starbucks new loyalty program case study

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Starbucks Loyalty Program Case Study

Starbucks, renowned as one of the foremost coffee brands globally, owes its success not just to its exceptional range of products. A significant contributor to its widespread acclaim is its highly popular loyalty program , which has been an inspiration for many U.S. restaurant chains and retail stores. Launched on December 26th, 2009, the Starbucks rewards program has amassed over 30 million active members, contributing to nearly 60% of the brand's total revenue. The program effectiveness was strikingly evident in 2019, with Starbucks reporting a substantial 7% increase in sales primarily attributed to the efficacy of its rewards program.

Program type 

Points system.

• Points for rewards
• Coalition Loyalty

Starbucks Rewards leverages a points-based system ingeniously designed to enhance customer engagement and loyalty. Members accumulate 'Stars' with each purchase made via their registered Starbucks Card or through the Starbucks mobile app.  The program is structured to encourage varied forms of engagement, enhancing the overall customer experience and brand loyalty.

• Earn 1 Star per $1 spent when you pay in cash
• Earn 2 Stars per $1 spent when you preload your digital Starbucks Card
• Earn additional bonus Stars through special promotions
• Earn double Stars on Delta Airlines travel days
• Earn double Stars on promotional days
• Points expire after 6 months

Starbucks Rewards allows its members to redeem their accumulated Stars at various levels, each unlocking distinct rewards. This structure caters to diverse preferences, allowing customers to either redeem their Stars for immediate benefits or save them for more substantial rewards.

• 25 Stars: Redeem for a free drink customization, such as extra flavor, espresso shot, or alternative milk.
• 50 Stars: Get a complimentary hot coffee, tea, or bakery item like a bagel or croissant.
• 150 Stars: Choose a free handcrafted drink, hot breakfast, or a parfait.
• 200 Stars: Earn a complimentary lunch item, like a salad, sandwich, or protein box.
• 400 Stars: Exchange for packaged coffee beans or select Starbucks merchandise.

Coalition loyalty

Starbucks and Delta Airlines have embarked on a partnership, merging the world of coffee with the skies. Linking your Delta SkyMiles® and Starbucks® Rewards accounts opens up a new realm of earning opportunities and exclusive benefits.

• Travel-day perks: Double Stars on Delta travel days
• Everyday earn: 1 mile per $1* spent at Starbucks
• Exclusive offers: More opportunities to earn Stars and miles

Interesting takeaways

Multi-channel communication.

Starbucks leverages multiple channels to communicate about its rewards program, ensuring widespread awareness and engagement. The use of a dedicated landing page, mobile app, points balance reminder emails , company blogs, and social media platforms creates an ecosystem where information about the program is readily accessible and consistently updated. The clarity and frequency of updates, including press releases for significant changes, demonstrate Starbucks’ commitment to transparency. This approach not only keeps existing members informed but also attracts new participants by clearly outlining the program’s benefits. Good communication is likely a significant factor in the program's high membership numbers.

Program simplicity and incentive structure

The simplicity of the points system (earn points and redeem for rewards) is user-friendly and easy for customers to grasp. This clarity enhances the appeal of the program and encourages participation. The structured nature of rewards incentivizes customers to accumulate more points to access greater rewards. This gamification element adds an extra layer of engagement, as customers are motivated to reach the next level. As customers get closer to a significant reward, their motivation to attain it increases. This psychological aspect of goal setting and achievement is a powerful tool in enhancing customer loyalty and encouraging more frequent purchases.

Incentivizing preloaded payments

Starbucks ingeniously incentivizes customers to preload their Starbucks account by offering double points for purchases made using a preloaded Starbucks Card. By preloading their accounts, customers commit themselves financially to future purchases at Starbucks, which effectively guarantees a degree of customer loyalty and repeat business. This strategy turns occasional visitors into regular customers, as the preloaded funds will likely be used exclusively at Starbucks locations. From a financial perspective, this strategy is beneficial for Starbucks. When customers preload their accounts, the brand receives cash in advance, improving its cash flow. This tactic also promotes increased engagement with the Starbucks mobile app, where preloading and tracking of rewards can be easily managed. 

Coalition program with Delta Airlines

The partnership with Delta SkyMiles is a strategic move that broadens the program’s appeal. By collaborating with an airline, Starbucks extends its reach beyond the typical coffee shop customer. This alliance allows both companies to tap into each other’s customer bases, potentially attracting new customers who are loyal to one brand to become interested in the other. It’s a creative way to expand market reach without direct competition. For customers who already patronize both brands, this coalition loyalty program reinforces their loyalty and increases their engagement with both Starbucks and Delta. It creates a more integrated customer experience and can deepen the sense of brand loyalty.

