Starbucks Rewards – The program We Love to Hate. Sort of.

Aug 2, 2012

Even if you aren’t a coffee aficionado, you know about Starbucks. The green umbrellas and the white cups sporting the green mermaid are familiar to nearly everyone.  And although you may not actually drink coffee, you can have fun saying: “Grande, skinny caramel macchiato, with an extra shot and no whip.” You have to give them credit, Starbucks changed peoples’ perception of the “coffee shop” by essentially revolutionizing the way we look at coffee. Even traditional non-coffee drinkers find themselves indulging in Starbucks’ tasty beverages.

But being so ubiquitous does have its downsides. To many Starbucks has become akin to LeBron James, the coffee (athlete) you love to hate.  In some circles its been called “corporate coffee”.  And to the true coffee aficionado, St. Arbux is closer kin to fast food than it is to gourmet coffee.

Love ‘em or hate ‘em, Starbucks has continued to define “customer experience” in its market – and that includes loyalty.

First – how does Starbucks’ rewards system actually work?

Every time a customer makes a purchase, they earn a star. Then, with each different star level earned, customers get more savings and benefits. For example, five stars gives free syrups and milk options, brewed coffee and tea refills, and a tall beverage with the purchase of a packaged coffee product.

So with five Starbucks transactions, these benefits are unlocked.

And from there the benefits grow. Once a loyalty customer has reached 15 stars, they earn a free beverage. On average, a consumer spends $4 with each Starbucks visit. This means that to earn 15 stars, you have to spend an average of $60 to earn a free $4 drink.

Is this a big loss for Starbucks? No. Is this a great savings for the consumer? Not really.

So why then does this system work so well?

What Starbucks has found out is that it doesn’t have to be a great deal of savings that keeps people coming back, instead it’s the idea of increasing savings as they continue spending, thus engaging the consumer with each and every visit.

Because let’s face it, people are going to continue buying coffee. And even if there are cheaper options available at other coffee shops, Starbucks offers both a consistent and quality product, as well as a rewards program that keeps people connected.

Starbucks methods of maintaining customer loyalty aren’t complicated, they’re actually quite simple.

The first is: provide a consistent, quality product and experience to the consumer.

Starbucks is known for their consistency. Hot drinks need to be the same temperature no matter where you are. If they’re not, you get a new one. The atmosphere is calming with consistent decoration and music styles. It’s something you can count on and consumers like that.

The second is: don’t just offer one-time promotions, because that can breed one-time customers. Have a rewards program that grows with the customer.

Starbucks is in it for the long haul with a rewards program that builds up steadily. This encourages consumers to keep coming back and earning more stars to save more money.

Again, it’s not complicated; it’s simply good strategy. By keeping consumers happy, Starbucks has become the leader in coffee sales by changing the way people buy coffee, and providing it in such a way that keeps people coming back time after time.

Anecdotally – it’s interesting that amongst loyalty professionals, Starbucks rewards seems to get a bum rap for being too complicated, cumbersome and thin on customer benefit.  Program adoption numbers however, seem to be telling us that the consumer sees value in it. Purportedly, 1 in 4 customers are using their Starbucks card for tender.  All of which  makes you go “Hmmm….”