Big Mistake: Starbucks Makes Loyal Customers Work Harder For Rewards
Starbucks is making it harder for its rewards program members to get their freebies.
While members will continue to earn the same number of Star rewards points per dollar spent, beginning February 13, the Star points needed to get a free brewed coffee or tea will double from the current 50 Stars to 100. Handcrafted drinks, such as a latte or Frappucino, will require 200 Stars versus 150, and you’ll need 300 Stars for a free salad or sandwich, up from 200 Stars today.
The already under pressure Starbucks green-aproned employees will be on the firing line to explain the changes on that inauspicious day. And who picked the unlucky day of February 13th to spring such an unfriendly surprise on Starbucks customers?
Shortly after Howard Shultz returned to Starbucks as CEO, he announced plans to come together with company “partners” — which are their employees — to “co-create” the company’s future based on a foundation of trust.
He returned to the company’s helm partly in response to efforts to unionize Starbucks workers. To date, some 270 of the company’s 9,000+ U.S. company-run stores have unionized, though the company has yet to reach a collective bargaining agreement with any of them.
Despite offering numerous employee benefits and perks, workers have been vocal about their dissatisfaction. Schultz’s restoring trust memo quoted comments such as, “What we say we do and what we do is not lining up,” “I don’t feel supported by my leaders,” and “I deal with more difficult customers than ever before.”
The later Starbucks frontline employees are sure to face once the company pulls the rug out from under its Rewards customers.
More unhappy customers will result in more unhappy workers setting up a vicious downward circle that the company can ill afford. In the past year, Starbucks dropped from number 149 in Forbes America’s Best Employers list in 2021 to number 272 in 2022.
While the quality of customer service is critical to customer satisfaction and brand loyalty in all of retail, it is even more essential in food service. With this change, the company is making it harder, not easier, for its workers to perform their jobs on which the company’s brand loyalty depends.
And Starbucks is highly dependent on its roughly 27 million loyal U.S. members, who generated 55% of the company’s U.S. revenues in the fourth quarter – $3.4 billion out of $6.1 billion total.
Customer loyalty is based on trust, trust in the company to treat them fairly and equitably. Employee loyalty is based on the same things. And customer loyalty and employee loyalty are inseparately linked. The changes to its Rewards program threaten both.
“Consistency is the name of the game in premium brand loyalty,” said Chandler Mount, founder of Research The Affluent, whose company has just completed a study of affluent brand loyalty.
“Major changes to the perception of consistency, value or quality jeopardize the customer-brand relationship, since customers have expectations for the brand and all that it stands for, including luxury-brand loyalty programs.”
Luxury may not be a word associated with Starbucks, but Schultz recognizes it as such.
“There is an affordable luxury to Starbucks that our customer base has been willing to support and the loyalty to Starbucks continues,” he said in the latest earnings call. “The Rewards program is generating significant revenue for Starbucks, which is highly predictable, and a relationship with that customer base is extremely loyal.”
While Chandler notes that premium and luxury brand loyalty is not driven by points or redemptions, changing the rules of the game and making it harder for loyal members to redeem points earned is not a good idea. It leaves customers with a bitter aftertaste, not good feelings.
Rather than cutting value, he sees Starbucks missed a bigger opportunity to add more meaning to the customer-brand relationship by personalizing the rewards to each customers’ tastes.
In fact, it may be confusing its exclusive Starbucks brand loyalty by linking its program to Delta Sky Miles through a recently announced partnership. It’s the first such partnership in the U.S. of what Starbucks envisions as a “Rewards Together” platform allowing members to link their rewards with other brands’ programs.
Nobody joins an airline rewards program because of brand loyalty. They do it to accumulate miles. It’s purely transactional, not emotional, the true measure of customer brand loyalty, especially in the premium and luxury space.
Perhaps veering away from the emotionally-connected vision of Starbucks as the “third place” is inevitable since its convenience channels, including drive-through, mobile order and pay and delivery, drove 72% of sales volume in the fourth quarter.
But that evolving transactional relationship between the brand and its customers puts even more pressure on the company to maintain consistency, reliability and value, all of which its new rewards scheme undercuts.
“Premium and luxury brand loyalty is motivated by meaningful brand benefits. Brands must deliver satisfaction at a higher level. In short, a brand can’t buy its way to loyalty,” he observed.