Areas of improvement

The removal of the tiers system.

The previous iteration of the program had a 'Gold' tier, which was a smart way to acknowledge and reward the most loyal customers. By offering them the ability to earn points faster and providing exclusive benefits, Starbucks recognized and cherished its most valuable customers. This tier system not only incentivized increased spending but also gave a sense of exclusivity and status. While simplifying the program might make it more accessible for new customers, it risks diminishing the perceived value for power shoppers. The elimination of the tier system could lead to a decrease of engagement from these highly valuable customers.

Lack of personalized engagement or rewards

In the current market, personalization is key to customer engagement. Starbucks’ generic approach to rewards and communication, without considering individual customer preferences and behaviors, is a missed opportunity. Personalizing rewards and communications could significantly enhance customer loyalty and encourage repeat business. Leveraging customer data to offer personalized rewards and product recommendations could not only improve customer satisfaction but also drive product discovery and sales.

Limited post-purchase engagement

Post-purchase engagement is crucial in maintaining a connection with the customer even after they leave the store. This ongoing engagement is essential for converting first-time buyers into regular customers. While Starbucks has started initiatives like Starbucks Odyssey , which offers additional ways to earn rewards through digital journeys, its integration with the main rewards program appears to be lacking. A more seamless integration could enhance the overall experience and effectiveness of the loyalty program. Recognizing that some of these initiatives are in their early stages, there is potential for growth and improvement.

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Rewards Case Study: Starbucks Rewards

Starbucks is a staple coffee brand with more than 32,000 locations in over 80 countries around the world. It’s safe to say Starbucks has an abundance of loyal customers. The iconic brand has revolutionized the coffee industry and changed the way everyone consumes coffee. Starbucks took something that had been done the same way for decades and turned it upside down with effective partnerships, beautiful branding, and a variety of types of coffee drinks. They have been doing things differently ever since, including customer loyalty.

Starbucks Rewards is often regarded as one of the best retail loyalty programs in existence and one of the most engaged among its members. According to a CNN report, by October 2022, there were 28.7 million active Starbucks reward members. Giving Starbucks a 16% year-over-year growth in its loyalty program.

They have created a loyal following of customers both with their customer experience and revolutionary rewards program. But recent changes to its loyalty program have its members criticizing the new changes. It’s now going to cost more to earn that free drink and menu item, meaning customers will have to work harder to earn those stars.

Let’s dive into what makes Starbucks Rewards unique and what we can learn from its recent changes in loyalty.

Changes no one asked for

Starbucks Rewards has over 28.7 million active reward members and with new changes to its rewards program that went into effect last month in February, customers were not happy. Starbucks increased the amount of “stars” (loyalty points) customers will need to redeem items.

Here is the breakdown of what changed:

• What costs 50 stars increased to 100 stars.
• What costs 150 stars increased to 200 stars.
• What costs 200 stars increased to 300 stars.
• Hot coffee or tea, baked goods, and packaged snacks will be 100 stars, up from 50.
• Lattes, frappuccinos, parfaits, and hot breakfast items will be 200 stars, up from 150.
• Sandwiches, salads, and protein boxes are 300 stars, up from 200.

Currently, Starbucks reward members can earn 1 star per every dollar spent if members just pay with a credit, debit card, or cash in-store or pay in-app. Members can earn 2 stars per dollar if they preload money into their rewards account or register a gift card to pay with.

Idk if anybody told y’all BUT @Starbucks made their rewards about 50 stars more to redeem. It sucks a lot. What used to be 50 stars is now 100. Lol now I don’t even want to use them. 🥹 — AshCash ✌🏾 (@TechBaeAsh) February 16, 2023

With the recent changes, that free iced coffee or chocolate croissant will cost a bit more, $100 to be exact if you’re paying with cash or a debit card or $50 if you preload money in your account. To earn that free cold brew or a breakfast sandwich, you will have to spend $200 if you’re paying in cash or $100 if you preload your account.

The reason for the change is unclear if it's because of inflation or the rising cost of products everywhere. According to an Axios report, Starbucks said it was due to the changing needs of customers. “We occasionally need to make changes to ensure the long-term sustainability of the Starbucks Rewards program and to meet the changing needs of our members.” Members will disagree.

