Starbucks Skinnies Its Rewards Choices
Almost exactly a year ago, I wrote in this blog that I didn’t think Starbucks’ then-new Gold loyalty program offerred enough in the way of benefits beyond the basic rewards card. As I pointed out at the time, while a $25 annual fee got you the Gold card and a 10% discount on everything, I didn’t think the great mass of users would find those price savings worth the pretty hefty up-front fee. Even those who know they’ll spend that much on Starbucks coffee in a month or two, I thought, would balk at laying down $25 bills and then amortizing it at 10% a double-shot.
Well, paint me blue and call me Karnak, because 12 months later, Starbucks have come around to my way of thinking. Now if I can just persuade other holdouts to heed my advice, from the new management of the Cubs to the folks who invent flavors for Ben & Jerry’s, this would be a much better world.
The new card regime, titled My Starbucks Rewards and slated to launch the day after Christmas, lets customers earn points towards rewards by frequency of use, handing out stars for paying with a rewards card. In the coming system, use the card five times and you move into the “green” level, where you get free brewed refills, free flavor syrups, a free tqall drink with the purchase of a pound of whole-bean coffee, and up to two hours of free Wi-Fi a day.
Use the card 30 times in a year and you’re automatically moved to the “gold” level, with a free drink after 15 purchases of any kind and other special offers yet to be named.
No mention of any 10% discounts, though. The old Starbucks Gold was designed to encourage people to spend more per visit, and Starbucks has apparently decided that ain’t happening in this economy or any that other may come along soon. This new cad structure instead rewards repeat visits, something that the company feels it can build and then use to market.
In making the change, Starbucks marketing senior vice president Terry Davenport said that the company has seen some success with the Gold card program, but that Starbucks fans were asking for a simpler one-track approach to loyalty. Announcing the card revamp, the company said it has 800,000 Starbucks Gold members. That’s actually pretty slow growth: earlier this year CEO Howard Schultz reported that 750,000 memberships were sold in the first five months of the program, so unless a lot of that was churn, Starbucks may feel its paid memberships have reached a plateau. Meanwhile the regular, no-fee Starbucks reward card has attracted 3.5 million users since its launch last April.
Judging by the comments on its popular MyStarbucksIdea.com forum , not all of those Gold customers will be happy in the space of time until their Gold memberships expire. In fact, more than a few are now complaining at having to use two cards to get both the purchase discount and the frequent-buyer free refill.
But for the rest of us (meaning, of course, me), this seems like a smart idea. I use a Starbucks card mainly for the convenience, not for the freebies and not for any discounts. I like to get in and get out, and filling up a card with value makes that easier.
In fact, I just recently started using the Starbucks Mobile Card iPhone app, a free app launched in September that lets me enter and store the account number of my Starbucks card, check it by phone and add value with a credit card as needed, avoiding that your-card’s-tapped-out surprise at the checkout. It offers me an enhancement of the value I prize most–speed. (Although one suggestion, Starbucks: Can you make the account numbers on those cards easier to read? Use and simple wallet-wear have turned mine into faint hieroglyphics.)
And maybe that’s what the larger loyalty strategy is turning to: a multi-faceted approach to satisfying customers niched by need so that those who want freebies can have them, those looking for discounts can get them, and those of us who want a quick caffeine boost before getting on with our lives can have that, too. We’re moving too fast to redeem stars.
But check with me next year after that fifteenth use.
December 15th, 2009 at 12:24 pm
In regards to the Starbucks Gold memberships having slow growth, the memberships were not available for purchase through local stores (at least in the locations I visited across the USA) after the first few months of the program, but had to be ordered online through the corporate website, which greatly reduces the customers’ likelihood to purchase. I think the company must have decided very early on in the program that they would discontinue the Gold rewards at the end of 2009.
I typically make purchases for four or five different people in my family at least once a day. To maximize my use of the program, I will have to either make each person’s order a separate transaction on one card, or get a separate card for each person’s regular orders. Prior to each transaction I will need to load the card with funds, as the transaction “stars” only apply if the transaction is paid for at least in part by the Starbucks card. The process that now takes about 30 seconds to order all items for the five people will then take roughly 15-20 seconds per order for five orders, costing the company additional Barista payroll plus the associated wear-and-tear on the point of sale equipment. Still, since most people will not go through the hassle of having each person order their own items, the company will most likely come out ahead on their per transaction profit. However, starting January 6 I will in all likelihood make my local independent coffee shop my frequent stopping place, as it will be a less expensive and less hassle shopping experience than Starbucks.