Ad Week has a story suggesting that retailers looking to overhaul loyalty marketing programs need to be careful how they proceed, lest they do "more harm than good."
Exhibit A in this discussion is Starbucks, which last month announced a major change in its highly successful program, putting more of an emphasis on dollars spent rather than the number of transactions.
Currently, program members get a free drink or food item for every 12 stars they earn; each transaction earns a star. But as of mid-April, members will get two stars for every dollar they spend, with 125 stars necessary to get a free item. In addition, Starbucks is changing how customers achieve gold status. In the past, it has been by earning 30 stars in a year, but the changed program will require 300 stars to reach that status, which gives people access to special offers.
Predictably, the story says, "the idea of having to spend $62.50 to earn a free item, instead of as little as $24, didn't thrill regulars, who reacted negatively and vocally on social media. Starbucks' brand perception plummeted as a result, dropping by 50 percent, according to YouGov. Starbucks' 'buzz' score, which asks respondents whether they've heard positive or negative statements about the brand, dropped from 60 to 29 in the week following the change."
The analysis suggests that what Starbucks claimed was an enhancement to the program actually could serve to dissuade people from going to Starbucks when faced with a choice. "The shift is also opening up an opportunity for Dunkin Donuts, which is already moving to intercept wavering Starbucks loyalists by offering a $5 gift card and a free drink when you sign up for the doughnut chain's rewards program," Ad Week writes. "While the competitor isn't naming Starbucks, it's not hard to spot the motivation behind the new offer."
Katie Hooper, managing director and vice president of strategy at HZDG, tells Ad Week that "as soon as you say you're changing your loyalty program, an instant skepticism emerges. When you make the reward harder to realize, it feels like something that's just helping the companies improve their revenue streams. We recommend telling customers how this is going to improve their daily life. Before, Starbucks was doing it really well by rewarding them based on frequency. It said they valued the customer no matter what."
Exhibit A in this discussion is Starbucks, which last month announced a major change in its highly successful program, putting more of an emphasis on dollars spent rather than the number of transactions.
Currently, program members get a free drink or food item for every 12 stars they earn; each transaction earns a star. But as of mid-April, members will get two stars for every dollar they spend, with 125 stars necessary to get a free item. In addition, Starbucks is changing how customers achieve gold status. In the past, it has been by earning 30 stars in a year, but the changed program will require 300 stars to reach that status, which gives people access to special offers.
Predictably, the story says, "the idea of having to spend $62.50 to earn a free item, instead of as little as $24, didn't thrill regulars, who reacted negatively and vocally on social media. Starbucks' brand perception plummeted as a result, dropping by 50 percent, according to YouGov. Starbucks' 'buzz' score, which asks respondents whether they've heard positive or negative statements about the brand, dropped from 60 to 29 in the week following the change."
The analysis suggests that what Starbucks claimed was an enhancement to the program actually could serve to dissuade people from going to Starbucks when faced with a choice. "The shift is also opening up an opportunity for Dunkin Donuts, which is already moving to intercept wavering Starbucks loyalists by offering a $5 gift card and a free drink when you sign up for the doughnut chain's rewards program," Ad Week writes. "While the competitor isn't naming Starbucks, it's not hard to spot the motivation behind the new offer."
Katie Hooper, managing director and vice president of strategy at HZDG, tells Ad Week that "as soon as you say you're changing your loyalty program, an instant skepticism emerges. When you make the reward harder to realize, it feels like something that's just helping the companies improve their revenue streams. We recommend telling customers how this is going to improve their daily life. Before, Starbucks was doing it really well by rewarding them based on frequency. It said they valued the customer no matter what."
- KC's View:
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I'm going to go out on a limb here and suggest that despite all the tsouris about the Starbucks move, in the long run it is going to end up being much ado about nothing.
While this is getting a lot of attention right now, in a matter of months most people will have forgotten about the shift in policies ... and Starbucks' best customers may in fact be completely satisfied with a system that seems weighted to reward them more than less frequent customers. I think the optics are lousy, but I think that there will be little long-term impact.
If you prefer Starbucks, this shift isn't going to send you running to the competition. And it is foolish, I think, to suggest that it will.
