Loyalty Truth

Last week Starbucks announced changes to its My Starbucks Rewards program, even shortening the name to Starbucks Rewards. I chronicled the impact of the changes for Starbucks customers and addressed the negative press that accompanied the announcement. My belief is that the changes will benefit the health of Starbucks over the longer term and create financial sustainability for the program itself.

To gain broader perspective on the changes taking place at Starbucks, I encourage you to avoid reading posts that begin with “Starbucks sucks”, instead focusing on opinions from thought leaders in the loyalty industry. Rick Ferguson published an inspired take on The Wise Marketer last week which you can find here. As a footnote, I am personally among the Pure Coffee Customers impacted by the program changes, yet still see the wisdom in the changes made.

Program rule changes aside, here’s the most important aspect of last week’s announcements. Starbucks continues to believe that its customer loyalty program is driving business success and its impact can be tied to increasing same store sales and profits. In the investor call this past Monday, Scott Maw, Starbucks CFO shared several key comments:

• He wanted “to reiterate how important the loyalty program is to both Starbucks customers and the company financial performance”
• He continued by saying “the loyalty program continues to add to the overall momentum of the loyalty business”
• He also noted “the program has the potential to contribute to increase comp store sales over time”.

Consider these nuggets of Loyalty Truth regarding the Starbucks program:

• There are now 11 million active loyalty members in the Starbucks program, a number which Starbucks says has increased 50% over the past 2 years.
• Loyalty members spend as much as 3x non-members and generate more profits based on increased visit frequency.
• Q1 fiscal year reporting showed that dollars loaded on Starbucks cards increased 18% to a record of $1.9 Billion.

The importance of Starbucks Rewards to the company is the most important takeaway for marketers from last week’s announcement. If anything, Starbucks wants to increase the engagement levels of its current member base. In last week’s investor call, Starbucks shared that about 75 million customers are coming through the doors every month, thus only 1 in about 6 are loyalty members. The company knows there is room for greater penetration of the customer base and is focused on increasing participation rates to match those of other industries.

Building customer loyalty is a difficult challenge for any business. Starbucks is increasing its focus on a program that has already delivered tangible results to the business, while sharing a message that other brands are wise to absorb.