Starbucks really moved the reward levels back……..in this economy — Jobe Bean Bryant (@jeauxdeci) February 27, 2023

How Starbucks Rewards misses the mark

Starbucks Rewards is one of the best examples of customer loyalty and how to build a brand community. Based on its recent changes and the reactions from customers, there are a few ways Starbucks Rewards misses the mark.

1. Changes no one wanted

Why change something when it’s not broken? Starbucks customers have tweeted, commented, and made dozens of TikTok videos on the unwanted changes Starbucks made to its reward program.

Customers were given a few weeks' notice of these changes, which left many to have to use all of their points before changes went into effect. Starbucks really missed the mark here because so many customers voiced their dissatisfaction with the recent changes and Starbucks did not relent and went ahead with their changes.

@maddykim16 #greenscreen starbucks is a scam!! #starbucks #stars ♬ original sound - Maddy Kim

2. Current tiers don't create exclusivity

Tiered programs are an amazing way to encourage customers to spend more and engage more. Tiers challenge customers to reach the next level while also introducing an element of gamification that customers love. Tiers are also effective when the highest tier is reserved for only the most loyal and profitable customer.

Starbucks currently has five tiers of different rewards customers can redeem. If Starbucks turned those five tiers into different levels of earnings, meaning each level would double the points earned, it would incentivize customers to spend more to enter and remain in a certain tier. Customers love an incentive or something to reach for and if Starbucks brought their famous gold card back, this would be a perfect way to entice customers into different tiers for their reward program.

How Starbucks Rewards raises the bar-ista

For a loyalty program contributing 55% of the company’s revenue, Starbucks has clearly locked in loyalty and a brand community. With an increase in prices in every industry, loyalty has become a key to growth and recession-proof for Starbucks. So what is Starbucks Rewards doing so well?

1. Outstanding mobile experience

Starbucks has become a global brand worth billions of dollars and we can take lessons on what great things they do in loyalty and rewards. Their top quality is their outstanding mobile experience.

How a customer interacts with a loyalty program can often make or break that program. Starbucks’ app makes its loyalty program more interactive and more effective. The app makes it easy to see how many “stars” (points) you currently have, as well as make orders and payments right from your phone. You can even use the service to find the nearest Starbucks location.

Starbucks mobile app, drive-thru, and deliveries generate over two-thirds of orders and up to 26% of sales from mobile apps alone. The app gives Starbucks Rewards an edge that other standard loyalty programs do not have. In today’s competitive environment, just having a loyalty program is not enough. You have to make an effort to differentiate your program from others.

2. Omnichannel retail

This leads to the second top quality of Starbucks Rewards and that is their omnichannel presence throughout the apps and physical retail locations and across their marketing. Not only can you pay on a mobile device or through in-store locations, but you can also shop online, order drinks through the app, or have an experience visiting different locations in any country. You know what you will get no matter where you are in the world.

From the rise of new services such as BOPIS (buy online, pickup in-store) to the conveniences of ordering from an app. Surprisingly, how we collect and receive our purchases are also different. Starbucks has expanded into delivery through its partnership with DoorDash which it tested in California, Florida, Texas, and Georgia last fall.

3. Experimenting with partnerships

The third top quality and characteristic of Starbucks Rewards are its partnerships. Starbucks has recently been experimenting with new partnerships in loyalty programs, going a step further with established brand partnerships. After testing its delivery partnership with DoorDash , Starbucks will expand nationwide in all 50 states by March 2023.

View this post on Instagram A post shared by Starbucks Coffee ☕ (@starbucks)

Starbucks is expanding into the NFT market with its program Odyssey. According to Starbucks, ”selected participants will be able to engage in Starbucks Odyssey ‘Journeys’ which are a series of entertaining, interactive activities to earn collectible ‘Journey Stamps’ (NFTs) and Odyssey Points that will unlock access to exciting new benefits and experiences.”

View this post on Instagram A post shared by Delta Air Lines (@delta)

What’s better than one loyalty program? How about two loyalty programs? For those frequent travelers, Starbucks and Delta announced a partnership where members can link both of their loyalty programs and earn points. “Link your Delta SkyMiles and Starbucks Rewards accounts to start earning 1 mile per $1 spent at Starbucks.” This is another way Starbucks can in a way gamify their loyalty program, while also offering more to its customers.

