Starbucks Loyalty Fail
Starbucks knows a thing or two about loyalty. I’m a Gold Card member, and enjoy the free refills as well as the periodic free drinks I accrue by using it. (Green Card members get the refill benefit, but not the free beverage after every 15 purchases. In addition, Gold Card members get a personalized card in that color and, theoretically, are addressed by name by the baristas.)
Many other coffee shops offer complimentary in-store refills to all customers, but Starbucks has converted refills into a loyalty benefit. (Similarly, Starbucks has put their own spin on the ubiquitous “free wi-fi” offered at most establishments. They created their own portal with special content like free access to pay sites like WSJ.com and NYTimes.com.) So, I was surprised when normally savvy Starbucks sent a friend this message:
This year you didn’t maintain Gold Level Status…
But it’s easy to get back again.
In order to keep your Gold level membership in My Starbucks Rewards™, you needed to earn 30 Stars within 12 months from the date you first reached the Gold level.
Without having earned those Stars, you’re transitioning back to Green level membership. Which is still pretty great. You can continue to use your Gold card and enjoy free select syrups and milks, plus free refills on hot or iced brewed coffee or tea during your same-store visit. Even though your Star counter is reset, if you earn 30 Stars in 12 months, you’ll get back to Gold…
The “30 Stars” required to regain Gold status is the same level that new members need to achieve. My friend reports not being warned of her looming loss of status, and this email came as a surprise.
Despite their friendly and upbeat tone, Starbucks missed the boat on this loyalty communication from a neuromarketing standpoint. They delivered a negative New Year surprise to my friend, and more or less told her she had to start from scratch to regain her Gold status. At least they didn’t wait until she appeared in a store so a barista could seize her gold card and cut it up!
What Starbucks Should Have Done
As described in Loyalty Programs: Of Rats and Men and my new book Brainfluence: 100 Ways to Persuade and Convince Consumers with Neuromarketing, the goal gradient hypothesis applies here: the closer rats got to a food reward, the faster they ran. Furthermore, a Columbia University study using coffee loyalty cards (yes, Starbucks, actual coffee loyalty cards) showed that the closer people got to their goal of a free drink, the more frequently they consumed coffee. So, if you believe that research here are three things Starbucks should to make their loyalty program more effective:
- Show progress toward free drinks. I’m a frequent Starbucks visitor, but I never know where I am in relation to my free drink after 15 stars. A barista has never said, “Roger, just four more coffees and you earn a free one!” The printed receipt has never encouraged me by showing how many stars I’ve accumulated. Instead, a print postcard appears in my mailbox every now and then. (I could check my stars online, but I don’t bother.) The research findings show that customers would be more motivated if they knew they were getting close to an award.
- Give advance notice of status loss. The loss of gold status came as an unwelcome surprise to my friend. Starbucks could have turned the same event into a motivator by sending an email, say, a month in advance that said something like,
“You have 25 stars! To retain your Gold Card status, you only need to purchase five beverages in the next 30 days!”
The timing of the notice, or series of notices, could be predicated on the number of drinks needed (a larger number would need longer notice) and consumption patterns. Emphasizing the substantial progress the customer had made toward keeping gold status would produce the same goal-gradient motivation described above, and would be far more likely to get a customer back in the store quickly than telling them they had to start over. Motivate, don’t DEmotivate!
- Give expired members a head start. If a customer went to the trouble to register on line and then consume enough coffee to earn a gold card in the first place, they are likely someone with above-average interest in coffee in general and in Starbucks in particular. There may be some reason their consumption fell off so dramatically that they lost gold status – a new workplace, a competitive store that was more convenient, etc. Whatever the reason, it doesn’t make sense to alienate this customer by sending them back to zero. If the “last chance” email(s) don’t get the customer up to Gold status, don’t give up, try another neuro-incentive:
“We’re sorry that you weren’t able to get back to Gold status, but because of your loyalty to Starbucks we’re making it easier for you! While new customers need 30 stars to achieve that level, as a past Gold member yourself, you won’t need that many. We’re adding ten stars to your account right now, so you’re already a third of the way to becoming a Gold member once again!”
The cost of this change in terms is low, and if it gets a slow-consuming customer back in the habit of visiting Starbucks it will pay itself back many times over.
