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Starbucks Aims to Create Loyalty from its Disloyal Customers. Huh?

It’s rare when a company voluntarily admits it could do something better – especially when that company is Starbucks. With a record $1 billion placed on its Starbucks Cards in the first quarter of 2013, the king of coffee has little to worry about.

Which is why Joe LaCugna, Starbucks’ director of analytics and business intelligence, may have surprised a few people when he revealed what Starbucks is doing now: catering to its disloyal customers.

Starbucks will use its metrics gathering to discover which members use their rewards card least frequently, sending text messages to mobile Starbucks trying to make disloyal customers loyalphones offering free cups of Joe and other timely and relevant rewards. So far the company has analyzed about half of its 6 million loyalty program memberships. The question is: what’s the harm – if any – in promotional advertising when it costs Starbucks pennies per cup?

With its new approach to the disloyal, my advice to Starbucks would be to think about the ‘Five Es,’ – that is, Enterprise, Experience, Economics, Enablement and Execution. Enterprise speaks to the business at hand, experience relates to the the brand relationship customers seek, economics concerns the cost of generating such loyalty, enablement relates to the mechanics of making loyalty happen and execution refers to its real-time deployment.

Brands that try appealing to every consumer segment all the time risk diluting what they stand for, undermining the enterprise at large and weakening the customer experience for truly loyal customers. They also risk raising short-term costs, making execution sluggish. In contrast:

  • Committed long-term customers usually possess a strong sense of brand pride and devotion for which, historically, loyalty programs reward them.
  • Doing so promotes positive brand engagement and the opportunity for genuine experiences that, ideally, loyalty program members are eager to tell their friends and family about through every channel they use, including mobile, social media, online and of course, word-of-mouth.

Starbucks’ brand message is clear: it caters to the upscale customer, who doesn’t think twice about ordering a $7 cup of coffee. Is it wise, then, to spend such effort seeking to attract, engage and retain a relatively disloyal subset?

Widening the loyalty net a little further isn’t a bad thing by any measure. It’s just that the intensity of its rollout needs to be measured. So if you’re a brand intrigued by Starbucks’ novel loyalty approach, by all means gather the data and start hunting for your most disloyal customers. But take the economics (read: cost) of the Five Es seriously, otherwise your enterprise could suffer. Consider a six-month trial period to see if the expense of catering to disloyal customers yields higher spends and increased brand interactions. Otherwise, efforts to attract, engage and retain the disloyal might be to your company’s disservice.

 

Kobie Marketing

Kobie Marketing