Posted by Stephanie Startz on November 3, 2009 01:34 PM
After home and work, there’s Starbucks: the “third place.” At least it used to be.
As sales decline, and consumers brew at home or visit competitors, Starbucks is struggling to rebound profits. Hoping to court customers back to the brand, Starbucks has retooled their loyalty program, discontinuing the year-old “Gold” in favor of “My Starbucks Rewards.” The program will go into effect December 26.
The new loyalty card cuts the 10% discount offered by the “Gold” program, and instead offers the equivalent of a local coffee shop punch card. Where “Gold” customers had to purchase a special card for $25, the “My Starbucks Reward” program is free. Consumers can load any denomination onto a gift card, register the card to protect the balance and begin accruing “stars.” For every purchase a customer makes using the card they earn a star. As customers accrue more stars they move onto better benefit levels.
The basic benefit level entitles customers to a free birthday drink. After earning five points, customers receive free in-store wi-fi (2 hours per day), free beverage customization, free brewed coffee refills, and a free tall beverage with purchase of whole beans. After accruing 30 stars customers receive a personalized card and a free drink after every 15 stars.
“My Starbucks Rewards” is a well-executed effort to better integrate the “third place” into consumer’s lives, creating stealth brand loyalty. (And to some extent, it's an antidote to Starbucks' off-brand campaign for its Via instant coffee.) As previously reported, consumers in test markets have been able to pay and participate using the “My Starbucks Rewards” iPhone app. The physical reward card and iPhone version remove the customer from the tangible concept of spending money. Starbucks is hoping that consumers will fall prey to the concept that having already loaded cash on the card, the drink is owed to them and practically free. Starbucks is expecting the card will not only encourage repeat visits, but will result in customers adopting a routine including Starbucks so to earn additional “stars” towards more free drinks.
The challenge to the success of the “My Starbucks Rewards” program is customer education. Undoubtedly, baristas will be expected to upsell the program to consumers coming in for their morning caffeine jolt. The rewards program may be too detail-intensive to consolidate into an elevator pitch. Will Starbucks sacrifice customer service and efficiency in exchange for a lengthy sales pitch from baristas?