Gold Stars for Starbucks Rewards

With almost 30 million program members, Starbucks Rewards is a top standard for loyalty programs that any ecommerce business can take lessons from and be on their way to replicating. Whether it's building an awesome omnichannel strategy or delivering a fantastic mobile experience or partnering with other brands in your industry, Starbucks can deliver lessons to all of us.

Editor’s Note: This post was originally published on July 24, 2017 and was updated for accuracy and comprehensiveness on March 13, 2023.

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Digital Innovation and Transformation

Mba student perspectives.

• Assignments
• Assignment: Digital Winners and Losers

Starbucks: Winning on rewards, loyalty, and data

Starbucks Rewards Program generates customer loyalty, increased revenue, and data for the company to create meaningful 1:1 relationships and personalized marketing efforts.

Starbucks Reward Loyalty Program

The Starbucks Reward Loyalty Program has a staggering 16 million active members (as of March 2019), with 11% growth of their user base in Q2 2018. Starbucks attributes 40% of its total sales to the Rewards Program and has seen same store sales rise by 7%. The Reward Program is available on mobile devices as the Starbucks app, and has seen impressive membership and growth since 2008, with multiple iterations on its original form. The investment made into the mobile interface has increased the frequency and spend of both regular and occasional customers. Starbucks uses this tool to individually market specific products and features based on data collected from the app about its users. Customers can order and pay through the app ahead of arriving at a physical location, as well as earn stars (rewards) that translate into free drinks, food, and merchandise. Starbucks is a clear winner that has reinvented their relationship with customers and captured enormous value through their investment into digital technologies.

How does Starbucks create value?

Customers benefit from using the app by:

• Ease of payment in store through mobile app
• Ability to order and pay ahead of arriving in store (and therefore skip any Monday morning rush lines by having a separate ‘mobile order pickup’ station – which in itself serves as a highly effective marketing tool for the app)
• Rewards and benefits: such as free refills on brewed coffee and free drinks on member’s birthdays, relatively quickly earned other rewards from purchases, such as free food/drinks/merchandise
• Special member events
• Ability to send other members and friends gift cards through the app
• App integration with other platforms such as Spotify to discovery music playing in store (a big part of Starbucks and more generally coffeehouse culture)
• Members are first to know about upcoming seasonal and new product releases

Starbucks reaps many of its own ‘rewards’ from the app:

Pathways to a Just Digital Future

All these features have created an intense loyalty for customers to the app and reward program, which kicks back nicely for Starbucks. Members of their rewards program are feeding in valuable data that Starbucks can then mine to personalize marketing efforts to individuals and create a uniquely direct relationship with their customers. Besides drawing in the ‘occasional user’ to come back and increase their frequency of purchase (key in this business), the app has also been seen to increase the frequency and spend of regular and super-user customers. According to CFO Patrick Grismer, “We know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully”.

Aside from the increase in revenue associated with the app, the real value lies in the innovative potential uses for the large amounts of user data collected, which forms the base of Starbucks’ digital strategy. Starbucks has begun experimenting with digital menu boards in their physical locations to allow for a dynamic menu based on customer demand (varying with regional preferences and times of day), that would ideally continue to boost same store sales. The decision of where to place new stores and how to expand has also been informed by this user data. The ways in which this user data can be used in the future are important in the ever more personalized retail world, where customers want less of being ‘talked at’ and more of being included in a conversation.

What’s Next?

Starbucks continue to prove itself to be truly customer centric, building innovation around the core theme of their relationship with customers. Their willingness to adapt and invest in their digital technology has allowed them to create and capture enormous value for both customers and the company. As Starbucks gets access to more customer data, the ability to continue to create more meaningful, personal relationships with customers will only increase, and this is how Starbucks is positioned to win in the future. They have continued to innovate on ease of use with the app, now integrating voice as a feature when ordering for mobile pickup. Of course, Starbucks will have to continue within this theme of digital innovation to remain a winner in the future. Use of consumer data builds a strong base for a number of potential technologies to harness in the future, but it doesn’t guarantee success.

https://www.e-zigurat.com/innovation-school/blog/companies-digital-transformation-strategies/

https://www.restaurantbusinessonline.com/marketing/starbucks-rewards-program-pushes-chains-growth

https://www.usatoday.com/story/money/2019/03/19/starbucks-redesigns-its-loyalty-program-so-you-get-free-stuff-sooner/3174227002/

https://zinrelo.com/loyalty-rewards-case-study-new-starbucks-rewards-program.html

https://themanifest.com/app-development/success-starbucks-app-case-study

Student comments on Starbucks: Winning on rewards, loyalty, and data

I loved this post, Leah! (Not just because I’m a Starbucks junkie and heavy user of the app.)