- Use the Starbucks Digital Network for loyalty. Why not provide loyalty members with some kind of incentive to log in, and place a cookie on their laptop or mobile device so they can be recognized on each visit? The same, “You are just four stars away from a free drink!” message could be prominently displayed, producing an increase in goal-oriented motivation. In addition, targeted offers could be displayed. Haven’t ordered a breakfast sandwich in a while? Here’s a coupon to get you back in the habit. Competitor Panera seems to be doing something like that with the random, or not so random, offerings from their own loyalty program. (Of course, the proprietary network has to work; about a third of the time I log on from Starbucks, I can connect to wifi but can’t access their special content.)
Do you think the Starbucks email was off-putting? Do you have any other suggestions to improve their loyalty efforts? Leave a comment with your thoughts!
I think Starbucks made some similar but bigger mistakes by introducing the program in the UK this January. Last year they changed the price of a filter coffee to something like £1.20 with a Starbucks prepaid card. Paying with a card also meant you got free add-ons in drinks like syrup. When they introduced the program (with levels and stars as your blog refers to) I saw the cost go up to £1.70 for a Grande filter coffee. So Starbucks raised the price of my beverage by about 40% without advanced warning and in exchange said after 15 drinks I will get a free one…so spend £7 more and get a free drinks. Sorry Starbucks you conditioned me to expect a certain price point for filter coffee which is not always super fresh either – so you know what I started doing? I now go to Pret a Porter and get £0.99 organic coffee that is hotter and quite nice actually. The staff are faster, there is never a line-up. Oh and yesterday morning, Monday morning, I went to a usually very busy Starbucks at 9:15am and there were only 2 people ahead of me. Quietest I’ve ever seen the store. Coincidence?
That’s the problem with discounts, Kimberly – the lower price becomes an anchor and the normal price looks high.
At least you have some competition to shop. In my immediate area, the only nearby shops are Starbucks stores. Nice people, good coffee, but I’d like a closer independent alternative just for variety.
I don’t think Starbucks missed a thing on this and that their program is right on target. Checking a balance is easy, quick and something I routinely do, just like I do with my Hilton and Southwest Airliines programs. It’s up to me to make sure that I have the required number of stays to remain at Diamond status with Hilton and the required number of flights to remain on Southwest’s A-list.
Starbucks’ loyalty program is a great program (I’m a Gold Card carrier, as well) and exists for one purpose: to encourage and reward patronage with their company.
You are a lot more proactive than most customers, Doug – clearly a caffeine fan! 🙂 I don’t really care what my point balance is, since I know I’ll get the freebie in due time. I have no incentive to check often, hence I don’t get nudged down the goal gradient.
I have to say that even my Hilton, Marriott and Southwest Reward program proactively email me, and tell me when my points are about to expire…so I can’t believe that Starbucks doesn’t. I think you should send your suggestions directly to Starbucks, Roger.
I also detest the mailed cards for a free drink–everything is so electronic these days–you would think they could figure out a way to do it digitally!
I’m not a big coffee fan – so Starbucks is not on my radar – but the point I walked away with this was how to keep customers who are slipping off the screen.
Don’t wait till they disappear
Encourage rather than discourage
Reward rather than punish
The old adage that its easier to keep an old customer than a new one – has me thinking after this article. I spend a lot of time thinking about getting “new” and not “rewarding” the old. This tells me to be careful. I could lose the little I got and in this economy that’s not a good thing.
It’s funny, Patricia – the adage about it being a lot more profitable to keep an existing customer than to chase a new one has been around for decades, but it’s a lesson that most companies often ignore.
I do think Starbucks does many things right. The Gold Card concept itself is brilliant. It adds status and personalization to boost an otherwise unamazing rewards program.
I got that same “you lose!” email from Starbucks this month and thought to myself, “Oh well!” — you’re right on, Roger. Coffee rewards shouldn’t be this big of a deal. So many other local indie shops use those punch cards which makes life easy. Starbucks makes its hard to earn free coffee, and frankly, I don’t think it’s worth the effort anymore. I’ve given up and will only go if there’s no other option.
Tea, you drink coffee? That’s just wrong! 😉
I do think Starbucks has some good elements, like the combined money card/loyalty card (most competitors don’t let you pay with your loyalty card). The accumulation of freebies is slow (15 purchases) compared to most independents. The status play with the personalized gold card is effective, IMO. I just wish I had an indie to visit once in a while!
To me relationship is a key word in business/marketing and Starbucks has broken that relationship with it’s pushy hard sell message.
To me, Pierre, the tone of the message is great, it’s the content that doesn’t match up. “You are great, we are cool, and by the way, we wiped out your stars and privileges!”
