How Far Can Starbucks Loyalty Program Reach?

Discussion
Mar 21, 2013
George Anderson

During Starbucks’ last conference call in January, chairman, president and CEO Howard Schultz was pumped about the growth of the My Starbucks Rewards program. Over the course of a year, he said, membership of the program grew 86 percent.

"It’s not that these new card customers didn’t know where to find us last year," said Mr. Schultz. "It’s that we are more deeply connected, and even more relevant, to them than any other time in our history."

Mr. Schultz attributed growth of the program to the integration of the company’s "mobile, web, card, and loyalty program strategies." In January 2011, Starbucks became the first national retailer to marry its own mobile payment technology with a loyalty program.

Now, comes word from Starbucks’ annual meeting that it will expand the program to allow members to earn rewards buying its bagged coffees in grocery stores. The new program, which will launch in May, will be expanded in the fall to include other Starbucks products.

The integration of the Starbucks Card and the My Starbucks program will be integrated with other company divisions including 300 Teavana retail stores.

Adam Brotman, chief digital officer at Starbucks, said the company expects the program to grow from 4.5 million active members at the end of last October to roughly nine million members by the end of its current fiscal year.

What is your reaction to Starbucks expansion of the My Starbucks Rewards program to grocery channel purchases? What can other retailers learn from Starbucks development of the program?

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19 Comments on "How Far Can Starbucks Loyalty Program Reach?"


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Dick Seesel
Guest
8 years 1 month ago

Starbucks has always been at the leading edge of brand management, starting with the original concept of coffee as a premium drink (not a commodity) in an atmosphere conducive to socialization. Their loyalty program (unlike so many others) is not all about offering a discount at point of sale, but more focused on repeat visits by consumers committed to their product.

Extending the reach of the program into grocery outlets—where their brand has plenty of competition for shelf space—is a powerful message to other marketers.

Max Goldberg
Guest
8 years 1 month ago

The expansion makes sense. Starbucks wants to reward its consumers no matter where they interact with the brand. This seamless experience is what consumers expect and Starbucks is making it happen. Other retailers should learn from this experience and also strive to meet this consumer expectation.

Ryan Mathews
Guest
8 years 1 month ago

Well, we will see how popular it proves with grocers, but that’s probably another question.

Sticking with the question at hand, I’ll give a tentative salute to Starbucks for recognizing that the consumer no longer thinks in terms of channels and has come to expect a seamless, transparent experience whenever, wherever and however they source a product.

The idea of facilitating that goal rather than creating siloed purchase, payment and reward systems points toward the future of successful retailing.

Zel Bianco
Guest
8 years 1 month ago

Starbucks is leading the way to incorporating customers on a multi-level platform, which is great for consumers and market researchers alike. What can other retailers learn? Keep it simple, accessible, and most importantly—EASY. If you build it, they will come.

Gene Hoffman
Guest
Gene Hoffman
8 years 1 month ago

Starbucks knows how to stay ahead of the curve and remain entrenched in the winner’s circle and this move is a another good example. Still, I wonder if loyalty to Starbucks wouldn’t continue to grow even without its reward programs.

When I reflect upon Starbucks amazing success, I come to the conclusion that it has captured the four forces that cement consumers’ loyalty and push forward a brand’s growth such as Starbucks enjoys: fashion, taste, fear and self-interest. Of course, good loyalty programs can help.

Camille P. Schuster, PhD.
Guest
8 years 1 month ago

My first reaction is, how does this work? Does the consumer have to present two loyalty cards when checking out? The number of people in front of me in line who forget to show their grocery card or who have forgotten to bring it always surprises me. If consumers have to remember to bring and show two different cards will make the problem worse.

If the retailer has to check their POS data to find people who have a Starbucks card and determine whether they purchased a Starbucks produce OR check POS data whenever there is a Starbucks purchase to determine whether that consumer has a Starbucks purchase seems like a time-consuming step. The idea sounds reasonable; the execution seems problematic.