One thing that I think about whenever I use mobile ordering is the way my experience has changed in the store – I spend less time on the transaction, keep my headphones in, and don’t have to interact with anyone behind the counter. This is a huge positive for me (e.g., when I’m in a rush) and probably makes me lower cost-to-serve for Starbucks, but I wonder does the presence of in-and-out customers like me make non-mobile users’ experience worse? Are they served more slowly? Do they no longer enjoy lingering over a book in Sbux’s “third place” when there’s a constant stream of mobile customers with headphones in, coming and going? Maybe this is why Starbucks is doubling down on its Reserve Roastery high-end concept, to segment out the grab-and-go types like me from the coffee shop experience-seekers.

To generalize, it seems that greater investment in/growth of digital channels can negatively impact traditional channels if not addressed proactively.

Really good point!

Great article highlighting Starbucks, Leah!

Your blog post reminds me of our first case in class on Dominos Pizza. At one point, Dominos was considered a huge winner in the app/delivery space as they were an early adopter of app & ordering technology. But as competition moved quickly, other players such as UberEats and DoorDash threaten the competitive advantage these single-brand apps, such as Dominos, had developed. I sat in class wondering if Dominos could follow the Starbuck’s app model and develop a loyalty program, or if selling pizza vs. cappuccinos are just too different of business models?

Interesting read! I think the membership programs that have become increasingly common in retail are an interesting way for traditionally analog companies to begin to experiment in the digital world. There is clearly value on the table for both the company and the consumer so I can imagine it would be an easier internal sell than some other digital transformation projects. I wonder how Starbucks will continue to improve their application to build an experience that connections the physical and digital worlds for their consumers and differentiate against other big chain coffee shops.

Thanks Leah for the interesting post. I completely agree that the reward loyalty program is an effective initiative to reduce the customer churn due to the entry of new coffee players. However, I believe that it is even more important to improve the customer experience by creating new products that match with the evolving preferences of customers. As you mentioned in the article, data will play a critical role in the future to offer a more personalized service. Starbucks has developed some initiatives in this line. For example, in 2019 Starbucks installed 1,900 Mastrena II expresso makers, which have IoT sensors for preventive maintenance purposes. This initiative will allow Starbucks to reduce machines’ failures, reduce customer wait time and improve customer experience. In the future, Starbucks should continue working with data to improve their products and increase customer retention.

Great analysis Leah and really unique viewpoint on what’s next for Starbucks! As brands continue to focus on building a deeper connection with their consumers loyalty programs that collect more personalized data and usage trends will help organizations better differentiate their service and product offerings. I am curious as Starbucks begins to really leverage big data what major changes do they decide to implement. There may be opportunities to decentralize operations and curate offerings providing localized products, location designs, and services which can further help Starbucks capture a larger share of wallet.

Great post, Leah!

I feel conflicted about Starbucks’ shift to the digital channel that allows for a greater number of customers to be served in a shorter amount of time. Personally, I’m the type of customer that spends hours at coffee shops for the quiet and relaxing ambiance, smell of coffee, and calming music. These days, Starbucks stores feel more like McDonald’s and the relaxing user experience has been completely lost. While they’ve now lost me as a customer, I recognize that they’ve gained 8 in my place that probably result in higher profitability. A win for Starbucks, but unfortunately a loss for me.

Great post! This is super interesting to me – I had no idea this was such a powerful tool. There is one main thing I’m wondering about: What do you think allowed Starbucks to be more successful than other coffee shops with their Rewards program? Was it more the technology, the convenience, the recommendations, or the combination of everything together? I guess my thought is that I don’t know why more companies haven’t been able to replicate this.

A second thought is just that the power of this loyalty seems so strong that it may be impossible to disrupt, despite lower prices elsewhere. We see new coffee shops popping up all the time, and I’m not sure any of them stand a chance knowing this.

Thank you for sharing! This has opened my eyes to how important loyalty is and how brands can work on building that with customers.

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Please note you do not have access to teaching notes, starbucks’s loyalty reigns.