Sadly, I am not yet a Gold Member, so I haven’t been able to enjoy the perks (perhaps that’s better than having them yanked away so cruelly?). Still, my biggest issue with the expiration is that the program didn’t start until late 2011, so there should have been a grace period for people, allowing earned credits to carry over.
Also, if you use the Starbucks iPhone app (not sure about Android) to pay with your registered card, it automatically updates to show how many credits you’ve earned toward Gold status. Very simple – but you have to use the app.
That’s interesting info about the mobile app, Diana. Showing the points earned there makes a lot of sense, kind of like the old paper punch cards.
This is sharp stuff.
Our work on customer loyalty has consistently shown two things that I think are relevant to this Starbucks situation. First, customers who are loyal to a brand hold that brand in high esteem for a range of reasons that tend to fall into two categories — brand “aptitudes” and brand “attitudes.” Obviously Starbucks strong aptitudes as a purveyor of coffee aren’t going to be affected by this somewhat sketchy element of program execution — and its likely that customers may persist in loyalty despite negative reactions. At the same time, Starbucks would seem to be very distinctively an “attitude” company — and this program execution would seem to fly in the face of that classy, personalized approach to their business.
Perhaps more importantly, our emotional research tools tell us that customers with a high loyalty to a brand are connected to that brand in part by a kind of “emotional glue” that goes beyond rational regard. In the case of Starbucks this emotional connection is driven partly by a feeling of being “nurtured” by the brand. It seems pretty clear that this very rejecting and anonymizing gesture on Starbucks part could do serious damage to a sense of emotional nurturance coming from the brand to its loyal customers. In sum, bad call Starbucks!
Great insights, David. They actually convey the bad news in a classy way, but sugar coating the message doesn’t offset the bitter content. I suspect relatively few customers were affected (frequent purchasers who became not so frequent), but they missed a chance to reactivate these lapsed buyers.
Hi, its Justin from the My Starbucks Rewards team here at Starbucks. Roger, thanks for your original blog and for being a loyal Gold Card member! I also appreciate the healthy dialog in the comments. You and the other contributors started a good conversation on customer movement along a loyalty journey. Customers naturally fall into a pattern of behavior and the goal of loyalty programs is to help that customer along their journey. My Starbucks Rewards is tiered to help customers along that frequency journey, enriching the benefits and offering new goals for which to strive.
We certainly want to build a relationship with our customers and help them move along that journey, communicating progress along the way. We are finding new moments in the customer lifecycle and new channels (whether mobile, email, Starbucks Digital Network, etc) in the customer’s journey to share their current status and progress toward the next goal. Our mobile apps and online account management tools are designed to inform customers how they are progressing and provide new channels for communication.
Sometimes customers don’t meet the requirements of a program tier, requiring a move. Because we value the relationship we have built with our customers, we chose not to start a customer over with nothing, which is why we only move customers down to Green (our middle tier). While it is true that 30 Stars need to be earned every year to maintain Gold status, we chose to soften that by allowing the customer to maintain the free syrups, free milk options and the other Green tier benefits.
Finally, I would love your thoughts and those of your readers on one of the points you mention. Once a customer no longer meets the criteria for a program status (airlines, hotels, or even the Starbucks Gold level), my theory is that giving a bonus, or boost, to re-earn the status may have limitations. There is a reason the customer fell from the tier – they did not find the rewards of that tier (or goal) worth achieving. I wonder if the better opportunity is to identify those customers earlier, while they are still in the Gold tier, and reinforce the benefits. This is where a bonus, or boost, might be more effective.
Appreciate the dialog and your insights as we continuously improve for our customers.
jtidmars (at) starbucks.com
Hi, Justin, thanks for stopping by! Your “identify those customers earlier” was exactly what I described in my second point which ended with, “Motivate, don’t DEmotivate!”
In general, it’s always better to provide at least the appearance of progress. In the Rats post I mentioned above, a coffee card with twelve boxes, of which two were already punched, caused faster consumption than a card with just ten empty boxes.
[Now about that balky Digital Network hookup… 🙂 It’s great when it works!]
Thanks for providing the first-hand insight!
The Starbucks mobile app is great for checking your balance, looking to see how many stars are needed to achieve the next free drink, and finding locations.
As a gold card member for 3 years now, I’ve been pleased with the program and it’s progres.