Peter Fader
Guest
8 years 1 month ago

Starbucks is definitely moving in the right direction. They’ve come a long way since the old days when they a very touchy-feely “experiential” enterprise towards being a much more data-driven one.

Their loyalty program can take them as far as they want it to. In other words, if they use it merely to support product-oriented decisions, then its impact will be limited. But if, instead, they put it front and center to determine customer-level CLV, etc., and then use those insights to truly run the business, then the loyalty program can potentially take them to new heights that a product-centered strategy can never achieve.

I hope the latter is true, and there are some nice indications that this is indeed the case.

Mark Heckman
Guest
8 years 1 month ago
Starbucks enjoys seeing their customers just about as frequently as any retailer I can think of. This is a tremendous advantage in advancing customer loyalty as it lends itself to frequent and often habitual use of loyalty tools such as cards that yield rewards and other benefits. However, because shopper frequency is much higher for Starbucks than most other retailers, many of the successful tactics that Starbucks employs to build their customer loyalty base may not be directly transferable to retailers who see their customers much less frequently. However, other retailers still can learn much from Starbucks. First, Starbucks keeps their loyalty initiatives “front and center” in their marketing mix. They tend to reinforce their programs with point of sale reminders and also train their associates to remind their shoppers of the benefits of participation. Further, Starbucks rewards are “achievable and valuable,” in that they represent a true value to the shopper and with the frequency of visit of the average Starbucks patron, reward thresholds can be reached within a reasonable period of time. Finally,… Read more »
Matt Lincoln
Guest
Matt Lincoln
8 years 1 month ago

Starbucks’ expansion of the My Starbucks Rewards program is very important. This is a move which is centered around acquiring customer information. Starbucks has the opportunity to become more promotional and market more personally to its consumers. However, more likely they will use this information as monetization and sell it out to vendors. Information regarding Starbucks’ demographic could be worth a lot. Information truly is power.

Bryan Pearson
Guest
8 years 1 month ago
Starbucks is just scratching the surface with what they could potentially do with the data from their loyalty program. Mobile phones are the first marketing device that customers carries with them all the time. And it’s early stages, because the devices are becoming context aware. Imagine strolling the streets of New York City, and having your phone send you real time alerts about nearby restaurants that match your tastes and preferences. In my book, The Loyalty Leap, I talk about how McDonald’s in Finland, in partnership with Nokia, is using location-based marketing to connect with consumers by delivering mobile ads to certain app users when they are near one of its 82 locations Consumers who click on the ads view a promotion one cheeseburger for one euro as well as directions to the nearest location. Almost 40 percent of those consumers selected the click-to-navigate option, while the overall pilot program resulted in a click-through rate of 7 percent. McDonald’s realized early on that the proliferation of digital properties provides specific visibility of the customer’s location.… Read more »
Ed Rosenbaum
Guest
8 years 1 month ago

Starbucks is on the cutting edge of future programs designed for growth. But they have their customer base which is huge and growing. I wonder if a loyalty program will be the piece that brings in more customers?

Lee Kent
Guest
8 years 1 month ago

There is no doubt that Starbucks is the leader in loyalty programs. They made loyal customers by making the purchase easy and more convenient, and then added to that. I am certain the addition of the grocery channel will prove a winner, but like Camille, I can’t quite see how it is going to work. I’m wondering if there will be an app involved, which limits participants, that allows for scanning the bar code to recognize the purchase? Hmmm….

Kurt Seemar
Guest
Kurt Seemar
8 years 1 month ago

Customers do not view brands by the arbitrary internal hierarchies that companies establish. We all know this because we are all consumers. It seems, however, that as soon as we walk into our place of work we forget this fact because we expect our customers to understand—and be sympathetic to—the inner workings of our company. It is refreshing for a brand to see itself holistically, the same way we do as customers.