Publication date: 9 February 2016

Teaching notes

By July 2015, 20% of Starbucks’s payments in the United States came through its mobile app. The company had created a tool to both drive loyalty and grow its customer base. No stranger to innovation, Starbucks was partnering with iTunes as early as 2007, earned its first mobile marketer of the year award by 2010, introduced its mobile app in 2011, and by 2015, 94% of Facebook users were either fans of Starbucks or friends with someone who was. This case explores the company’s commitment to mobile and its social media prowess, and considers just what it takes to drive loyalty in a customer base.

Murray, M. (2016), "Starbucks’s Loyalty Reigns", . https://doi.org/10.1108/case.darden.2021.000023

University of Virginia Darden School Foundation

Copyright © 2016 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

You do not currently have access to these teaching notes. Teaching notes are available for teaching faculty at subscribing institutions. Teaching notes accompany case studies with suggested learning objectives, classroom methods and potential assignment questions. They support dynamic classroom discussion to help develop student's analytical skills.

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Starbucks New Loyalty Program Case Study

You’ve probably heard by now that many Starbucks customers are upset, if not infuriated by the brand’s change to a spend-based loyalty program. In reality, not all customers are upset — but many of those frustrated come from the 50% of customers who average less than $5 per visit. The other half of customers who spend more than $5 per visit are happy because they’ll be getting rewarded more often for their loyalty.

The new spend-based program is actually fairer than the current visit-based program. Brands run off of customer spend not visits, so they should reward their customers accordingly. Unfortunately because Starbucks initially rewarded customers on visits not spend, the brand created expectations with regular coffee drinkers who are understandably upset as their loyalty is less appreciated now.

Here’s a quick review of the changes.

It’s easy to see why the typical $3 per visit customer is upset.

Daily visitors who spend $3 every weekday will now have to spend $150 (50 visits) instead of $90 (30 visits) to reach Gold status and become eligible to receive rewards. Then they have to spend another $63 (21 visits) instead of $36 (12 visits) to even receive a reward. The program is barely worth participating in for this group of customers. Yet this is a group that could be very valuable to Starbucks as many of these customers can spend upwards of $700 per year.

Meanwhile the $7 per visit customers are excited about getting rewarded for their increased spend. They will reach Gold status after 22 visits instead of 30 and receive a reward after spending $63 (9 visits) instead of $84 (12 visits). The more they spend per visit and the more frequently they visit, the faster they will be rewarded — the exact behavior a brand wants to reward.

It’s tough to please every customer, especially when you have established a set of expectations. Starbucks realized the spend-based program rewarded their best customers better and opted to change the program by using their average ticket of $5.

Yet Starbucks’ customer model poses a challenge because many regulars prefer a standard $3 cup of coffee. They may not spend a lot each visit, but their high frequency should still be recognized more than once every 21 visits.

Starbucks could show their appreciation for low-spend, high-frequency customers by rewarding them with other privileges such as experiential benefits. The top 20% of frequent Starbucks customers visit 16 times per month. To include more customers, the brand could create a “Star Status” for customers who visit more than 12 times per month. The new status would offer experiential benefits with one of Starbucks’ partners like Spotify or The New York Times. These benefits could be ongoing for Star customers or once every 10 visits to remind customers that the brand values their business.

Only Starbucks has access to their customer data and segments, so it’s hard to speculate if the program change will be positive. They may have decided the loss of sales from low spend-high frequency customers was worth the increase in spend per visit from all customers. In the end, Starbucks’ new program is better suited to reward their best customers and the focus on more experiential rewards could help satisfy the customer group they have upset in the process.

The Science Behind Starbucks’ Massively Successful Customer Loyalty Program

Starbucks has completely revolutionized the coffee business. It took on something that existed from ages and completely overhauled it from its core. Today, Starbucks is regarded as the world’s largest coffee house with high regards for its customers.

The Starbucks success is a story of taking every business aspect differently. They have time and again challenged conventional business methods in the food and beverage industry. And, today we are going to discuss one of the aspects that they completely revolutionized, Customer Loyalty.

A little history of the Starbucks loyalty program

Starbucks entered the customer loyalty space with its Gold program, where customers paid an annual fee of $25 and got 10% off on all offerings throughout the year. But as time proceeded, the program started fading away. So, Starbucks had to come up with a new program .