Minda, I guess I’ll have to download the app and check it out! Providing star status updates is definitely a good thing. The only minor problem: one key aspect of the Gold Card is the status factor, and using a phone app partly negates that.
Unlike some others, I found the post by Justin to be both confusing (filled with overly complex sentences and over-wrought language), and disingenuous. Really, new channels for communication? Customer movement along a loyalty journey?
The bottom line is that Starbucks’ program is not viewed by many as a particularly GOOD program. I was so fascinated by this issue that I polled most of my friends and acquaintances for their opinions, and this is what I learned:
1. The requirements for a “free” coffee drink are too high for most people. Practically everybody else allows an “earn” after ten purchases; some do it at eight. I’m not so much a coffee guy, but my local sandwich shop gives me a reward at SEVEN. Guess which sandwich shop I go to most?
2, Most, but not all, of the people I surveyed said that they stick their card in their wallets, and only pull it out at Point of Sale. Otherwise, they mostly forget it. They have no idea when they’re about to get extra points, or get a new status level.
3. Not everyone is motivated by syrups or milks. Free syrup would do nothing for me, as I don’t use syrups, nor do many of the people I know. Giving me something free for which I wouldn’t have paid in the first place is sort of a Non-Benefit to me. It’s like offering me free women’s lingerie. The idea is nice, and perhaps it would look lovely on me, but I don’t currently USE women’s lingerie, so it’s not actually a benefit (yet).
4. Finally, the status issue is questionable, particularly since (at least in my local Starbucks), it’s not really talked about. I stop in at least twice a week, and I’ve never even HEARD of the loyalty program. No literature, no POP, nothing. No staff member has ever whispered a word about it. So how good a program can it be if nobody talks about it, there’s no signage or anything else, and I don’t know that I COULD raise my status. This is perhaps the biggest fail of what is, to me, a monster fail.
Don’t misunderstand, I love Starbucks (perhaps a wee bit less than I did a while ago). I love coffee. But I don’t like being run around just to get an itty bitty little bit of a “benefit” that isn’t as beneficial as it otherwise could be. In fact, given the facts adduced herein, I might in future have to rethink where I get my daily (almost) cuppa.
I agree, James, that Starbucks doesn’t seem to push the program very hard with signage, etc. Then again, since I’m a member, the baristas wouldn’t encourage me to join. I haven’t noticed them doing so with other patrons, but perhaps they are for those that don’t have a loyalty card.
One thing that I think is brilliant is combining their payment card and loyalty card. At Panera, I have a separate keyring tag and a regular gift card. It doesn’t seem like it would be all that challenging to combine the two as Starbucks does.
There is such a competition now. In order to keep its clients, Starbucks should do more and more..not only to rely on its fame!
Spot on Roger
I completely agree with everything you put forward in your article. But if this is an example of “big boy brand” thinking what chance do serious strategic marketers have with SME clients who don’t have the time, budgets and resources to put customers at the heart of all of their marketing efforts.
The joined up thinking here is non-existent. Funny really how they could get it so far wrong : )
Alex, sometimes big companies OVERTHINK stuff like this. Most small coffee shops have old-fashioned loyalty cards that get stamped or punched. Often they are smart enough to give the customer an extra stamp or two to get the customer moving toward a full card and free coffee.
Holy crap this makes incredible sense and is consistant with all I’ve learned from Pink, you and others. I can’t say I’d have thought of that approach, but I am virtually applauding that approach… especially the notion of “jump starting” the customer with 10 credits. I can feel my amygdala’s reaction to “I’m 2/3 to goal, and I’m gonna start drinking!”
Very true, I feel like most reward systems are this difficult.
Just to warn people here, even if you make the 30 purchases by your anniversary date you aren’t guaranteed to keep your status. My anniversary date is March 11. I made my 30th purchase on March 10th. This afternoon at 4 pm I check my account and find out that I’ve been dropped down to green level again. Even though the purchase shows up in my transaction history apparently I didn’t get the credit for the star as quickly (I still haven’t received credit, stars earned shows 0).
So even if you keep track of your anniversary date, just make sure you get all your purchases in long before your anniversary date because “by your anniversary date” does not have the same meaning for Starbucks. They really know how to kill customer loyalty; honestly I was getting tired of defending my Starbucks loyalty anyway. Most people I know are “anti-Starbucks” and I can see why. I’m just going to stick with my local coffee house that gives me “10 drink” punch cards, recognize me and know what drink I always order, and always has superb customer service.
