birthday drinks in the F&B industry.
To ensure that customers remember to claim their free gifts, the company sends a special email invite to customers two days before their birthday.
The Starbucks experience would not have been possible without a strong customer service team to answer customer queries. This is perhaps one of the biggest lessons for e-commerce companies to learn, and in this journey, Helplama can be an ideal partner in building and scaling customer service teams.
We have flexible plans suited to every industry and budget. To work with us, you do not need to sign restrictive agreements either. Contact us today for more information.