We've all seen rewards programs everywhere, mostly with airlines and credit card companies. Rewards programs are available for absolutely everything we buy and from seemingly every company we purchase from. Popular coffee house Starbucks is no exception to the rewards program game but this week they made media headlines as they changed their system. Now, usually when a company changes a rewards program they do it in a way that creates positive media buzz and attracts more members. Starbucks must be operating under the assumption that any press is good press as they have taken a simple program and made it so complex consumers are left confused about where the benefit is.
The company announced that its new system, which will start in April, will reward customers based on how much they spend, rather than just the frequency of their purchases, which seems to be frustrating the frequent flyers of the coffee house. One of the changes is that customers in the new system will be able to earn two stars for every dollar spent, whereas in the past, customers earned one star per transaction. (That was easy right? One star for one transaction).
Now at first glance you can see why the company wanted to change that. If you were rewarded per transaction and there was no limit on number of transactions then you could see how people would want to pay for everything separately. Starbucks claims that a long line, created by customers ringing up multiple transactions was the number one complaint they were trying to address. The problem is that the rewards program is done through an app so they could have just prevented multiple transactions in the app.
Starbucks has laid out the changes on a website that explains the two systems. In the current system, customers earn one star per visit, need 30 stars to reach the "Gold" level and need 12 stars to receive their free reward. In the new system, it will take 300 stars to get to Gold level, and they'll need 125 stars for a free reward. Although they will earn two stars for each dollar, those who make smaller orders have expressed that they feel ripped off.
In typical Starbucks fashion, the company responded to customer complaints with another sales pitch that they claim was going to be a part of the change all along. The company released a statement that says that in stores, there will be "Double-Star Days," meaning once a month, Starbucks "Gold" members will earn four stars for every dollar they spend, regardless of how often they come in. Starbucks will "surprise" those members with what day that will be and encouraged those who want to participate to sign up for the company's emails to find out when it will happen. While customers seem to be satisfied with this response how have investors digested this news?
This week Starbucks