• Customers earn “Stars” by paying with a registered Starbucks card or the Starbucks mobile app, or by entering Star codes, one transaction equals one Star.
• Welcome level — just register your card and get a free birthday drink, plus a free customization for your first drink.
• Green level — earn five stars to add free in-store refills to your Welcome perks, and 2 customization to your drink instead of one.
• Gold level — earn 25 stars in 12 months to get all of the above benefits, plus a free drink or food item after every 10 Stars, special email or text offers, and a Starbucks gold card.

Starbucks Rewards Customer loyalty program

Upon implementation of the Starbucks Rewards customer loyalty program , Starbucks reported an increased revenue of shocking $2.65 billion, with brand executives pointing towards their reward program as one of the major enabler for such an increase.

We are going to discuss 3 factors that we think made their customer loyalty program one of a kind.

Superb Mobile experience

Consistent customer interaction is very crucial for any customer loyalty strategy. If the interaction is of low quality, there’s a high chance of customers never discovering the program, let alone using it. Starbucks knew this and therefore targeted devices that are most used by its customers, apart from targeting just email or their website, they aggressively went after the mobile ecosystem.

The Starbucks app puts the power and comfort in the user’s pocket. The app is available for all major mobile operating systems around.

Since the adoption of smartphone in the last decade, Starbucks gradually shifted every aspect of their loyalty program to the mobile platform. The app can be completely linked with your loyalty program. This allows a lot of Starbucks Rewards members to use their account to full potential. Even if they forget to carry their membership cards with them, they can easily use their app to make a purchase without losing on any reward points.

Go beyond the retail outlets – Collect points for Starbuck’s products at grocery stores

Starbucks even expanded their customer loyalty program beyond their retail stores. You can purchase their assorted coffee bean collection from any grocery store around US and other countries. Not just that, but you purchase tea, K cups, ready to enjoy drinks, etc and make points of it as well.

A shopper just needs to look for a star code on the participating product and enter the code into the app. This really makes me fall in love with their loyalty program, because no matter where you are, if you’re buying a Starbucks Rewards product, you can redeem bonus points from their app or their web portal.

Exclusive Gold Card status

When I first got my starbucks membership, one true motivation behind getting a membership was getting hold of that elusive gold card, which you can earn after earning 30 stars ( 5 stars to reach green level, then another 25 to reach gold level).

And why not?

A Gold card level member is entitled to a lot of perks at any Starbucks retail outlet. A few perks that a Starbucks gold member gets is –

• Free Beverage customizations on all your drinks – Up to 2 customization per drink for free.
• Free tall drink on purchase of 250gram of whole bean coffee.
• Free size upgrades for featured beverage during the first 2 weeks of its launch.
• Free drink after every 10 stars you earn.
• A personalized one-of-a-kind Gold Card.
• And more seasonal special offers.

I feel this is the true motivation behind Starbucks Reward program offering. If you’re frequenting a Starbucks store, then earning your way to gold card is a no brainer. There is so many things on the table for free that you just can’t let it go.

Another factor is the brand value that Starbucks emanates off. Starbucks loyal customers shares a lot of their experiences over social media. This is something that you don’t find with other coffee house loyalist. They feel a sense of pride when they move to a higher level and when they compare it to other coffee houses. And that’s why the Gold card is so effective. It hits 2 targets with one arrow, first one being, keeping the customers happy and the other increasing brand value via word of mouth and social media.

The gold card, simply put, is a way to state that you are a Starbucks elite and you have a status symbol to uphold now. And, that is the true motivation behind why one should get enrolled into the Starbucks rewards program.

Many marketing and business experts rank Starbucks reward program as one of the best customer loyalty program, ever to be executed by a brand.  It’s a great strategy from a business standpoint as well as a very attractive offering for customers as well.

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Starbucks Loyalty Rewards Program Case Study: What Makes It Work?

Coffee helps us to kick start our day or helps us take the best breaks when we need one!  Coffee gives us the much-needed boost of energy. The coffee market is growing at a CAGR of 5.5% during the forecast period (2019 – 2024).  The number of Americans who drink a cup of coffee daily has been the highest in six years.   This highlights the massive potential of this market segment. One of the key players in the coffee market is Starbucks, a common name to the coffee cravings! Starbucks has 30,184 stores worldwide, making a consistent coffee experience available in different countries throughout the world.

About Starbucks Loyalty Program:

Starbucks offers one of the most sought-after loyalty programs ‘Starbucks Rewards’ program that offers freebies and discounts to members giving them plenty of reasons to choose Starbucks over other players. ‘Starbucks Rewards’ program represents a significant portion of the coffee chain’s recent fiscal growth. Starbucks has reported an increased revenue of $2.65 billion, attributing their rewards program for most of the increase. Over the last two years, membership has grown more than 25%, loyal customers use Starbucks’ membership program (16 million members) for about 40% of sales at the company’s US stores.   Revenue rose 4.6% to $6.31 billion  during the quarter from the previous year.

