Case Study Starbucks Loyalty Program

Case Study
Starbucks Loyalty
Program
Student: Selina Mai 梅芳草
Class: 蔡瑤玉

Starbucks Rewards
A loyalty program launched by Starbucks
has been one of the most successful
implementations of a loyalty and customer
retention strategy.
It has been instrumental in propelling
Starbucks to 16 billion in revenue and a
market cap that exceeds $80 billion

Starbucks Rewards
The new Starbucks Rewards program was
launched on April 12, 2016 and it replaced
the previous loyalty rewards program
named My Starbucks Rewards

Reason for the change:
The older program gave the customers a star for
each visit regardless of the spend level.
high incentives for low spenders.
By moving to the new loyalty program, Starbucks
aligned the customer benefits with their spending levels.
In the new program, customers who are high spenders
($5 or more per visit) will earn rewards faster than
before.

I. How does the new Starbucks
Rewards Work?
II.Why do customers like the Starbucks
Rewards program?
III. Why does Starbucks love the new
program?

I. How does the new
Starbucks Rewards Work?

• Customers are rewarded 2 stars for every dollar spent on any drink, food, or
other item at Starbucks. The more money they spend, the more stars they
earn.
1. Reward: 2 stars for every $1

• Customers are enrolled into the Green tier upon sign-up.
• They will then need to earn at least one star per year in order to maintain
Green status. Once a customer earns 300 stars, the customer is upgraded to
the Gold tier.
• Gold customers must earn 300 stars every 12 months to maintain their status.
• Starbucks is therefore encouraging customers to spend at least $150 per year
in order to maintain Gold status.
2. New Tiers: Green, Gold

3. Benefits
Benefits of Green member:
• a free drink on the customer’s birthday,
• free drink refills in-store, and
• the ability to pay by phone and order in advance so the customer can
waiting in line.
Downside: while they are earning stars with each dollar spent, the stars are
worth nothing until they reach Gold status.
Benefits of Gold status (300 stars)
• a free drink for every additional 125 stars.

II. Why do customers like the
Starbucks Rewards program?
• Starbucks is making it easy for customers to earn
rewards!
• Customers load up pre-paid balances on their
Starbucks app, making it quick and simple to make in-
store purchases.

1. Getting something for
FREE
• Customers who were going to
drink coffee anyway are now
receiving something for FREE!
• Customers appreciate goodies
like free drink refills, a free
birthday drink, and the ability to
pay using the phone app.
• Getting 2 stars for every dollar
spent (while it doesn’t mean
much until Gold status is
achieved) creates a feeling of
appreciation and anticipation.

2. Elite Gold Status
for High Spenders
• High spenders love this
program.
• Once they earn 300 points
to reach Gold status, they
are rewarded with a free
drink for every 125 points
earned.

3. User Experience
• Starbucks has created a fun and engaging user experience in their mobile
app. It helps the Starbucks Rewards program become more interactive
and effective.

The mobile app
• gives the program an
edge that other
standard “card only”
programs do not have.
• differentiates the
program in the eyes of
the consumers.

III. Why does Starbucks love the
new program?
Starbucks loves the new program because it is aligned
with user spending.
• It encourages higher spending
• It helps collect copious amounts of valuable user
data.

1. The More You
Spend, The More
You Earn
• The new program is
directly aligned with
high spenders.
• For Green members,
there is very little
payback in terms of
free drinks.
• For Gold members,
the payback
percentage is close to
8%.

2. Getting More Users to
Download the App
• The new loyalty rewards program is
getting users to download the Starbucks
app
• When customers visit the store, an in-app
balance encourages greater spending
compared to when payments are made in
cash or credit card.
• The app collect data on user behavior,
spending patterns, and locations
 give Starbucks a wealth of new
information on customer behavior, enabling
them to better target their customers.

The new Starbucks Rewards program is one
of the top loyalty rewards programs in the
world.
It significantly reduces the probability that
customers will buy coffee at another store.
It is worth top marks for creating an
amazingly engaging user experience.

But the money banked at Starbucks appears to be growing rapidly, with the
current $1.2 billion nearly double the $621 million the company had in 2014,
according to Bloomberg. That growth has been fueled by the company’s
popular app: Starbucks has “one of the most successful mobile wallets,”
Leena Rao writes in the new issue of Fortune. In March, Starbucks
announced that it will launch a prepaid Visa card later this year.
As more customers join the company’s loyalty rewards program—it now
has 12 million members—they are paying for their coffee using the
Starbucks (SBUX, -9.07%) cards or its mobile app, which now have a total
$1.2 billion loaded onto them for future lattes or snack purchases,
according to a Wall Street Journalanalysis of “Where Money Lives.”

https://investor.starbucks.com/financial-data/annual-reports/
https://investor.starbucks.com/press-releases/financial-
releases/press-release-details/2017/Starbucks-Reports-Q4-
and-Full-Year-Fiscal-2017-Results/default.aspx

Case Study Starbucks Loyalty Program

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