I read the announcement made recently by Starbucks about some new innovations with Starbucks Rewards. The one that intrigued me the most was this one, from the company’s March 20, 2013 press release:
Starbucks Introduces Innovative Cross-Channel, Multi-Brand Loyalty Program
The announcement by Adam Brotman, chief digital officer, of an expansion of the company’s loyalty and rewards program, and an industry-first innovation that will enable customers to earn rewards for grocery channel purchases that can be redeemed in Starbucks retail stores and is expected to double the number of customers enrolled in the company’s programs in fiscal 2013.
While I saw everyone in the Twitter-sphere jumping up and down about how cool this is, I was thinking about something different. We live in the world of the details behind loyalty programs including data integrity and data collection. Having spent plenty of time working with loyalty programs (including in the grocery store retail industry) I know that the idea of trying to make an SKU linkage in the grocery basket that transfers to a manufacturer’s loyalty program carries significant complications.
How are they going to make this work?
The feature isn’t live yet, but details are beginning to emerge.
The program will include specially-marked packaged coffees — both whole bean and ground — that will feature a code that can be redeemed online at the company’s website. Guests will be able to earn “stars” for their My Starbucks Reward accounts, enabling them to receive free food or beverages at Starbucks stores, along with other special offers.
Aha! Special packages that will include a code that Starbucks Rewards members may redeem online to earn “stars.” For those of you not quite familiar with Starbucks Rewards, “stars” are the promotional currency of the program. Members earn stars for their purchases and the number of stars you’ve earned translates into your status and benefits. So the responsibility is on the shoulders of the member to make sure that they get the code from the package. I suspect it will be inside the package because otherwise I’d be able to simply walk through the grocery store and collect/scan codes from the outside of dozens of Starbucks packages without buying a single one. You’ll need to make sure you get the code and scan it or input it online to get your credit. In some ways, it’s like the 21st century version of collecting boxtops.
Don’t get me wrong, I think it’s a reasonably good move for Starbucks. It will be interesting to see whether it plays a big role in getting current Starbucks Rewards members to earn stars on grocery purchases or a big role in getting grocery customers to join Starbucks Rewards. Or both.
The precedent set is important. It is now credible to put codes on your packaging that may allow certain restaurant brands to tie in their grocery brands with a restaurant loyalty/rewards program. Well, the first in line for that one will be Dunkin’ Donuts who announced recently that they’ll be rolling out loyalty in the near future. There are many other candidates with grocery brands including companies such as California Pizza Kitchen, T.G.I. Friday’s and Taco Bell.
Starbucks has been very successful with My Starbucks Rewards. The integration of loyalty, prepaid and mobile is a powerful combination. Here is an excerpt from an article at FastCasual.com, quoting Starbucks CEO Howard Schultz:
Overall, the Starbucks gift card accounts for 25 percent of U.S. tender, Schultz said. He noted that the Starbucks gift card was likely the most popular gift item of the 2012 holiday season. More than $1 billion was loaded onto Starbucks gift cards in the quarter (a 25 percent increase over the same period last year), and one in 10 adults in the U.S. received one as a gift.
What’s more, 20 percent of card transactions at Starbucks locations were conducted using the mobile app, Shultz said. Over 7 million customers now use one of our mobile payment apps, translating into 2.1 million mobile payment transactions each week, with hundreds of thousands of additional Starbucks mobile app downloads each week.
It wasn’t just about payments either. The integration of the Starbucks loyalty card with the payment app meant that the company added 1.4 million members in Q1 of 2013. That’s an increase of 86 percent over last year’s 778,000 new members for the same quarter, Schultz said.
Clearly, loyalty plays a strategic role at Starbucks. They ‘get it’ – loyalty is a strategic game changer.
Here’s a little more about My Starbucks Rewards, from the website:
MY STARBUCKS REWARDS FEATURES/BENEFITS
“Earn 1 Star every time you pay with your registered Starbucks Card or Starbucks mobile app at a participating Starbucks or our online store. As you collect Stars, you move up to bigger benefits. Get started by registering a Starbucks Card.
Use your card once, earn your first reward. Sweet!
Something to Drink or Eat On Your Birthday. Get a little extra birthday love with a free drink or food reward on your big day.
Five Stars puts you at Green. Besides your free birthday drink or food reward, you also earn:
Free Refills in the Store. We want you to feel at home when you’re at Starbucks. Paying with your registered Starbucks Card gets you brewed and iced coffee and tea refills at no charge during your visit at a participating store.
Collect 30 Stars within 12 months and you’re Gold. Once you reach Gold, keep those benefits for another 12 months by earning another 30 Stars. With Gold, you get all the Welcome and Green benefits plus:
Free Drink or Food Reward Every 12 Stars. Use your Starbucks Card 12 times and the next one’s on us.
Personalized Gold Card. Your barista will know you’re somebody special when you place an order.”