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Starbucks Loyalty Program Now Will Reward Customers Based on Spend

It used to be based on number of visits. Now, the My Starbucks Rewards loyalty program will be based on how much money customers spend.

That was the main message of Monday’s early morning special conference call.

Starting in April, in Starbucks throughout the U.S., Canada, and Puerto Rico, the loyalty program will award stars based on the amount of money spent per customer.

Starbucks CFO Scott Maw said during the call that the main reason for the change to the loyalty program (from visit-based to spend-based) is because it was the No. 1-requested change customers wanted.

“We believe that customers, because they earn more, will spend more,” Maw explained. “It’s really that simple. And that will help with comps. We’ve increased our investment in 1-to-1 marketing and personalization to understand our customers better. That is associated with this program and is an important part of what these changes mean for us.”
Maw assured conference call attendees that Starbucks completed a rigorous regimen of research and testing before opting to implement the changes to the loyalty program.

“Because it’s the No. 1 requested item, it gives us a level of confidence that this is the right change,” Maw explained.

“We did an extensive amount of research and focus groups and surveys around different changes to the program. We’re pretty confident this is the right thing to do. A very small minority will be negatively impacted by this.”

Here are some of the key changes planned for the My Starbucks Rewards loyalty program:
Now: 1 Star per visit; April: 2 Stars per $1 spent
Now: 30 Stars to Gold level; April: 300 Stars to Gold level
Now: 12 Stars for a free reward (Gold); April: 125 Stars for a free reward (Gold)
Now: Three levels (Welcome, Green, Gold); April: Green, Gold (plus monthly Double Star Days)

In mid-April, any customer at the Green or Welcome levels will be moved to the Gold Level. Gold members will be given another year of gold membership.

Matthew Ryan, Starbucks Global Chief Strategy Officer, told conference call attendees that customers love the flexibility of being able to use reward redemptions on anything.

“It provides a great way for customers to discover and experiment with other things on the menu,” Ryan said. “We’re approaching the changes to the program through the lens of our customer. We are very proud we have more than 75 million customers coming through our doors in the U.S.”

Ryan noted that one in six customers are loyalty program members, which represents a significant opportunity to grow the membership base even more.

“There was some dissatisfaction with the current structure of the program,” he said.

Although this only accounts for 1% of total transactions, Ryan said some customers ask for items to be rung up separately, which extends transaction time.

“With the new program, we will avoid transaction splitting,” he said. “The real benefit will be increased customer satisfaction.”

Starbucks is using direct email communication to spread the word about changes to the loyalty program.

“Stars will be awarded by what you buy, and not just frequency of visitation,” Ryan said. “As we switch the mechanics of the program, we are not using it as an opportunity to weaken the rewards proposition. The vast majority of customers will earn rewards just as fast or faster than today. Our customers love the potential to earn more stars. There is an elegant simplicity to this. We think we will be matching what people want and expect.”

Maw said changes to the loyalty program will:
Contribute to sales growth
Provide the potential for deeper customer engagement
Reduce transaction splitting and will increase ticket size

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