Starbucks Loyalty, Changing Its Rewards

ASSOCIATED PRESS

Starbucks Links ‘Stars’ to Bucks in Loyalty-Program Shift - Starbucks Corp. is changing its loyalty program to reward customers based on how much they spend rather than how frequently they make purchases, a move the cafe giant hopes will boost sales and shorten wait times.

Under the new system, announced Monday, customers will earn two rewards points, or “stars,” for every dollar spent, rather than one star for each transaction. The change is designed in part, executives said, to end gaming of the current system in which some customers buying multiple items ask baristas to ring them up separately, so they can earn a star for each item—a tactic that has been slowing down lines.

The new Starbucks Rewards system, which takes effect in April, also will change how stars can be redeemed, requiring 300 rewards points to get to gold-level membership, and then 125 additional points for a free cup of coffee or other reward. Previously, customers needed 30 stars for gold level and 12 more for a free reward.

For a customer who continues to spend $5 per transaction, which Starbucks says is the current average, that would mean the same number of transactions to reach gold, 30, then 12.5 more for a reward, versus 12.

Executives said tying stars to spending instead of transactions long has been the top request Starbucks customers make to the company via a website called MyStarbucksIdea.com. The change puts Starbucks more in line with the rewards programs offered by other retailers and industries such as airlines, which have been shifting their frequent-flier programs to award miles based on ticket price instead of distance flown. That system favors bigger spenders, as does the new Starbucks program.

Starbucks Chief Financial Officer Scott Maw said he expects the change to encourage people to spend more money per transaction, which is likely to contribute to sales growth.

“A vast majority of our customers will increase the pace at which they earn rewards,” said Matthew Ryan, chief strategy officer at Starbucks. “There is a small minority that will earn rewards at a slower pace.”

Starbucks, which has more than 11 million active members in its loyalty program, has been seeking new ways to grow the program. Mr. Ryan said fewer than one in six Starbucks customers are loyalty members, a participation rate that is lower than that of many other companies. The coffee giant has been teaming up with other companies, including music-streaming service Spotify and ride-sharing service Lyft Inc., to allow those customers to get reward points that can be redeemed at Starbucks.

Instead of the three levels in Starbucks’s current rewards system, the new system also will drop the introductory “welcome” level to have just two: green and gold. In mid-April, any customer making a transaction at the welcome or green level will be automatically awarded gold status for a full year, and anyone making a transaction at the gold level will get their gold status extended for a year.