Making these changes wasn’t easy considering Starbucks' history and equity in the platform. It wasn’t exactly broken. But the brand didn’t let short-term fear cloud what was a necessary evolution to inspire repeat visits and bring new customers onboard amid a growing competitive set. Rewards is a crowded game these days.
And all those predicted benefits are starting to flood in, especially in regards to adding new customers. Starbucks 90-day active members base accelerated 14 percent, year-over-year, in the quarter, hitting 17.2 million active members. Loyalty members accounted for 42 percent of U.S. tender in the period. Johnson said Starbucks is seeing improved engagement from the group. The growth of the platform, adoption of mobile order and pay, and Starbucks’ personalized marketing efforts contributed nearly 2 percent of comp sales growth in the U.S. for the quarter—an improvement from recent periods.
COO Roz Brewer said there are three components to understand why the program is thriving. Firstly, there’s power in the notion of “redemption for all." This allows Starbucks to give new members stars within two to three visits. In the past, it was 30–40 trips, which is a massive change and key to helping digitally registered customers take the next step to rewards. How many guests in the past kept that frequency up to start benefitting? How many bailed a few visits in or simply forgot to use the rewards option?
The second piece is multi-tier redemption. Before, members could only redeem once they hit 125 stars. Now, they’re able to cash in their stars across five tiers, ranging from 25 to 400 stars. And Starbucks added new items, including merchandise and at-home coffee, for customers to score. The last part is a no expiration feature for Starbucks credit card holders. Stars last indefinitely for them.
Brewer said, unlike previous changes, employees felt “100 percent ready” to open restaurants with this new platform. There was zero interruption. “The program is a success,” she said. “We’re seeing conversions from our [non-Starbucks Rewards members]. In addition, I’ll add to that, we’re able to speak to our non-SR members. And that’s our occasional member … joining us in the afternoon likely through drive thru, enjoying refreshment and cold beverages.”
“And so it’s growing our category where we needed it the most and improving our afternoon daypart as well,” she added.
Let’s touch on that last note. Starbucks’ afternoon business has been climbing in recent quarters. Johnson said the segment saw comps growth in Q3 for the first time in three years. The catalyst was Starbucks’ cold beverage platform. Nitro Cold Brew, in particular, hit 5,800 stores by quarter’s end and is expected to roll out to all company units by the end of fiscal 2019 (80 percent by early August). Of the 3 percent growth in average ticket in the quarter, 2 percent was driven by beverage attach and beverage mix, while pricing lifted the remaining 1 percent. Beverage growth contributed about 80 percent of Starbucks’ total sales growth in Q3. Starbucks had to make advancements in its back rooms and behind the bar to accommodate for Nitro, adding new equipment.