Starbucks announced quarterly results yesterday and a few things caught our ear in the earnings call with Wall Street analysts. Starbucks reported revenue of $6.75 billion and non-GAAP earnings per share of $0.70 for the quarter, but also reported strong growth in the ranks of its rewards program membership. President and CEO Kevin Johnson said in a call with analysts on Wednesday (Oct. 30) that the rewards program is an “important growth driver” for the company and revealed that Starbucks Rewards membership in the U.S. grew to 17.6 million active members at the end of the quarter, which marked a year-over-year increase of 15 percent. Another 15 million active participants in the program are in China.
In our 2019 Delphi Report – Why Loyalty Programs Fail [Hint: It’s coming out next week!] – the expert panel discussed the importance of C-level support in successful loyalty marketing initiatives. Over the last several years we have noticed increased discussion of these programs by C-level officers during quarterly earnings calls; this never used to be the case. Clearly, Starbucks CEO is not only behind the rewards program and recognizes the contribution the program makes to earnings, but additionally feels compelled to bring it up with the analysts. Loyalty has come a long way — and it has ended up on Wall Street. Perhaps the analysts will start asking for ‘same customer sales’ instead of ‘same store sales’?
Johnson noted that the company continues to pursue new opportunities to expand digital customer relationships and loyalty data indicate that when customers join Starbucks Rewards, their spend level with Starbucks meaningfully increases. He added that another element of the company’s digital strategy is artificial intelligence (AI), something we discussed in last year’s Delphi Report: The Future of Loyalty Marketing. Over the past year, Johnson said, the company has been “dialing up our in-house capabilities and investments in AI” with an initiative that it calls Deep Brew. Johnson spoke of Deep Brew as a means to harness data, power the company’s personalization engine, optimize store labor allocations, and drive inventory management in its stores. The company also plans to harness Deep Brew in ways that free up store associates so they can spend more time connecting with customers. Johnson also noted that the firm continues to see a strong correlation between associates engagement and customer connection, which leads to higher customer frequency. That relationship reinforces the firm’s belief that the experience delivered by its front line staff is an important competitive advantage as it elevates customer experience and drives growth.
Kudos to Starbucks. Who says loyalty marketing is dead?