Can you imagine how different our twenty-first-century lives would be if there were no Starbucks?
With its unique business strategy and wide usage in popular culture, Starbucks is arguably the biggest coffee shop in the world. Today, there is at least one Starbucks in every tenth of a square mile.
Even though the third wave coffee movement is increasing dramatically, Starbucks still commands a loyal customer base. Generating 40% of its revenue, Starbucks’ rewards program led to a 7% increase in sales in 2019. So, how has Starbucks created a loyalty program that helped them to secure a dedicated customer base whilst boosting their revenue?
In this blog, we’ll look at how the Starbucks loyalty program works and how you can take a page out of their book to scale your business and secure long-term brand loyalty.
An overview of “Starbucks Rewards” loyalty program
Starbucks’ brand is iconic. To align with their brand identity and logo, Starbucks created a tiered loyalty program structure that consists of two levels: Green and Gold. To award their customers, they enabled them to earn “Stars” with each purchase. Through earning stars, customers then earn free products or free top-ups along with additional personalized rewards.
But that’s not all. Starbucks continuously revamps its loyalty program to match their customers’ needs. In 2016, Starbucks implemented a value-based loyalty scheme that awards customers two stars for every dollar spent. And, the customers who collect 125 stars were able to redeem a free drink and food.
Then, in 2019 Starbucks’ new rewards program enabled members to redeem rewards at 25 stars. They also eliminated the expiry of the points to enhance long-term brand loyalty, since shoppers are less likely to churn if their points don’t have a deadline.
Today, customers can directly download the Starbucks Rewards app to their phones and use it as a digital card in store. Members can access the menu and place orders before they even get to the cafe. To encourage customers to return to the store more often, the app also sends push notifications advertising promotions.
Recent research by Manifest revealed that of all mobile users who regularly use restaurant loyalty apps, nearly half of them (48%) use Starbucks Rewards. Increasing its user base by 11%, Starbucks reached more than 16 million active members in 2019. Alongside its tremendous number of stores and placement in popular culture, Starbucks’ rewards program is always at its core.
So, what are the benefits of the Starbucks Rewards Program and what makes it one of the best in the industry?
👉 The quick and easy answer is its ability to let members make payments and redeem rewards via the mobile app. It is known that 57% of consumers want to engage with their loyalty programs via mobile devices.
👉 Keep in mind that 77% of customers are motivated to join a loyalty program if the benefits are clearly communicated. Starbucks informs their customers about how they can earn points and redeem rewards via the app as well as a dedicated landing page on their website.
👉 To encourage members to repeat purchases and interactions, Starbucks shows its members’ current points balance and available rewards on their homepage.
👉 To increase engagement, Starbucks includes free music and games in their rewards program. Members who play the games in the app or on email are able to earn bonus stars.
👉 78% of customers become loyal to a brand if they’re individually recognized and rewarded for their loyalty. To show how much they value their members, Starbucks offers members free drinks on their birthdays.
👉 To boost engagement and acquisition, Starbucks allows members to send gift cards to other members and friends through the app.
👉 79% of customers feel that they are loyal to brands if they can unlock exclusive benefits. To delight and surprise their loyal customers, Starbucks announces seasonal promotions and new product releases to its members first. They also create double star promotion campaigns to reward their loyal customers.
Such benefits can easily create brand loyalty, however, the success of Starbucks’ Rewards Program lies in putting customers first and leveraging their data. Through centralizing its members’ purchase and behavioral data via the app, Starbucks began to provide a plethora of customized offers and targeted communication that powered them to build longer-lasting relationships with their members.
By following a similar strategy, you can easily convert one-off customers into loyal members, and scale up your business. For instance, to access a comprehensive analysis of your customer’s buying behavior, you can use your loyal program’s data.
First segment your loyal, at-risk, and churned customers. This allows you to deliver more targeted communications. To provide further personalized communications, you can then check the buying behavior of each customer. For example, to re-engage your at-risk customers, you can create a double points campaign. Or you could exclusively offer double points to one of your customers who has purchased from you several times in the last two weeks.
9 Ways To Scale Like Starbucks
Let’s take an example to see how you can successfully adapt with Starbucks’ rewards program strategy in mind.
