Posted by William Charles on June 21, 2018
Misc

Published on June 21st, 2018 | by William Charles

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Starbucks To Redesign Rewards Program In 2019 – What I Think Will Actually Happen

Starbucks released a statement (‘Starbucks Announces Strategic Priorities to Accelerate Growth and Create Long-Term Shareholder Value‘) announcing a number of things, but the most relevant to us is the following:

In FY19, the company expects newer digital initiatives to contribute one to two points of comp growth in the U.S., supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company.

Unfortunately that doesn’t really tell us that much and Starbucks has declined to comment further. Even though Starbucks is positioning this as an improvement my bet is that it will be a devaluation. In 2016 Starbucks moved to a rewards program where you earn stars based on how much you spend (2 stars per $1 spent), but on the redemption side a flat 125 Stars could be redeemed for a free reward. There is no cap on the free reward so users are better off redeeming rewards for high value items such as food or expensive custom coffees. I suspect Starbucks will move to a system where the redemption side will be tied in to how much the item costs. For example a Sandwich might cost 250 stars where a coffee might only cost 100 Stars.

When they talk about expanded personalization I suspect we are already seeing this with custom offers on the Hopscotch game for example. Obviously this is just speculation at this point though and it’s impossible to determine if this will be good or bad for consumers until we know the full details and even then if they move to dynamic redemptions it will probably depend on what you want to redeem rewards for.

 



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This will definitely be a savings “enhancement” to the program. Their sales are down and they’re closing 150 stores (three times the usual) so they’re definitely looking at cost savings.

Coffee cost nothing though and motivating people to spend any amount of money / go more often would net them additional profit. If anything, they should make the rewards cost less to encourage more frequent visits.

Not fully accurate. Although the coffee may cost next to nothing to make, it costs a lot to pay the person making the coffee, and more often than not, my local Starbucks has a line, so a person ordering a cheap beverage can actually be costing the company money.

sales aren’t profits. if sales are down, you’d think they would be trying to make the program more attractive to drive up sales.

exactly, with all the stupid stuff they’ve been doing this year (wasting money on re-education training for employees and opening up their stores to noncustomers), one of the only reasons I still drink coffee there is because of the attractive rewards program. If they get rid of that, i’m pretty much done. Whoevers in charge needs to be thrown out.

This seems to be the trend in most rewards programs: linking both the earning and the redeeming to the dollar.

guy bucktastik

Petrodollar will become the cafedollar.

I really hope they redesign the program to instead of it being based on a “loaded” digital card, that I can infact make direct purchases for the single transaction.

I travel for business and our work has adamantly said that we cannot load a Starbucks card and get reimbursed for it… For obvious reasons. So I either pay directly with the credit card or go somewhere else.

From what I’ve always heard, companies love gift cards because customers many times A. forget they have them B. Don’t realize how much they spend.

I bought 15k of Starbucks stock yesterday so I hope they give you guys less benefits. But stay loyal.

Right there with you. This may suck for rewards advantage players but I don’t see the news justifying them dropping ten percent of their share price in one day.

There prices are just ridiculous.

I agree that is why I own part of the company but don’t buy coffee there. Never could afford it. An ice tea is like $4.50. But caffeine is addictive and people don’t mind paying huge prices for it.

I rarely need to spend money at Starbucks. Load maybe a hundred bucks a year but go 5-7 times a month. I build stars from their promos and can get a couple free ones per month. Right now, after the hopscotch thing and a couple of dashes, I have over 4000 stars between two accounts. I use the protein boxes for the free item.

And good investment. I made some good money on SBUX many years ago but ended up choosing to keep AAPL in my portfolio.

I call BS

Your math doesn’t add up

The meme of Starbucks being so expensive is annoying. You know you can get a tall coffee for just $2 right? Any latte or espresso drink is expensive no matter where you get it. I don’t get why Starbucks always gets singled out.

Their coffee costs more than 7-Eleven sure, but it’s not expensive.

You can argue that it’s more expensive than making your own coffee. Sure is. Most things someone else makes for you are.

I only get Ice Tea at Starbucks as not a fan of their coffee. However, I notice very few people get coffee at Starbucks. Most people get their 600 Calorie frappuccinos. And they can’t even make a Machiato. Worse thing is when you go to a real coffee shop and ask for a machiato they tell you they make it the traditional way and not the starbucks way and I have to answer yeah that is what I want a hundred times.

Anyway coffee costs them next to nothing and they charge a lot for it. Good opportunity to make money when people are worried that their growth has slowed.

I don’t disagree. But if I go to the grocery store to buy a sirloin tip steak and see people buying dry aged filet mignon, I don’t rag on the Piggly Wiggly for being expensive. That’s my point. Not really directing this at you, just ranting.

$2 is expensive for coffee. Should be 10c.

Bottled Water is expensive no matter that price it is at. It should be free.