Gordon Arnold
Guest
8 years 1 month ago
Many moons ago I was enrolled in an advanced sales and marketing seminar that discussed the perks of being wealthy. The opening message simply put is that the more wealth one has, the better the lifestyle that can be obtained and maintained. This information took only one hour of the five day course. The rest of the time was dedicated to breaking down the pricing and capacity volumes of the highest quality products and services which may be successfully sold to the masses with higher than usual selling prices and margins. When any given item or service is differentiated from the market standards and made renowned as the best offered, it wins a status of prestige with ownership and then it sells. Starbucks spends every available dollar they have to assure the public that there is no better beverage of its kind prepared for public consumption and the results are demonstrating they do this well. The information released from Starbucks executive management team is largely impressive considering the continuing miserable condition of the world economy.… Read more »
Janet Dorenkott
Guest
Janet Dorenkott
8 years 1 month ago

Starbucks ability to maintain customer loyalty has always been impressive. Their in-store loyalty program is growing partially because it’s new and their customers are jumping on board.

As far as adding it to the grocery store purchases, I view that more as an online coupon to a certain extent. I view it this way because although you get loyalty credit for the purchase, you still have to produce your retailer loyalty card to get discounts on the rest of the items in your basket. It could become a nightmare for customers if they had to produce a loyalty card for each manufacturer. However, if it’s positioned as a mobile coupon that they happen to get loyalty credit for, it might be more successful.

I think the grocery loyalty card will work for a couple reasons. First Starbucks has a young, trendy clientele. Second, their products are expensive, so any discount you get tends to add up. However, I don’t think this would work well for other manufacturers.

Martin Mehalchin
Guest
Martin Mehalchin
8 years 1 month ago

I applaud them. Loyalty programs should be about the consumer’s total relationship with the brand (or family of brands in this case). Far too many retailers project their own internal silos onto their consumer facing programs.

Starbucks has to make sure that this program is ready to execute. As we saw with the negative press yesterday around hiccups with their Square integration; poor execution of a good program idea can undermine the hoped for benefits.

Phil Rubin
Guest
8 years 1 month ago

More success to come for Starbucks and like most loyalty leaders, it starts at the top with Howard Schultz. Payments being integrated is as huge differentiator and a great foundation. Expanding to other parts of its business is obvious though much harder in practice. Given the company’s commitment it is a fait accompli, however.

Customers see Starbucks, and soon Teavana, as a brand. They do not think about cafe versus grocery as channels the way most companies do, yet most companies fail to make omni-channel a priority. A great example: soft goods brands who sell direct through their own channels and also through other retailers (i.e., their wholesale business). A brand like Coach or Burberry has no clue who it’s indirect retail customers are as they view customer loyalty and CRM as limited to direct channels only.

As more companies embrace not only omni-channel direct business, but also their own I direct channels, as Starbucks is doing, they will see huge gains.

Rick Boretsky
Guest
Rick Boretsky
8 years 1 month ago

Starbucks truly does and always has understood the omni-channel consumer.

Bill Hanifin
Guest
8 years 1 month ago
Considering that My Starbucks Rewards has over 6 million registered card users and that about 25% of all transactions are made by program members, it makes sense to give thought to any program evolution or feature change enacted by the “world’s biggest coffee shop.” Awarding Stars for purchase of Starbucks products in grocery chains and other distribution channels is a brilliant, but natural extension of its loyalty program. The tactic enables Starbucks to connect the dots between products sold in channels outside the retail store chain and the consumers who buy them. Between the lines, the move draws attention to the issue of Big Data. Starbucks is already awash in data and is reported to struggle to distill what they have collected into usable chunks that benefit marketing executives as well as store managers. Adding “code on pack” technology to facilitate their program in the grocery channel opens up another wellhead of data. The City of New York has recently reported the extent to which it is using Big Data to streamline city operations. The… Read more »
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