Too bad you had a negative experience, Yuetiva. A loyalty program should make you feel good about the brand, not angry! One thing many companies do is empower their employees to fix issues quickly in the customer’s favor. Also, on something like loyalty level expiration I’d think a generous grace period (implemented automatically) would make sense. That would avoid the sense of loss experienced by a customer who realized that she was just one short of the required number on the last day. Thanks for stopping by!
Yuetiva, this is Whitney from the My Starbucks Rewards team here at Starbucks. The last thing we want to do is disappoint our members and were sad to read of your recent experience. After taking a look at your account we noticed that there was a system delay in the posting of that very important 30th Star. Your account has been renewed in Gold Status for the next year as it should have done automatically on 3/10. Trust that we are looking into this issue to make sure other customers don’t experience the same thing. We most definitely value you as a loyal customer and are glad you were able to share your experience here. If this problem persists, please do not hesitate to contact us at 1-800-STARBUC. Again, we appreciate all the dialog and insights regarding My Starbucks Rewards. We try to listen as much as we can everywhere so that we able to continuously improve for our customers.
Thanks for stopping by, Whitney! Hope that solves Yuetiva’s problem!
[…] 2012 besprak het blog ‘Neurosciencemarketing’ al de wijze waarop Starbucks Gold members naar Green downgrade. En om eerlijk te zijn is er in de […]
I don’t think Starbucks was in the wrong at all. If your friend were to check their account on Starbucks website, or used one of their mobile apps, it clearly states on both when their Gold status expires. Your friend had plenty of warning, they just didn’t pay attention enough to their account on Starbucks.com to see when Gold expired.
You are assuming a far higher level of motivation than most casual (and less than 3 buys a month is definitely casual) coffee buyers have, Josh. Nobody in that category is going to remember when their card expires or pro-actively visit a website to find out. The mobile app does a much better job of keeping the user aware of progress, but plastic card users get no feedback.
I would like to THANK Starbucks for helping me save money recently. Fortunately, I never bought into their HYPE, and I never once paid cash money for my cups of coffee from a Starbucks store because it’s way too expensive. I just bought their bags of coffee in the grocery store, entered those star reward codes into my Starbucks account online, and then took the empty bags to Starbucks to redeem it for a free cup of (usually too strong for me) coffee occasionally. However, the price of their bags of coffee went up in my local grocery store last month, and I grabbed a bag of Seattle’s Best instead as it was only $5.99. My husband and I were happily surprised when we drank it. The taste is really good, and my son even remarked that the Seattle Best tastes like Starbucks’ USED to taste like years ago. I now have a dozen packs of Seattle’s Best in my freezer (all bought on sale), so I’m good to go for a while, and with the money I’ve saved I won’t be bothering with the so called “star level” BS anymore (their website sucks, and my star amount was never accurate anyway). B’bye, Starbucks.
Of course, Gina, Starbucks now owns Seattle’s Best. Can’t escape ’em! What did you think of their rebranding (from a traditional design to the big numbers)?
My perception of Starbuck’s loyalty program: It makes up for being hard to use by being useless. Case in point I have a coupon for 5 free bonus stars. I put the Star Code in, a dialog box in red appears stating, only a maximum of two stars can be redeemed a day. Rejected! Send email to Starbucks the coupon has not expired what gives? Reply from Starbucks: Due to a larger than normal volume of emails it will take 7 days for us to reply. Basically I have been Starbucked!
I have a free coupon for a drink go to Starbucks, store tells me oh we don’t honor those. Starbucked, again!
That’s what you want with a loyalty program. Because we all know loyalty is built up by the lack of honesty and rejection… no wait that can’t be right. There is no perceived value with the Starbucks loyalty program. Now I get to share this story with other people. Because it is funny.
If I ran Starbucks I would fire the team that rolled this loyalty program out.
Roger, I agree with you 100%. However, your article brings up an important point: companies confuse loyalty programs with repeat-purchase rewards programs.
The difference is important: Loyalty is a feeling. When you are loyal to a brand or a company, you continue doing business with them – repeat purchases are a consequence. Programs that categorize customers for how much they spend focus only on the transaction, they are really bribing you into buying again.
I suggest companies might want to re-think their loyalty programs to focus on their loyalty TO customers. I shared my thoughts on a post here https://theadaptivemarketer.com/2012/01/29/is-your-loyalty-program-demonstrating-your-loyalty/ (5 years old but still valid, I think). I would love your perspective on it.