Retail

Could Starbucks’ Revamped Rewards Alienate Customers?

Will Starbucks’ New Rewards Alienate Customers?

Research and analysis firm Bernstein said Starbucks’ changes to its rewards program could alienate some of its customers, according to a report by CNBC.

The coffee giant announced it was revamping its rewards program in a push to attract new customers, in the midst of slowing traffic in its North American stores.

The company’s loyalty program makes up about 40 percent of its daily transactions. With the new version of the program, members still get two stars for every dollar spent, but the company is getting rid of the tiers and offering a wider range of items to redeem.

“We want to make the program more appealing to more people,” said Matthew Ryan, chief marketing officer at Starbucks. “We want members more engaged out of the gate.”

Under the rules of the program, when customers spend $62.50 at the store, they get 125 points and are eligible for a free item.

When the new changes go into effect on April 16, customers will have to spend $75 to redeem certain items at 150 points. A salad or a sandwich will cost even more: $100 for 200 points.

“We think the new rewards plan runs the risk of alienating the core customers,” Bernstein Analyst Sara Senatore wrote in the research note.

“With lower discounts on higher-value items, the program should be margin accretive – assuming no change to customer habits. But customers are savvy, and higher spenders are likely to recognize that the effect reward rate is lower (as much as 50 percent lower on some items).”

The last time Starbucks tinkered with its rewards program in 2016, it faced backlash on social media. It remains to be seen if customers will react in a similar way this time around.

“We are confident the upcoming enhancements to Starbucks rewards will lead to the continued growth and customer enjoyment of the program,” Starbucks spokeswoman Maggie Jantzen said. “These changes will bring immediate value and increased choice to our members, and we’re looking forward to introducing them on April 16.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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