UPDATE (May 2016) :: Well almost exactly 5 years after I wrote this article, detailing why the current reward system was bad and outlining changes to make it more successful, they finally listened. You now get 2 stars for every dollar spent instead of 1 star per visit. There has been a bit of negative press about it but really its just the people who go there for their one cup of drip coffee a day. So many more people spend a ton more than that and sometimes multiple times a day that the negative press will die in short order. I’m shocked it took Starbucks 5 years to realize they should incentivize spending and not a visit (allow me to reiterate my marketing genius comment from below…). Even one of my suggested creative add-ons they are now using, monthly double star days. You’re welcome Starbucks, just wish you’d have done this 5 years ago…
Original Article (March 2011) :: Starbucks is a great company. I’ve been a huge fan for years. You don’t get to where they are without doing some things right. Sure they make mistakes, but they usually will take steps to fix them too (e.g., Clover Brewing System…) which is nice to see out of a large company. There is one aspect where I am thoroughly annoyed with them though, their so-called Rewards system. What a joke, lets analyze this a bit.
We want to say “thanks” for coming into our stores and using a registered Starbucks Card. With My Starbucks Rewards, you’ll earn 1 Star every time you pay with your Card. And as you collect Stars, you move up to bigger benefits.
This sums it up nicely I think. Their rewards system boils down to simply quantity of visits. Visit 5 times you hit Green Level and visit 30 times you hit Gold Level. Who is the marketing genius behind this? They should lose their job. No, seriously. This is one of those things where someone probably came up with a nice system, then some other large company douche bag started preaching simplicity or some crap and now they are left with a reward system that doesn’t make me want to go to their stores and gives me no real incentive to. Allow me to point out the issues here and outline a reward system that would be so much better they should make me a Platinum member just for thinking of it.
There are a lot of people that go to Starbucks daily for their morning cup of coffee. Let us say that in one scenario you get your grande cup of coffee there every day at a cost of $2.50 (over-estimating). After $75 dollars and month you are reaping the max level and max awards they offer. The best being the free drink, so after each $40 you spend (could be much less), you get a free drink. This free drink could be the one treat to yourself that is much more expensive so you end up with a $5-$8 drink for free, not too bad. Then there is someone like me who doesn’t really enjoy the Starbucks coffee unless its a good bean that is clover brewed so I get a more expensive espresso drink. I actually spend over $9 on my drink (8-shot venti caramel macchiato), but lets just call it $8 so after 30 visits and $240 I’ve now reached the gold level to get my free drink!
So for some, in order to get any Starbucks rewards they need to spend well over twice the amount as others. Sure I’m going to Starbucks anyway to get my drink regardless of the reward, but it doesn’t make it right that another customer who spends half as much as me is getting rewarded the same. Allow me to introduce Starbucks to a “Point System” directly tied to money spent. Sure it might not be creative or original but that might be because it works. Have each whole dollar spent be equal to one point earned. To roughly equate it to what they have now they could make 25pts get you to the Green Level, 100pts for Gold, and then maybe 250pts add a Platinum level as we all love those. Now the guy who goes to get his daily cup of coffee will have to go 40 days instead of 30 to get to Gold, but at least the type who won’t go everyday cause they are getting a more expensive espresso drink might only have to go 15-20 days. Having a much more flexible point system instead of hard-coded visits can allow Starbucks to get really creative as well. Some things they might add:
- Announce a certain day or time of day as double points for a period of time.
- Make holiday special drinks double points.
- Make Clover brewed coffee double or maybe 1.5 points per dollar.
- Limit points earned per visit to 10 to prevent abuse (someone buying drinks for group).
- Points can be earned only on drinks not food or merchandise.
- Points can be used on food or merchandise however.
- If Starbucks can track the Store # of the purchase maybe add extra points for the first purchase in a different store from the last one you went to (getting someone who travels to stop in to a Starbucks that is outside their local community).
As you can see the new system gives so many more opportunities for Starbucks corporate to get customers in the door and spending money. Of course points can be redeemed for in-store or on-line purchases but they should also think of better incentives beyond point redemption at the various levels. Free drink, free pound of coffee beans, more exclusive music beyond what they give out at the store. Offering a higher Platinum level they could go further like one free added espresso shot to any drink.
The main point here is that the current system isn’t great for Starbucks and not great for many of the customers. Adopting a new system similar to the one above gives their marketing team a great canvas to work with and could easily drive customers to the stores more frequently while spending more money.