More on the Rewards contention
Starbucks grew its active member base by 500,000 customers in Q2, a 13 percent increase that brought its numbers to 16.8 million. Starbucks Rewards members accounted for 41 percent of sales in the U.S. this past period. Johnson called the rollout of the new program “smooth,” and said it offers greater choice and flexibility. In addition to earning two Stars for every $1 spent in Starbucks stores, members can now access free brewed hot coffee and tea refills, a free birthday treat, and exclusive personalized offers along with additional opportunities to earn Bonus Stars through monthly Double Star Days.
Howard Schneider, VP of loyalty strategy at Kobie, said the new progam is more impactful for members. "Starbucks’ Kevin Johnson said two magic words: choice and flexibility," he said. "Effective loyalty programs should avoid the one-size-fits-all approach. The essence of a well-designed program is to understand what motivates individual customers or segments and direct the right offers, content and experiences to the right customer at the right time in order to optimize the lifetime value of each customer. Starbucks’ new program offers meaningful value to more members. This allows Rewards to engage more customers and reinforce the behaviors they want to drive: afternoon and evening visits, more high-margin items on the ticket and repeat visits."
The breakdown, which some customers have compared to frequent flier programs, looks like this:
- 25 Stars: Extra Espresso Shot, Dairy Substitute or Additional Flavor
- 50 Stars: Brewed Hot Coffee, Hot Tea or select Bakery Items
- 150 Stars: Handcrafted Drink, Hot Breakfast or Yogurt Parfaits
- 200 Stars: Lunch Sandwich, Protein Box or Salad
- 400 Stars: Select Merchandise or Packaged Coffee
- No Star Expiration for Chase Credit/Debit Cardholders: Stars earned by Starbucks Rewards Visa Credit and Prepaid members will no longer expire
As noted before, Starbucks hopes it can convert some of its digitally registered guests who aren’t Rewards members—a sizable group that counts 15.3 million people.
Despite some of the kick back, Brewer says the negative response has been far less than in volume than past years when Starbucks made a Rewards change.
“The vision for the program is to really provide more access to potential members,” she said.
The first part of that, Brewer added, is allowing new members to gain rewards earlier. The first reward comes after two to three visits. And it’s launched with a new Rewards app that lets employees know how many stars the customer has available and then explain the benefits.
“We think that is keeping any of the dissension down just because our partners are now able to explain the program right from the POS system and tell them what's available to them,” Brewer said.
To dial into the space further and just how fierce the loyalty war wages, Dunkin’ just last week introduced a multi-tender test at more than 1,000 locations nationwide. It gave guests, for the first time, the chance to earn points regardless of how they pay.
Previously, DD Perks members could only earn points toward free beverages by paying via an enrolled Dunkin’ gift card. The test allows customers to garner points whether they pay by cash, credit, debit or a Dunkin’ gift card. Guests accumulate points with every purchase by scanning a DD Perks loyalty ID QR code in the Dunkin’ mobile app or with a new physical loyalty card, which is available at participating restaurants, before payment.
"Dunkin’ is also on the right track with their test of multi-tender loyalty. From my experience, it's a best practice for loyalty programs to be tender-neutral to reach the maximum number of customers," Schneider said. "In [quick-service] and retail environments, marketers can always offer a bonus to customers using the preferred form of payment, but a tender-neutral program allows all customers to engage."
Last quarter, Dunkin’s rewards program represented about 12 percent of Dunkin’s visits, with 3 percent on-the-go mobile. It hit 10 million members in 2019, roughly five years from inception. Dunkin’ has added about 500,000 members per quarter. Dunkin’s said that the single greatest barrier to broader participation in its Perks program was a construct that required pre-loading a credit card in order to participate and use on-the-go mobile. This multi-tender test, which could go national if successful, addresses that.
Another change that could have Rewards implications for Starbucks is delivery. Starbucks said earlier it would bring delivery to roughly 2,000 stores by spring. Johnson updated progress Thursday, noting the company expanded the program in Q2 to nearly 1,600 units across seven major markets.
Johnson said Starbucks’ early focus is to drive customer awareness that leads to trial and adoption of the new channel. “This approach is enabling us to refine the program as it grows and ensure a quality customer experience,” he said.
Starbucks grew by 319 new stores in Q2, bringing the total to 30,184—an increase of 7 percent over the prior year. But 94 percent of those net new openings were outside of the U.S., while 88 percent were licensed.
Starbucks’ U.S. count stood at 14,778 as of March 31, up 3 percent from 14,296 as of April 1, 2018.
Meanwhile, in that same period, Starbucks has boomed 17 percent to 3,789 restaurants in China from 3,236.
This past quarter, Starbucks debuted 66 locations in the Americas—67 net licensed growth. The corporate footprint dropped by one unit. That was an expected slowdown from the prior-year quarter’s growth of 187 total locations.
The China/Asia Pacific segment upped 2014 stores in Q2.