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Running My Starbucks Rewards through the loyalty filter

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Running My Starbucks Rewards through the loyalty filter
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My Starbucks Rewards is hailed by marketers as one of the most successful loyalty programs in the market.

A few statistics from the company’s 2013 Annual Report tells the story:

  1. Nearly 7 million people in the US are active in My Starbucks Rewards
  2. One in every three U.S. transactions is paid for with a Starbucks Card
  3. The Starbucks mobile payment app is used, on average, to make more than 4 million mobile transactions per week in the U.S.
  4. Over $4 billion was loaded onto cards in fiscal 2013 globally

The importance of the loyalty program and the mobile payment app to Starbucks is unquestionable. Considering that Starbucks announced at its Annual Shareholders Meeting that it plans to drive its market capitalization beyond $100 billion, these numbers have to be taken even more seriously. Interestingly the financial impact of the program comes in spite of a value proposition that would be a hard sell for other brands with less passionate customer groups.

The core value proposition awards individual Stars, the program currency, for each purchase visit. Members are not rewarded for spending more money with Starbucks or for purchasing multiple items in one visit. One of the questions near the top of the program FAQ page is “Do you earn more than one star for buying multiple items in a visit?”. Though few like to admit it, many members are encouraged by this rule structure to split purchases into multiple one-item transactions. Why not earn 5 Stars when buying the office some coffee rather than just one?

The Gold level of My Starbucks Rewards is reached by earning 30 Stars in a one year period. I was a happy recipient of my Gold Card recently and naturally assumed that the balance on my existing card would be transferred to my new Gold Card, standard upgrade procedure for most loyalty programs.

Checking my account on the program website, I found that my previous “run of the mill” card was still registered with a monetary balance in evidence. Until I visited my rewards account online, I did not know that Starbucks treats the Gold Card as a new card and that it must be registered to be associated with your rewards account. Since I was now using my Gold Card to transact at Starbucks stores, I now effectively had money sitting on my old card unavailable for use while transacting with an unregistered card. My attempts to register the Gold card on the program web site and combine value from both cards into one ended in frustration.

One essential element of successful loyalty programs has to be that they are easy to understand. Offer transparency and easy to understand rules are in high demand by Millennials marketed to by the program. Their Gen X Aunts and Uncles and Boomer parents care about clarity and transparency too.

The quality of the customer experience interacting with the rewards program depends on these foundational elements of program structure to be in place.  As the next phase of growth kicks off for Starbucks, it might be an opportune time to run some of its program rules through the loyalty filter, improving the taste of My Starbucks Rewards for its most valuable members.

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