Starbucks Reward Loyalty Program
The Starbucks Reward Loyalty Program has a staggering 16 million active members (as of March 2019), with 11% growth of their user base in Q2 2018. Starbucks attributes 40% of its total sales to the Rewards Program and has seen same store sales rise by 7%. The Reward Program is available on mobile devices as the Starbucks app, and has seen impressive membership and growth since 2008, with multiple iterations on its original form. The investment made into the mobile interface has increased the frequency and spend of both regular and occasional customers. Starbucks uses this tool to individually market specific products and features based on data collected from the app about its users. Customers can order and pay through the app ahead of arriving at a physical location, as well as earn stars (rewards) that translate into free drinks, food, and merchandise. Starbucks is a clear winner that has reinvented their relationship with customers and captured enormous value through their investment into digital technologies.
How does Starbucks create value?
Customers benefit from using the app by:
- Ease of payment in store through mobile app
- Ability to order and pay ahead of arriving in store (and therefore skip any Monday morning rush lines by having a separate ‘mobile order pickup’ station – which in itself serves as a highly effective marketing tool for the app)
- Rewards and benefits: such as free refills on brewed coffee and free drinks on member’s birthdays, relatively quickly earned other rewards from purchases, such as free food/drinks/merchandise
- Special member events
- Ability to send other members and friends gift cards through the app
- App integration with other platforms such as Spotify to discovery music playing in store (a big part of Starbucks and more generally coffeehouse culture)
- Members are first to know about upcoming seasonal and new product releases
Starbucks reaps many of its own ‘rewards’ from the app:
All these features have created an intense loyalty for customers to the app and reward program, which kicks back nicely for Starbucks. Members of their rewards program are feeding in valuable data that Starbucks can then mine to personalize marketing efforts to individuals and create a uniquely direct relationship with their customers. Besides drawing in the ‘occasional user’ to come back and increase their frequency of purchase (key in this business), the app has also been seen to increase the frequency and spend of regular and super-user customers. According to CFO Patrick Grismer, “We know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully”.
Aside from the increase in revenue associated with the app, the real value lies in the innovative potential uses for the large amounts of user data collected, which forms the base of Starbucks’ digital strategy. Starbucks has begun experimenting with digital menu boards in their physical locations to allow for a dynamic menu based on customer demand (varying with regional preferences and times of day), that would ideally continue to boost same store sales. The decision of where to place new stores and how to expand has also been informed by this user data. The ways in which this user data can be used in the future are important in the ever more personalized retail world, where customers want less of being ‘talked at’ and more of being included in a conversation.
Starbucks continue to prove itself to be truly customer centric, building innovation around the core theme of their relationship with customers. Their willingness to adapt and invest in their digital technology has allowed them to create and capture enormous value for both customers and the company. As Starbucks gets access to more customer data, the ability to continue to create more meaningful, personal relationships with customers will only increase, and this is how Starbucks is positioned to win in the future. They have continued to innovate on ease of use with the app, now integrating voice as a feature when ordering for mobile pickup. Of course, Starbucks will have to continue within this theme of digital innovation to remain a winner in the future. Use of consumer data builds a strong base for a number of potential technologies to harness in the future, but it doesn’t guarantee success.