Having a big brand community just like Starbucks, Lively, a leisurée brand, created a tiered loyalty program structure that complemented their unique brand values.
Our loyalty program is an extension of this appreciation for our community and a way for us to show our current customers how much we value them.
Michelle Cordeiro Grant, Founder and CEO at Lively
👉 Following Starbucks’ approach to align their program with their identity, Lively’s tiered loyalty program structure is made of three levels: “Bestie”, “Total Boss”, and “Powerhouse”.
👉 To clearly communicate about how their loyalty program works, how members can earn points, and what benefits they can receive, Lively also created an on-brand integrated loyalty page.
👉 When customers create an account and sign-in, they can directly see their current points balance, their available rewards, and the rewards that they can redeem in the future.
👉 Similar to Starbucks, Lively’s members can access everything through the rewards page. Members can follow the brand on social, sign-up to their newsletter or write a review with one click.
👉 To increase engagement, Lively’s members also earn a point per dollar spent. Then, to increase repeat purchase and spend, Lively offers customers two points per dollar spent if they move up to the second tier and three points for the third tier.
👉 To delight their loyal customers, Lively also offers birthday gifts and points on their member’s birthdays.
👉 To reward their members for their loyalty and make them feel valued, Lively provides early access to new styles and sales to their top-tier members. Members who are in the “Powerhouse” tier, also get access to exclusive events. Keep in mind that 66% of customers are motivated by experience-based rewards.
👉 Unlike Starbucks, Lively implemented a referral strategy that functions as a two-sided incentive. Lively encourages its members to make a referral by offering them 100 points and to convert the referred friend into a new member, they offer a $10 discount on their first purchase.
👉 Through identifying their loyal, at-risk and churned customers, Lively was able to deliver tailored communications for each segment. They created a double points campaign for their loyal customers. This personalization tactic led to a 37% increase in repeat purchase by loyalty program members.
And, for their at-risk customers, Lively sends personalized loyalty emails about their points balance to give them a reason to return to the store. These emails can be about available rewards or points expiry.
Recent Changes to Starbucks Rewards Program and Customer Reactions
In recent updates to their Rewards Program, Starbucks increased the number of “stars” required to redeem various items, prompting mixed reactions from customers. For example, rewards that used to cost 50 stars now require 100 stars, and items that were 150 stars now cost 200 stars. These changes, while aimed at adjusting the program's structure, have led to some customer dissatisfaction, as they effectively make it more challenging to earn free drinks and menu items. This decision reflects the delicate balance Starbucks must maintain between customer satisfaction and business sustainability.
Financial Impact of Starbucks Rewards on Company Revenue
The Starbucks Rewards Program plays a crucial role in the company's financial success. As of October 2022, members of this program were responsible for driving 55% of Starbucks' U.S. operating revenue. This significant contribution underscores the effectiveness of the loyalty program in not only retaining customers but also in boosting sales and revenue. The program's ability to create a loyal customer base has been instrumental in Starbucks' sustained market success.
Missed Opportunities in Reward Program Structure
Starbucks' current rewards structure, while successful, may miss opportunities for creating a more engaging and exclusive tiered system. Introducing more distinct levels within the program, where each tier offers increasingly valuable rewards, could incentivize customers to spend and engage more with the brand. This approach could reintroduce elements like the coveted Gold Card, providing a tangible goal for customers to strive for and adding an element of gamification to the loyalty experience.
Strengths of Starbucks Rewards: Mobile Experience and Omnichannel Retail
A key strength of the Starbucks Rewards Program is its superior mobile experience. The user-friendly app allows customers to easily track their “stars,” place orders, and make payments, enhancing the overall interaction with the brand. The app is a pivotal part of Starbucks' strategy, contributing significantly to order volumes and sales. Additionally, Starbucks' omnichannel approach, integrating mobile, in-store, and online interactions, provides a seamless customer experience, allowing for various ways to engage with the brand and its products.
Innovative Partnerships and Expansion into New Markets
Starbucks has been exploring innovative partnerships and new markets to expand its loyalty program's reach and appeal. Notably, the company has partnered with DoorDash for delivery services, broadening its customer base. Additionally, Starbucks is venturing into the NFT market with its Odyssey program, offering unique digital experiences and rewards. Collaborations with other brands, such as the link-up with Delta Air Lines, allow customers to earn rewards across different platforms, showcasing Starbucks' commitment to evolving and diversifying its loyalty offerings.
