The Associated Press reports that Starbucks yesterday say that it is confident that changes in its rewards program will generate more sales in the long run, though it "warned that the transition could be bumpy ... While it's still early, Starbucks said spending is up across loyalty members, including those who stood to lose out from the change."
Earlier this month, Starbucks changed its loyalty program to reward dollars spent rather than the number of transactions. Rather than customers earning one star per purchase and getting a free coffee every 12 stars, now they earn two stars for every dollar spent, with 125 stars needed for a free coffee. The optics were poor, and there was much outcry on social media about Starbucks making it harder for customers to be rewarded as a way of saving money.
Starbucks made the comments yesterday as it revealed during its first three months of the year, it same-store global sales were up six percent, with US same store sales up seven percent in the US. This was below expectations of Wall Street analysts, and the company did warn that despite its own expectations that the change in the long run would drive sales, there could be a short term impact on sales. (Indeed, analysts expectations may have been a little unreasonable, since total revenue for the quarter was up nine percent to $4.99 billion, and quarterly profit was up 16 percent to $575.1 million.)
CEO Howard Schultz told analysts, ""We're building something so enduring and so unique I think it's going to be one of the most significant changes to the equity of the brand."
In other Starbucks-related news, the company has opened its first stores in South Africa.
According to Reuters, "Starbucks, brought in under license by South Africa's Taste Holdings, is the latest U.S. chain to court brand-conscious consumers in South Africa, which has Africa's most advanced economy. The same queues snaked out from Krispy Kreme when the doughnutmaker opened its first store 50 meters up the road last year."
Earlier this month, Starbucks changed its loyalty program to reward dollars spent rather than the number of transactions. Rather than customers earning one star per purchase and getting a free coffee every 12 stars, now they earn two stars for every dollar spent, with 125 stars needed for a free coffee. The optics were poor, and there was much outcry on social media about Starbucks making it harder for customers to be rewarded as a way of saving money.
Starbucks made the comments yesterday as it revealed during its first three months of the year, it same-store global sales were up six percent, with US same store sales up seven percent in the US. This was below expectations of Wall Street analysts, and the company did warn that despite its own expectations that the change in the long run would drive sales, there could be a short term impact on sales. (Indeed, analysts expectations may have been a little unreasonable, since total revenue for the quarter was up nine percent to $4.99 billion, and quarterly profit was up 16 percent to $575.1 million.)
CEO Howard Schultz told analysts, ""We're building something so enduring and so unique I think it's going to be one of the most significant changes to the equity of the brand."
In other Starbucks-related news, the company has opened its first stores in South Africa.
According to Reuters, "Starbucks, brought in under license by South Africa's Taste Holdings, is the latest U.S. chain to court brand-conscious consumers in South Africa, which has Africa's most advanced economy. The same queues snaked out from Krispy Kreme when the doughnutmaker opened its first store 50 meters up the road last year."
- KC's View:
-
As a loyal and regular Starbucks customer, I've found the new program a little disconcerting. Best I can tell, I think we're actually generating rewards at a faster rate under the new system, which is a good thing. Though I've discovered that if you know that you are getting two stars for every dollar you spend, you suddenly become aware of exactly how much you're spending. That's not an awareness that Starbucks may want people to have.
I used to think that the change in the star system is just optics. But it could end up being a matter of dollars and sense.
