Order Up: Starbucks Rewards Changes Signal A Renewed Focus On Profitable Loyalty
As one of the most popular loyalty programs in the world, the stakes for the Starbucks Rewards program are high. Today, the program boasts nearly 29 million active members, and over half of Starbucks sales are driven through the program. Starbucks Rewards members collect “stars” for every purchase they make, redeemable for free drinks, food, and merchandise. When Starbucks announced some changes to its rewards pricing — increasing the number of stars required to redeem for some food and drinks — effective February 13, 2023, some customers took to social media to air their grievances. One Twitter user tied their frustration with the changes to larger economic trends: “Inflation is literally affecting the Starbucks points rewards system, it’s gone too far.”
But Starbucks also lowered the number of stars needed for several menu items, including regular hot and iced coffee. The reduction preserves the value exchange between the brand and its customers. And it isn’t the first brand to adjust its rewards program structure. Dunkin’ made a similar change at the end of last year, adding the ability to redeem points for food but raising the number of points required to redeem many beverage rewards. Best Buy recently announced that it would offer free shipping to loyalty program members in addition to other benefits, but earning loyalty program points will now require using a Best Buy credit card for the transaction.
What’s driving these changes? As brands face challenging economic headwinds, they are seeking ways to maximize the value of their most loyal customers. After all, brands must still demonstrate profitable growth to their shareholders, often with fewer resources than in “normal” years. To guarantee value to both the business and its loyal consumers, brands need to periodically reassess the benefits of even the most well-established programs. Though customers are quick to express their frustration with loyalty program changes, Forrester’s research shows that customers will adjust to program changes if the value exchange is still strong enough.
If members don’t feel valued, they will take their money elsewhere. Show your customers you appreciate their devotion to your brand — especially in challenging times — to build stronger emotional connections with them. Meaningless messages of gratitude won’t get you very far, so find other ways to reward loyalty when financial rewards aren’t as feasible for your bottom line. For example, customers want experiential rewards like enhanced customer service and early access to new products in addition to the standard financial benefits of a loyalty program.
Questions? Forrester clients should set up a guidance session to discuss. In the meantime, be on the lookout for more research on how to build an adaptive loyalty strategy in 2023.