Starbucks Rewards - A Case Study
Updated: Jun 4, 2021
Starbucks is a household name. Besides for being the world’s largest coffeehouse company with 33,000 stores worldwide, it’s also one of the most valuable brand in the Fast Food industry with an estimated brand value of 11.5 billion USD in 2020. It would have been higher, if not for the pandemic that disrupted the entire F&B landscape.
Let’s analyse the Starbucks experience and its loyalty program that has enabled it to grow into the massive presence it is today.
Starbucks’ loyalty program called “Starbucks Rewards” is widely regarded as one of the most successful and sought-after loyalty programs among major restaurant chains and perhaps in existence. It boasts of high usage from its members (48%!) and Starbucks attributes 40% of its total sales to their rewards program. These loyal customers also helped the company tide through the pandemic. Starbucks reported a mere 5% drop in regular digital users on their app which was made up by a surge of new customers (3 million in the 3rd quarter of 2020, an increase of 17% from Q2) who downloaded it.
Starbucks CEO Kevin Johnson explained that “customers are looking for safe, familiar yet convenient experiences in their life and Starbucks’ digital assets have proven to be a huge competitive advantage.”
So the question is – what exactly is Starbucks doing right to create such a successful loyalty program and what can we learn from it?
Engaging and User-Friendly
Starbucks Reward is entirely app-based, and much of its success is due to how user-friendly its interface is. A quick glance at the front page shows all the important bits and the simple yet elegant layout mirrors that same experience when visiting a Starbucks outlet. Navigation is quick and easy too, with the four major functions clearly listed: Pay, Stores, Gift & Order.
The app also delivers a personalized experience with customized promotions and offers according to your purchase history. A touch of personalization makes customers feel more treasured and valued and goes a long way in retaining them. Furthermore, the app offers dynamic challenges from time to time for customers to earn bonus “stars”, the currency Starbucks Reward uses. It can be as simple as buying and trying out a new item on the menu or to completing a streak of purchases over a couple of days.
A recent new addition is the “music” feature, where songs being played in the Starbucks store can be viewed on the app. This extends to recently played songs and offer patrons more control over the music played by allowing them to “like” songs to influence future Starbucks playlists.
Starbucks offers customers a variety of rewards upon becoming a member. In addition to earning two stars per dollar spent, members enjoy other benefits such as free in-store refills, member-exclusive events & product updates.
Furthermore, members that achieve the gold tier are able to claim a free drink every 150 stars, which is equivalent to about a week of patronage. This is considerably generous, as completion of challenges do also give you up to 150 stars. There are other redemptions you can make with your stars, such as mini customizations for 25 stars, hot coffee or baked goods for 50, a lunch item for 200. You can even purchase Starbucks merchandise with stars!
It is worth pointing out here that Starbucks has made using the app itself such an enjoyable experience that these reminders and updates users typically consider jarring do not come off as overwhelming and instead enhances the entire experience.
Starbucks has two membership tiers: green and gold. Customers are automatically upgraded to the gold tier upon accumulating 300 stars. In order to retain gold membership, they have to subsequently earn 300 stars every 12 months.
One of the main motivational factors for achieving gold membership lies in the personalized Gold Card. It is aesthetically pleasing and screams class with its elaborate design.
Of course, there are other exclusive rewards that only gold members are eligible for such as double-stars days where they earn four stars per dollar spent instead of 2.
Starbucks Rewards takes convenience to the next level with in-app ordering that allows you to skip the queue.
Starbucks understands that coffee is ultimately still a grab-and-go breakfast beverage. A portion of their loyal customers are deterred by the long queues in the morning, particularly so when they are in a rush to get to work. As a member, regardless of the tier, you can simply place an order at a nearby outlet and make payment through the app itself, making for a seamless transaction. There are express counters in stores to facilitate such orders so you can bypass the queue entirely.
Starbucks have also launched multiple initiatives to make online ordering and payment easier. My Starbucks, a feature integrated into the Starbucks app, allows customers to order through voice command or messaging.
It’s safe to say that the Starbucks Rewards app is at the very center of Starbucks’ incredible growth. Restaurants can all take a page out of Starbucks’ book to create a loyalty program that focuses on these few key areas.