Starbucks has been one of the most customer centric brands we can think of, without ever making much of a fuss about it. From the beginning, Starbucks was focused on serving a great product, creating a wide menu of coffee drinks that tickled the imagination of java fans — made nearly comatose by the previous generation of coffee servers who treated coffee like it was a daily vitamin, necessary, but pretty boring.
Starbucks brought life into the enjoyment of a routine morning beverage; and, introduced variations on the theme that gave many reasons for customers to stop in virtually any time of the day to take some caffeine on board. They introduced a new lexicon to describe their product as well. Clever at first, the “Tall, Grande, and Venti” descriptions have become the subject of many a meme, but the fact that customers were willing to learn how to order their coffee drink just added to the cult feeling about the brand.
Starbucks Rewards Program Evolution
Starbucks introduced the Starbucks Card (a gift card) in 2001, well before it had a loyalty program. If you recall the story, the gift card was launched for the intrinsic benefits of any prepaid payment instrument. It brought convenience to the holder and made a great “one size fits all” gift.
Here’s where the first pivot occurred.
Some prescient person at the company began solving for a way for people to retain their card value even when cards were lost. “Give us some personal data and we’ll ensure you never lose your value” was the perfect onboarding ramp to start to understand the habits, needs, and desires of the customer base. Registering a gift card by contributing just a few bits of personal data became the inspiration for evolution of the gift card to loyalty card.
What better way to step into the customer loyalty “program” game than with an operational platform that was already working and in place? In 2009, My Starbucks Rewards® loyalty program and Starbucks Card mobile payment were born.
Even the basic design of the original Starbucks Rewards, based on visits, not value, was brilliant. Think of the behavior change that the program inspired. People who wanted to earn some perks for their patronage were willing to shift money from a checking account or credit card to a prepaid card. The only way to get credit for purchases to earn rewards was by completing purchases with the loyalty card.
To the surprise of many observers in the marketing world, people did not focus on how much they were spending on coffee drinks and snacks each month, but willingly transferred money onto the loyalty card as participation skyrocketed.
But there was something more that went unnoticed at first. Was it the 5-8% effective rebate that made the program a success or was it the ease and convenience of mobile payment that sparked adoption? Starbucks was very early in the mobile payment game and the cool factor of paying with a phone added to the cult status of the brand.
Free unlimited WIFI was introduced in Starbucks stores in 2010 — it seems much longer ago, doesn’t it? This cemented the standing of the coffee shop as a gathering place, for business, personal, or social reasons. It took a while but in 2018 the company found the words to describe what its stores were meant to represent to customers when it launched the idea of Starbucks as the “third place” in our daily lives. The company called the adoption of its Third Place Policy as more of a “defacto strategy” than a huge innovation. The message was clear, the customer was still the central focus of the business and the company wanted to not only serve a great product, but give people a place to call “home away from home”.
Starbucks Unveils New Store Format
The Starbucks Rewards program has been through two big evolutions, one in 2016 and another in 2019 that we covered in an earlier article.
In September 2019, Starbucks announced a new store format: “Starbucks Pick Up”, which consists of minimalist stores that will only process orders from the Starbucks App.
Wait a minute, is Starbucks hinting that it is moving away from its customers? Is it abandoning the coffee-house gathering spot vibe that has been the foundation of its growth for decades? Hardly. The introduction of the order-ahead stores speaks to the growth of customers using its app (more than 17 million, representing 14% growth in the latest quarter).
Starbucks continues to keep the customer in focus as its highest priority. As an organization it adheres to the most essential concept of loyalty marketing, that “not all customers are created equal”. The company is witnessing changes in purchasing habits and is opening doors to accommodate new behaviors.
The tale of Starbucks and the growth of its rewards program as core to its success is less about the “Program” than it is a healthy recognition that it is profitable to meet the customer where they are. Seeking to connect with every profile and segment of customer to deliver a convenient and comfortable experience is an example of how brands can tackle customer loyalty more holistically in the future. Rewards and offers are important fuel to grab the customer’s attention, but the loyalty program must not be the sole center of attention.
To generate authentic and enduring customer loyalty to your brand, your loyalty program should be fully embedded in the daily activation of your brand promise through product, operations, and brand marketing.