Note this article was written in 2018 based on the Starbucks loyalty programme at that time which was revised in 2022, so please check out this article for the latest Starbucks loyalty strategy insights.
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This article is the first in a series intended to capture the key insights from the world’s best and most relevant loyalty programmes around the world. We review one programme each month, explaining how it is structured, budgeted and communicated, highlighting strategies we love and that we believe will be useful to you. Starbucks’ loyalty programme, Starbucks Rewards is the obvious place to start.
Overview:
In its most recent quarterly financial results published, Starbucks achieved revenues of over $6 billion globally with a total store count of 28,039 across 76 markets. Over two-thirds of its stores are located in the US, with 73% of revenues coming from drinks as you’d probably expect. However, the most impressive update on the Starbucks story is the extraordinary success announced for its flagship store in China.
Described as their ‘crowning glory, the revolutionary interactive store in Shanghai is the company’s highest-grossing store despite only launching in December. Daily sales in this store are double what the average US store makes in one week! It’s almost worth flying to Shanghai, just for the retail experience. I wonder then, is this the most popular coffee shop in the world?
Starbucks Reserve Roastery in Shanghai
How Starbucks Rewards Program Works
From a loyalty perspective, the Starbucks Rewards programme was first launched a decade ago in 2008, and in 2017 it grew by over 1.4 million people, to achieve an active membership of over 14.2 million in the United States alone. Like most successful programmes, the mechanics of the Starbucks Rewards programme are fairly simple.
A key structural change to the programme – awarding points (which they call ‘stars’) on spending rather than per transaction (as previously) was made about two years ago. This is a notable trend in the loyalty industry following concerns that customers were asking for each of their purchases to be charged separately in order to claim multiple stars – frustrating waiting customers in line behind them.
The current Starbucks Rewards US programme consists of two tiers – green and gold. The mechanics are detailed below – illustrated here with a lovely Starbucks infographic…
Mechanics:
- Members earn Stars as their loyalty currency.
- Members earn 2 Stars for every dollar they spend.
- Tier status is governed by annual spending and stars earned – green members become gold when they reach over 300 stars in one year.
- Green members do not earn Stars towards rewards. They earn stars towards gold status – which then earn rewards.
- Gold members earn free rewards for every 125 stars earned (which requires an accumulated spend of $62.50).
- Members also earn any drink or food item of their choice on their birthday.
- There are no fees to join the programme.
- As part of its ‘Stars Outside Starbucks’ concept, the brand recently launched a Visa card with Chase bank (with a $49 fee) which earns Star Rewards on all cards spent, plus a higher earn rate of 3 stars/$ in Starbucks stores.
Service benefits:
Alongside the traditional earn-and-burn structure of the programme, Starbucks Rewards offers some real service benefits that reduce friction – an essential element to any successful loyalty strategy.
The key favourite with customers is Mobile Order and Pay – an option allowing members to pre-order and pre-pay their drink in key markets such as the US, Canada, UK and Ireland. Mobile pre-orders via the Rewards app now represent an incredible 11% of U.S. company-operated transactions, with mobile payment overall reaching 30%! The combination of customers’ willingness to pre-pay on gift cards, along with the outstanding ‘jump-the-line’ benefits have achieved unprecedented success and ‘mountains of cash’, according to this aptly named article – The Bank of Starbucks.
Starbucks Rewards Program in Brief:
Likes:
- Free birthday treat of a drink or food item (green or gold tier).
- Free drink refills for all members (green or gold tier).
- The amazing pre-order/queue-skipping service within the app (if you’re lucky enough to live in a country with that benefit and the necessary technology!)
- When the Starbucks Rewards programme was re-launched in 2016, it offered instant gold cards for a number of weeks – an excellent and clever incentive to drive momentum for the new programme.
- Some grocery product packaged coffee purchases also earn Starbucks Rewards which drives home consumption as well as driving core café loyalty behaviour.
Lows:
- Your free birthday treat of a drink or food item expires the day after your birthday.
Fun Facts:
- Gold cards are highly aspirational but they are not real gold – as (apparently) some members expected!
- Starbucks acquired the ‘Frappuccino’ brand in 1994, and by 2012 had sold over $2 billion of drinks just in that category.
Innovation:
In their most recent annual investor meeting, Starbucks CEO Kevin Johnson called out his innovation strategy and investments as key to how the company’s value doubled in the last five years.
Specifically detailed as one of his top three priorities for future growth, Johnson highlighted ‘increasing digital engagement’ with the 60 million daily customers who are NOT Rewards members. Among the decisions announced, mobile pre-order and pay functionality is being extended to all customers even without them joining the Rewards programme in full. Clearly, digital engagement is no longer just a tool and a platform for recognition and reward – it’s an essential strategy being driven by CEOs for direct connection with their customers on their mobile devices.
If, like Starbucks, you are focused on truly engaging your customers and you want to build your loyalty program using innovative mechanics like those that make up the Starbucks Rewards program, please contact us.
Live loyalty offers the best ideas from programmes like Starbucks Rewards to create a compelling strategy that ensures you engage and connect with your customers.
About Us:
Liquid Barcodes is a leading global loyalty and digital marketing technology company specialising for the convenience store and food service industries. Our proprietary cloud-based technology platform allow retailers to create and manage their digital marketing campaigns with a proprietary process we call the “customer connection cycle’ to engage, promote and reward customers’ activities in real-time across digital and media channels.
How we do it:
We have developed the most advanced loyalty and digital marketing technology platform specifically for convenience store and foodservice retailers globally.
Retailers use our self-service dashboard to create and manage loyalty driven marketing campaigns that increase purchases with their existing customers, as well as effectively target and acquire new customers through partners or paid media channels.
One core component of live loyalty is gamification. We have gamified branding, loyalty and promotions. We believe this approach is essential in order to get customers’ attention and ultimately truly engage them with repeatable actions thereby winning their loyalty.
Check out some of our exciting/proven results here:
About Me:
Chief Content Officer, Liquid Barcodes and Independent Loyalty Consultant
With over twenty-five years marketing experience, I specialise in loyalty marketing consulting, managing consumer loyalty propositions, strategy and operations. In addition to working with Liquid Barcodes, my clients have included Telefonica O2, Three Mobile, Electric Ireland, Allied Irish Bank and The Entertainer, as well as Avios – the global points currency for some of the world’s top airlines. I am also a judge for the Loyalty Magazine Awards.
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