As someone deeply immersed in the world of business and marketing, I've always been fascinated by the strategies that successful brands use to cultivate customer loyalty. Starbucks, with its iconic presence and innovative approaches, stands out as a prime example. Their loyalty program, Starbucks Rewards, is a masterclass in customer engagement and retention. It's not just about earning points; it's about creating a personalized, seamless experience that resonates with customers on a deeper level. From the ease of mobile transactions to the excitement of exclusive benefits, Starbucks has crafted a loyalty program that genuinely values and understands its customers. This approach has not only secured a dedicated customer base but has also significantly boosted the company's revenue. As I delve deeper into the nuances of this program, it becomes clear that any business, big or small, can learn and benefit from the Starbucks model of customer loyalty.
Frequently Asked Questions
How does the Starbucks Rewards program work?
The program allows customers to earn “Stars” with each purchase, which can be redeemed for free products, top-ups, and other personalized rewards.
What are the levels in the Starbucks Rewards program?
There are two levels in the program: Green and Gold, each offering different benefits and ways to earn Stars.
Can you use the Starbucks Rewards app as a digital card?
Yes, customers can download the app to their phones and use it as a digital card in-store, as well as to access the menu and place orders in advance.
What was the significant change in Starbucks' loyalty program in 2016?
In 2016, Starbucks introduced a value-based loyalty scheme, awarding two stars for every dollar spent, with 125 stars redeemable for a free drink or food.
How did Starbucks update its rewards program in 2019?
In 2019, Starbucks allowed members to redeem rewards at 25 stars and eliminated the expiry of points to enhance long-term brand loyalty.
What percentage of mobile users who use restaurant loyalty apps use Starbucks Rewards?
Nearly 48% of mobile users who regularly use restaurant loyalty apps use Starbucks Rewards.
How does Starbucks communicate the benefits of its loyalty program?
Starbucks informs customers about earning and redeeming points through the app and a dedicated landing page on their website.
What exclusive benefits does Starbucks offer to its loyalty program members?
Members enjoy benefits like free drinks on birthdays, access to seasonal promotions, and double star promotion campaigns.
How does Starbucks personalize the loyalty program experience?
Starbucks provides a personalized homepage and access to the playlist of the desired store for each member.
What is the financial impact of the Starbucks Rewards program on the company's revenue?
As of October 2022, the program was responsible for driving 55% of Starbucks' U.S. operating revenue.
What recent changes to the Starbucks Rewards program have affected customers?
Recent updates increased the number of stars required to redeem various items, leading to mixed reactions from customers.
Could Starbucks improve its rewards structure?
Introducing more distinct levels with increasingly valuable rewards could further incentivize customer engagement and spending.
What makes the Starbucks Rewards mobile experience stand out?
The user-friendly app allows customers to track stars, place orders, and make payments, enhancing their interaction with the brand.
How does Starbucks integrate its loyalty program with an omnichannel retail approach?
Starbucks integrates mobile, in-store, and online interactions for a seamless customer experience across various platforms.
What innovative partnerships has Starbucks explored to expand its loyalty program?
Starbucks has partnered with DoorDash for delivery services and ventured into the NFT market with its Odyssey program.
How does Starbucks' partnership with Delta Air Lines benefit loyalty program members?
This collaboration allows customers to earn rewards across different platforms, enhancing the program's appeal.
What role does gamification play in Starbucks' loyalty program?
Introducing elements like the Gold Card adds a gamification aspect, providing tangible goals for customers.
How does Starbucks use its loyalty program to boost customer engagement?
The program includes exclusive benefits, personalized offers, and innovative features to keep customers engaged and loyal.
What strategies can other businesses learn from Starbucks' loyalty program?
Businesses can learn the importance of personalization, seamless mobile experiences, and innovative partnerships to enhance customer loyalty.
How has Starbucks' loyalty program influenced its brand image?
The program has strengthened Starbucks' brand image as a customer-centric and innovative company, enhancing its reputation and appeal.