Starbucks is a huge, international firm, and it has developed a unique loyalty reward system for its customers. As with any large company, Starbucks has a variety of competitors, many of whom also have their own customer loyalty reward schemes. Such schemes are designed to keep existing customers and, as the name suggests, to reward the loyalty of existing customers. The schemes are not designed to attract new customers. Therefore, comparing the effectiveness of two different loyalty schemes can be problematic. Nevertheless, Starbucks appears to have honed their scheme to encourage customers to keep using the stores.
The Starbucks loyalty reward scheme is, overall, a very attractive and well thought out concept. A customer can sign up for a card, on which they will earn ‘ stars’ every time they make a purchase. In order to earn stars, the payment must be made on the card, and the card can be topped up online on in a Starbucks store (My Starbucks). There is no fee to join this program. The card is easy to use, and is accepted across North America and in many other countries around the world. The balance on a Starbucks card can be easily checked online after the card has been registered. The scheme does reward loyalty as promised. As the customer uses his card, he has opportunities to climb the levels of the reward scheme, to Green level and then to Gold level, which offer more rewards in return for points than the base level (My Starbucks).
The idea of having to place money onto the Starbucks card, rather than working with a simple points card, is a reliable way of ensuring that customers continue to eat and drink in Starbucks. Once a customer has put $20, for example, on his card, he is very likely to visit a Starbucks, even if it means he has to walk a little further than if he was to visit one of Starbucks’ competitors.
As the scheme offers the option to top up a card online, this means that many people can now top up their card using their smartphones. Therefore, wherever the customer is, even if they are not near a cash point, they can gather the money to have lunch and to earn points on their Starbucks card.
Having the auto-reload option means that the customer always has money on their card. For a regular coffee drinker, the prospect of not having the hassle of running out of money and topping up is will be attractive. By using auto-reload, the card will always have money on it and, therefore, the customer will always be inclined to use the Starbucks stores. Starbucks encourage customers to use auto-reload, claiming that by using it they are sure not to miss out on rewards they are entitled to.
The rewards system is intelligent for two major reasons. Firstly, the rewards do indeed improve as the customer progresses up the Starbucks Green and Gold levels. Therefore, the customer will be keen to use their card and Rewards do improve, so you are more likely to go back and want to climb the levels. Secondly, the competitive nature of modern society means that people tend to enjoy the act of climbing levels, whether it’s in a computer game, the employment field or, indeed, a Starbucks points system.
Starbucks appears to be targeting well-educated, professional people (Kembell et al, 2002). The rewards are items that adults would generally like rather than, for example, teenagers or the elderly. Starbucks is known to be a useful store either to eat in or to take away snacks and beverages, and for this reason is attractive to busy professionals.
Starbucks’ main competitor appears to be Dunkin Donuts. Interestingly the two companies’ websites are extremely similar. Like Starbucks, Dunkin Donuts offers a loyalty reward scheme to its customers. The two schemes are similar in that both involve cards that need to be kept topped up with money and then used in store. Also similar is the idea that the more the card is used, the more the customer is rewarded for their loyalty. However, there are also notable differences in the schemes.
While Starbucks offers rewards such as free drinks, for example, Dunkin Donuts states that by spending money on the Dunkin card, the company will then put extra money onto the card for the customer to spend in the stores (Perks).
Furthermore, Dunkin Donuts makes the prospect of automatic top-ups more attractive, by offering to double the reward money being placed onto the card if the customer signs up for automatic top-ups (Perks).
Rewards systems, in terms of giving out free gifts, are effective so long as the rewards are good enough to make customers strive to obtain them. The Starbucks rewards on the Green level are limiting, and won’t be attractive to all people. However, the Gold level is significantly better, and therefore customers are likely to strive to conquer the Green level and then climb to the Gold level. Conversely, as the Dunkin Donuts scheme offers to place extra money onto the customer’s card, this scheme will appeal to every customer, as they can spend their rewards on whatever they desire. However, as there is no system of levels with the Dunkin Donuts reward system, there is no incentive to hurriedly spend money in the store.
As customer loyalty schemes are designed to encourage loyalty among existing customers, it is difficult to declare which of the two companies has a more effective scheme. They each have their individual advantages over their competitors. However, the loyalty schemes of both are likely to appeal to their respective customer bases.
Kembell et al. (2002). Catching the Starbucks Fever. Academic Mind. Retrieved from
http://www. academicmind. com/unpublishedpapers/business/marketing/2002-04-
Perks and Rewards. Dunkin Donuts. Retrieved from
https://www. dunkindonuts. com/content/dunkindonuts/en/ddperks. html
My Starbucks Rewards. (2011). Savings Lifestyle. Retrieved from
My Starbucks Rewards Program Information. Starbucks. Retrieved from
https://www. starbucks. com/card/rewards/program-information