Starbucks is streamlining its Rewards program in December, consolidating the two different programs it has now (one free, one fee-based) into a single program with tiered rewards. Good move on Starbucks’ part, a move that is long overdue. Each program offered certain perks such as the fee-based Gold program’s 2 hours of free wi-fi internet access per visit. At $25 per year, Starbucks realized $17.5 million from Gold card membership fees between November 2008-March 2009. With results like that, what was the motivation to consolidate the programs?
Reward programs should be rewarding to customers, not marketers! I posed a challenge to students in my Promotion class earlier this semester, asking them to critique Starbucks’ two-card program. Although they had been in class less than 3 weeks at the time, they already understood something about promotion: incentives should be structured so that they entice customers to take action. Students were nearly unanimous in their belief that Starbucks’ program did little to drive sales.
Customer reward programs are valuable for maintaining brand loyalty and even increasing customers’ purchase volume. Their impact can be maximized by keeping them simple and providing rewards that customers value and can access conveniently. I recall a rewards program for Baja Fresh restaurant in which I was enrolled. it gave a $5 discount for every $100 spent with the restaurant. A decent reward, except one had to go online and enter a 20-digit card number (no exaggeration – I counted) to access the reward. I thought that was bad, but it got worse when Baja Fresh ended the program. Not coincidentally, my visits have dropped substantially.
Marketing Daily – “Starbucks Reward Change Signals Strategy Shift”