We see worlds differently.

A coffee business cannot afford to sell coffee for 10 cents. You see a fantasy world.

I think you missed the point. Credit means that those are the costs for the respective items but the world doesn’t work that way. It’s a business

There’s a difference between missing the point and not understanding why someone would bother to make that point in the first place. Everyone understands that when you purchase something, you aren’t paying the raw cost of that something. Water is wet.

I don’t know enough about the costs associated with coffee, but there is no way you take away all profit from the equation and a coffee only costs Starbucks a dime. The paper cup itself itself probably costs 2-3 cents alone.

Credit is just a clueless socialist who thinks the entire world’s purpose is to provide him stuff for free.

You apparently haven’t read Credit’s comments here. He rails on everything that makes a profit. He DOES want it for 10c.

I am not a socialist. But until we see some bankers publicly beheaded for the 2008 crisis the capitalism you promote is just larceny.

You ding dongs are capitalists when you are making money and socialists when you are bearing the cost. The polluters do that and the bankers do that. You are their minion carrying out their work so you get more scraps than someone else weaker than you. It doesn’t need to be zero sum but your small mind has made it to be.

And that was clearly a big brained comment. Pardon us.

Recently went up from $1.95 to $2.15 pretax. Not worth it for their terrible drip coffee.

Meanwhile convenience stores still charge well under $2 for their drip coffee.

The good ones charge $0.99 to refill your own mug. And it’s not that much worse than Starbucks.

I’d rather spend my $2.50 at my local coffee joint that has AMAZING drip than Starbucks that has very suboptimal.

I only go to Starbucks when it’s one of the 24 hour ones.

I remember when it was $1.50 for a tall, which wasn’t bad. Now it’s $2.25 where I live. McDonald’s is $1 and just as good.

as someone who do marketing, their current reward system, the no cap reward redeem is an excellent marketing strategy.strongly doubt they would change it

This I have to agree. I have loaded about $10 on their cards abs gotten 3 free items through collecting stars through promotions. I get really expensive free stuffs like 10 espresso shots in the frappuccino. On paper they are losing money. In reality considering so much food and coffee they waste at the end of the day(mine gives it away to homeless shelter) anything they make of me is free incremental money they would have never gotten so. It’s a win for them.

After my next batch of stars, I am done with Starbucks. They are trying to hook me onto caffeine with the limited time start promotions. A black dude did the same on the street corner with coke, he might get shot.

So considerate of you giving someone at a homeless shelter 10+ shots of caffeine. You trying to make them addicted to SB?

Their personaliazation currently leaves a lot to be desired, definitely an area they can improve. A decent offer on stuff I like will serve to drive me into the store but I get so many lousy just for you ones that have nothing to do with what I purchase. (ie I won’t buy 3 breakfast sandwiches for 125 stars because I don’t like them).

One thing I’m counting on is losing value with any new program.

William Charles,

I think you forgot to include the word “Rewards” in the title of the article.

I enjoy SB. I’ve had their loyalty program even before getting into churning. But if they keep nerfing this, they’re just going to lose more of my business. Dunkin is already cheaper; and quality local coffee shops keep popping up. Why would I go for something pricey without good rewards?

Why would you anyway if you have “quality local coffe shops popping up”? Starbucks is more expensive but indeed they are more tasty than their counterpart in a dollar coffee shop. That is true for any luxury item. You definitely pay a premium for it and it definitely can not compete with the “per $ value” of cheaper, mainstream item, but you can get everything just a little bit better. That little better is exactly what makes an iphone an iphone and people seem not against the idea of paying a grand on it.

Michael Rogers
Michael Rogers

I got to agree with Kaung. He hit all the points exactly with me. Exact same scenario.

There is a current promotion to get 325 stars by loading money through Chase Pay. Not sure if it is targeted. FYI.

I’m sure how they plan on devaluing the program, but, if they do, I hope they realize that very few people will be inclined to use their credit cards. I don’t know if they care though about that market though. Thoughts?

They should do something straightforward like DD Perks. I get free drinks all the time with it and I don’t have to go through any loops.

Might just be me, but I don’t think their intent is to give you free drinks all the time.

I stopped going to Starbucks for anything other than a doppio espresso, which is one of the least expensive things on their menu. The place is just not worth it, it’s glory days are well behind it, and no rewards program is going to change that, especially if there is devaluation.Starbucks will be flat or declining in the long term.

grumpy cheeseburger
grumpy cheeseburger

“The company has added 5 million new digitally registered customers since April 2018…” I wonder how many of those drop off and don’t show up to buy anymore. (really, 5 million in two months, can someone tell me if that is that possibly true?)
I’ve grown weary of their constant errors on my orders, getting drinks that are only 2/3 full, and waiting for eons because they are serving the driver thru customers first.

This program will just get worse and worse. Time to switch to Dunkin Donuts.

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