Starbucks Hits A Home Run On Changes To Loyalty Program (Starts October 16, 2012)

Ever since the Starbucks Black card came out back in 2008. The Starbucks Rewards loyalty program has undergone several facelifts, and starting on October 16th some new changes will go into effect. Usually program changes are bad for the customer, especially when it comes to airline loyalty programs lately. But some industries have actually improved their loyalty programs recently. Starwood’s most recent changes (award nights counting toward elite status and improved Platinum benefits like free continental breakfast and earning suite upgrades after 50 nights) immediately come to mind. In any case, Starbucks has taken a few steps in the right direction with the changes they have made.

The changes

Gold members earn a free drink after 12 stars (previously 15).

This is a fantastic enhancement! I always thought 15 drinks was very stingy, especially considering that most people pay $4 on average for a drink, so earning one after 15 is a 6.7% rebate. Of course, it could be zero, but when most independent coffee places give you one free drink after buying 10, this is a poor ROI.

Redeem free drinks for food.

Another awesome enhancement. A lot of customers drink regular coffee, and when it comes to redeeming their free drink they feel obligated to get something indulgent like a quardruple shot caramel macchiato with extra whip, syrup, sauce, and soy. Of course, no one enjoys drinking this mess, but people feel like they need to get as much value as they can and when the price of the drink rings up at $7.50 vs. $2.00 for a regular coffee (despite the fact that they might enjoy the regular coffee more), it makes them feel a little better about their redemption. I know this example is totally ridiculous, but trust me there are people who actually do this.

Gold Benefits (No Change)

Get gold status after 30 stars every year.

No More Postcards (#1 member-requested change)

Awesome! I hated these postcards. You either lose them or they expire, or they never get delivered in the first place. Yay. It’s about time! Now redeem for your free drink or food using the mobile app or Starbucks card.

No more free soy & syrup

Honestly I could care less about this, but I’m not sure how this really improves Starbuck’s loyalty. The soy might be expensive, but the syrup is dirt cheap and people who like flavored drinks really value this benefit. I’m sure they did the analysis and think that revenue will go up now that they can squeeze an extra 35 cents out of people for syrup, but come on, is making people pay for these things really going to offset the cost of giving out more free drinks?

No more tall drink with whole bean purchase

I really don’t understand this one either. I mean, selling whole beans for $10 – $20 is hugely profitable. I mean, almost every coffee shop I go to like Intelligensia, Peet’s, etc. gives you a free small coffee when you buy a pound of beans. Intelligensia even gives you one on beans that are on sale. Plus, the barista doesn’t even have to do anything (aside from grinding the beans possibly) to make the sale. I’m guessing they think that the free drink wasn’t encouraging anyone to buy a bag in the first place, and these people would have bought the beans anyway. However, now it makes buying beans through resellers like Amazon, Costco and grocery stores much more attractive, since there’s no point in buying the beans directly from Starbucks anymore. Does Starbucks really think it’s more cost effective to sell beans through 3rd party retailers than it is to sell them direct from their stores? You not only get more traffic into your stores by encouraging people to visit to buy the beans, but now you’re sending that traffic to other retailers. Plus all it costed you was a free drink?

Bottom Line

All in all I think these changes are mostly positive for the customer. Getting free drinks more frequently is a great way to keep customers loyal and visiting your stores more often. Allowing customers to redeem rewards for food is also a fabulous idea. It gives customers flexibility, but it also may introduce them to new products that they wouldn’t otherwise have purchased in the first place. If they like your cookies, pastries, etc. they might buy it more often in the future or introduce their friends to it. Love this improvement to the program. Finally, getting rid of the postcards was long overdue and I’m glad they finally invested the resources to complete this project. Well done!


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