Starbucks Invests in New Rewards as Loyalty Members Help Inflation-Proof the Brand

Starbucks’ loyalty members are perking up the coffeehouse chain in the face of stiff economic headwinds.

The Seattle-based brand, the world’s largest restaurant company by revenue, shared Tuesday (Aug. 2), along with the announcement of its financial results for the third quarter of 2022, that loyalty program 90-day active membership in the United States rose 13% in the quarter to 27.4 million members.

“What’s driving some of the increase in traffic and the strength in our business is our rewards program,” interim CEO Howard Schultz told analysts on a call. “Our loyal Starbucks Rewards members drove a record 53% of U.S. company-operated revenue.”

According to data from the July edition of PYMNTS’ Digital Divide study, “Digital Divide: The Move to the Metaverse, created in collaboration with Paytronix, 37% of consumers are interested in using loyalty and rewards programs to make restaurant purchases.

Read more: Study Shows Restaurants See Metaverse as New Loyalty Play

“We are not currently seeing any measurable reduction in customer spending or any evidence of customers trading down,” Schultz said, citing “deep customer engagement and loyalty,” among other features, as protecting factors.

The news comes as many restaurants see the impact of inflation on consumer habits. U.S. Bureau of Labor Statistics (BLS) findings from the Consumer Price Index for All Urban Consumers (CPI-U) showed that, in June, food prices rose 10.4% year over year, and food away from home (i.e., restaurant) prices rose 7.7%.

However, consumers feel these price increases even more acutely than BLS data would suggest. A national online study of 3,783 consumers conducted by PYMNTS last month revealed that consumers reported paying 20% to 30% more for retail and grocery purchases and to eat at restaurants. With consumers straining under the burden of these increases, many are paring back their purchases, leaving many restaurants feeling the impact of this trade down.

See more: Why Retailers Should Worry About Inflation but Dread the Wealth Effect

Starbucks, however, is testament to the ability of a strong loyalty program to help restaurants weather difficult periods. In an interview with PYMNTS’ Karen Webster earlier this year, Paytronix CEO Andrew Robbins said in the face of challenges, it is even more important that restaurants invest in their digital platforms.

“Digital engagement mechanisms to keep close to the guests are paramount,” Robbins said. “So, a strong loyalty [customer relationship management (CRM)] program, online ordering, those are the twin pillars of a good strategy. And we see this every single time there’s a downturn.”

Read more: Restaurants Lean on Loyal Customers to Navigate Omicron, Inflation Impact

Loyalty expectations are rising. The 2022 edition of PYMNTS’ Restaurant Readiness Index, also created in collaboration with Paytronix, revealed that personalization features within loyalty apps showed strong growth between September 2021 and April 2022.

See more: More Than Half of Restaurants Depend on Digital Sales, Despite Uptick in On-Premises Orders

As such, building on this prioritization of digital loyalty, Schultz teased an upcoming announcement of “a very exciting new digital initiative” focused “most importantly” on loyalty, which will include “new methods of emotionally engaging customers” and a “broader set of rewards.”