Starbucks has a lot of loyal customers, and one way the firm keeps them coming back is with their rewards program. The coffee company has announced changes that they say address the "no. 1 request we heard from members." Unfortunately, the changes are angering another batch of customers.
In short, Starbucks is borrowing an idea from the airlines, who have been switching from miles-based loyalty schemes to dollar-based ones. Their new plan is based on the amount spent rather than the number of purchases.
There's business logic in rewarding spending more directly, of course. An airline's most profitable customers are usually the ones who spend the most money, not the ones who fly lots of miles using heavily discounted tickets.
There's no doubt that Starbucks has had feedback from customers who sometimes make larger purchases but receive a single "star" regardless of dollar amount or the number of beverages. Under the current plan, if you and a friend meet for coffee, you'd each get a star if you pay individually. If one person treats, though, only one star would be earned.
Buy six specialty coffees plus pastries for the office? Still just one star in the old plan. There's little doubt that to some customers this seemed unfair.
Starbucks "fixed" this by switching to a system where instead of simply earning 12 stars (in essence, 12 visits) got you a free drink or snack to a more complicated scheme in which every dollar spent earns you two stars. When you accumulate 125 stars, you get your freebie.
The customers who will be negatively affected are those that don't spend a lot per visit. If, like me, you prefer your caffeine in the form of brewed coffee, it may now take you 30 visits to earn a free item -- hardly worth thinking about. And, forget about "goal gradient" motivation (see Loyalty Programs: Of Rats And Men) kicking in with that big number.
To achieve "gold" status currently takes 30 visits in a year. In the new plan, the customer who buys $2 coffees will need about 75 visits.
Amusingly, a key part of Starbucks messaging on the change is "More Stars." This conveniently overlooks the "starflation" that devalued them by a factor of ten.
The Logic
Overall, this program makes a lot of sense for Starbucks, and it will make their higher-spending customers happy, too.
If you are stopping to pick up coffee and pastries for a large meeting, you might be tempted to choose Starbucks over, say, Panera, if you knew that one purchase would put you well on the way to food or drink reward. That's a win for both the company and the customer.
While it's possible this program could cost Starbucks more than they spend on their old one, they are now rewarding the behavior they want. And, they seem to be setting the stage for partnering with other brands to offer points.
In the long run, perhaps there will be an entire ecosystem built around Starbucks Rewards. Starbucks stars would, I think, be more motivating than the airline miles offered by some retailers and restaurants. It's easier to relate to a free latte than a few hundred miles being added to your tally of hundreds of thousands.
The Miscue?
A few years ago, I pointed out that the way Starbucks "demoted" gold members who hadn't visited often enough was done in a somewhat tone-deaf manner. (See Starbucks: Loyalty Program Misfire.)
The problem wasn't that Starbucks was wrong to establish a consumption threshold for its gold status, it was the abrupt dismissal of the non-qualifiers and the loss of accumulated stars. Someone who had earned 29, one short of the 30-star requirement, simply was notified they didn't make the cut. And, they would have to start over.
These emails provoked some strong negative emotions on the part of the demoted members. Starbucks could have avoided that by more frequent communication about how many visits the member needed to retain their status and, perhaps, a way of achieving it without starting from zero. This would have cost the firm next to nothing, but would have avoided some of the nasty surprises and increased the perception of fairness.
The new kerfuffle seems to have its roots in the same lack of anticipation of consumer emotional reaction to the program changes.
In short, customers who considered themselves loyal and felt some affinity for the brand now found they were no longer valued. A dozen visits for a free item is fairly easy to track mentally, and seems achievable. 25 or 30, by comparison, seems almost unattainable.
Naturally, furious Starbucks customers took to Twitter to express their dismay:
@Starbucks, I've been a loyal customer for years. And this new star program is how you reward me? #StarbucksRewards
— Lara Miller (@laramiller29) February 23, 2016
Guess I'll be brewing Peets at home more often. New #StarbucksRewards only rewards big spenders.
— Geetika (@geetikalizardi) February 23, 2016
Starbucks did to their rewards what companies do to nutrition tables on sugary cereals to make them look healthier #StarbucksRewards
— Lecks (@Alexander_Krane) February 23, 2016
@Starbucks I'm moving to @TheCoffeeBean because their rewards are better than what you propose. Adios #StarbucksRewards
— plramirez (@plramirez) February 23, 2016
Although the hashtag #StarbucksRewards wasn't one of the top ten trending on Twitter, when I checked today there was a continuous stream of posts, almost all negative.
According to social monitoring site Hashtagify, the popularity rating of the #StarbucksRewards hashtag shot from a value of near zero for many weeks to 31 this week.
Sample data from Keyhole, another social monitoring spike, showed a surge in #StarbucksRewards tweets:
Could Starbucks have launched this program in a way that was less offensive to their lower-spending customer group?
One option could have been to phase the change in over time. So, perhaps, for a few months one purchase per day could earn an eight-star minimum reward. This would be a less abrupt change for brewed coffee drinkers. Even as they were being weaned from the expectation that a dozen $2 cups of coffee would get them a free item, they would see the additional points they earned when they made a larger purchase.
The airlines have taken a gradual approach by starting with lower dollar targets for their elite levels and then raising them each year.
Presenting the change in a manner that suggested "here's the change you were asking for!" is also a recipe for upset customers. Starbucks has all the data for each rewards member, and it would have been easy to target low-dollar customers with a special message to soften the blow.
For all the hype about Big Data and personalization, it seems like brands often ignore their ability to target the needs of individual consumers.
Chances are, of course, most Starbucks customers who are offended by the change in rewards calculations will get over it. Likely, additional purchases by big spenders will offset the loss of a few disgruntled regular coffee drinkers. But the firm could have crafted a launch less likely to alienate a portion of their customers.
What do you think -- much ado about nothing? Are you affected in a positive or negative way? Share your thoughts in a comment.
Roger Dooley is the author of Brainfluence: 100 Ways to Persuade and Convince Consumers with Neuromarketing.
