Starbucks and loyalty: the debate rages on

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By: RickFerguson |

Posted on April 5, 2016

Another week, another op-ed bemoaning coffee-chain giant Starbucks' supposed betrayal of its customers by changing the terms of its reward programme. This week' entry comes courtesy of Entrepreneur magazine, in which contributor Pini Yakuel argues the now-familiar refrain that, by decreasing reward value for frequent low-spend customers in favor of increased value for big spenders, Starbucks risks damaging long-term brand loyalty. We've already punctured that argument in previous posts, so there's no need to revisit well-trodden ground. But Yakuel's other key point - that many of today's loyalty programmes are too one-size-fits-all in today's era of hyper-customization - bears the ring of truth.

Here's the money quote from Yakuel:

"In this age of personalisation, when customers increasingly demand and receive personally tailored offers wherever they conduct business, it�s a wonder that [Starbucks] can�t come up with a loyalty programme more befitting of the times. While commerce is heading full-on to customize wherever possible, loyalty programmes everywhere have remained a staple of the old world�s one-size-fits-all paradigm."

Yakuel argues that Starbucks and other big programmes, such as airline programmes, moving from a frequency-based to a revenue-based reward model should maintain some sort of frequency-based channel for those low-value customers who don't buy a lot, but who buy often. One supposes that if Starbucks had offered its customers the choice between enrolling in the new programme versus staying put in the old one, the new programme would scarcely exist. Operating a complicated, multi-level scheme just to placate those customers who buy a tall latte once a week in exchange for four hours of free wi-fi would fail to serve Starbucks' bottom line - the ultimate goal of any reward programme.

But Yakuel's larger point - that one-size-fits-all doesn't cut it when technology now makes one-to-one marketing not only possible, but imperative - is an essential one. The true test of Starbucks' new programme will be in how effectively it leverages what it learns about its best customers to deliver a truly relevent, personalised customer experience. If you're a high-value Starbucks customer, what rewards really ring your bell? What offers will resonate with you most personally? What soft benefits will provide an experience that Starbucks' competitors can't match?

Yakuel is right that a point-per-dollar loyalty programme with nothing else going for it has become a dinosaur. Given Starbucks' pedigree in designing effective customer loyalty programmes, however, we're confident that the company will remain a nimble player in today's fast-evolving loyalty ecosystem.

Read the rest of Yakuel's op-ed here.

- Rick Ferguson

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