One of those smart decisions: change the way their loyalty program works. Come April, the Starbucks Rewards program is going to be revenue based, which is a big change from what it is now.
How is this good for customers?
According to the email rewards members got, the change is to “reflect the #1 request we heard from members: more Stars awarded based on what you buy, no matter how often you visit.”
Here’s a chart that breaks down the changes:
- Changing from 1 Star per purchase to 2 Stars per $1 spent.
- Gold level is now at 300 Stars.
- You now need 125 Stars for a free drink.
Starbucks also emphasized the fact that any existing Star balance you may have will be multiplied so you don’t lose out to the inflated currency (Stars) of the new program.
According to my calculations, the break-even point between the old and new program is $5. If you spend more than $5 per visit, you’ll earn rewards faster. If you spend less, it’ll take you longer to earn rewards.
- Before April - 30 separate purchases will get you Gold status, and 2.5 free drinks (12 Stars = free drink).
- After the April change - 30 separate purchases at $5 each will earn you 300 Stars and Gold status. But 300 Stars is less than 2.5 free drinks. It’s right about 2.4.
Customers aren’t happy
That's evident when you look through just a few of the tweets that mention the coffee giant:
How is this good for Starbucks?
You just saw the math. They’ll be handing out less free stuff! Less free stuff equals more money. And any revenue based rewards program will require customers to spend some arbitrary base amount before getting rewarded. In Starbucks case, you will no longer be able to get 12 tall coffees at roughly $2 each and then get a 13th free. You have to spend about $40 more. Like the tweet above says, everyone who wants one free coffee will have to spend at least $62.50. And Starbucks says thats the number one requested thing their customers wanted?
Let's face it, this move is mainly for Starbucks' benefit. They can spin it however they want. They should realize, however, their customers aren't stupid. And telling them this is what they "requested" is insulting. They should just tell the truth: "we want more of your money before you get rewarded."
However, in one or two ways this can be seen as good for the customer. First, Starbucks is expensive. If you already spend $5 per visit, this really doesn't make any difference to you. Second, customers can, in theory, get a free drink in one visit (by spending $62.50), whereas before that would have been nearly impossible (unless you made 12 separate purchases, which would probably deserve a standing ovation...or something).
Regardless, I'm still gonna be going to get the occasional coffee/drink there because like Starbucks and want them to be around for a while. And I'm guessing most of you will too. Now, if you’ll excuse me. There’s a Starbucks across the street I need to visit. This one is getting a bit too crowded.
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