How Does the Starbucks Rewards Program Work?

Starbucks has enabled customers to check their gift card balance, points, and mobile orders via phone, website, in-store, or on their user-friendly app. Real time correspondence of different channels eliminates the possibility of a lapse in communication. This omnichannel capability is attractive to customers, encouraging engagement at many levels. Customers earn birthday rewards, free in-store refills and double-star days- these are limited-time promotions during which members earn twice the points for purchases made.

Experience the Zinrelo Loyalty Rewards Platform to Believe it!

Mobile app makes online ordering and payment easy. The mobile ordering system acts as a digital marketing tool, allowing customers to see new items much in advance of launch. The Starbucks app provides users with an inviting and innovative personalized experience, just like the coffee chain itself. The convenience of using an app acts as a powerful driver of loyalty. The simple layout of the app makes it appealing to users.

Starbucks gathers information on customers habits, interests etc. thus empowering them to offer more relevant perks & communication to customers. According to a survey by Manifest, a technology survey data company in 2018, Starbucks has the most regularly used loyalty rewards app (48%). Launched in 2015, the mobile order and pay feature helped customers to order via the app & skip the line. The app offers customers convenience while clearly communicating how customers can earn rewards points (stars) and what they will get with them. A strong gamification strategy fueled by exclusive customized offers, has helped the brand stay top of mind for customers.

Changes & enhancements to the ‘Starbucks Rewards’ programs are on the leading edge of customer loyalty. They have recently revamped their rewards program in North America to offer occasional customers greater access to freebies. With the aim to provide more flexibility in the program to bring in greater value to more people.

Highlights of New Starbucks Loyalty Program-

• Customers have multiple benchmarks to cash in their stars for rewards. They can get rewards faster, option to make minor customizations for free in exchange for 25 stars. Some of the most popular rewards like Macchiatos, Starbucks lattes and other drinks will now require 150 stars, an increase from the previous program.
• Members can redeem smaller amounts of stars for lower-value buys
• Starbucks rewards will form a single-level program, where all members can begin to earn stars toward free rewards from the day they join.
• Points will not expire for customers, who attach the loyalty program membership to their Starbucks rewards Visa credit card or a prepaid card. In the previous program, any gold-level points would expire six months after the calendar month they are earned in.
• When a customer walks in a Starbucks store, any purchase they make can be used towards rewards.

Starbucks used to give a free drink of customers choice after $62.50 in spend; now, customer must spend $75. Customers were upset with this change, as there were initial hiccups in the communication of the new program benefits. However, Starbucks was fast to address customer concerns on social media.

What has Not Changed in the Starbucks Program?

• Free Starbucks birthday drink, this could be a complimentary handcrafted beverage, or one complimentary ready-to-drink bottled beverage or one complimentary food item.
• Opportunity to earn bonus stars on monthly double stars days.

How do the Rewards Work in the New Program?

New redemption options:.

• 25 stars: an espresso shot, dairy substitute, or additional flavor
• 50 stars: brewed hot coffee, hot tea, or bakery item
• 150 stars: handcrafted drink, hot breakfast, or parfait
• 200 stars: lunch sandwich, protein box, or salad
• 400 stars: select merchandise or at-home coffee

The move to revamp the program is to offer customers more flexibility and options.

Starbucks is continuously revamping its loyalty program to offer more value to customers. Further enhancements will help make the program more enjoyable to customers.

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About author.

Samir Palnitkar ,  is the VP of Customer Success at Zinrelo, An expert on building and growing “retention-first” businesses, he frequently writes on customer retention and rewards programs. Samir holds five technology patents, and is the author of two technical books.

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Case Study: Starbucks’ Success Elevating Customer Experience with Customer Journey Mapping

Customers journey mapping to deliver great customers experiences.

Starbucks, the world-renowned coffee company, is known for its exceptional customer experience and innovative offerings. To stay ahead in the competitive coffee industry and maintain its reputation, Starbucks has consistently prioritized understanding its customers and their needs. One key strategy that Starbucks has used to achieve this is customer journey mapping.

Customer Journey Mapping Strategy

Starbucks embarked on a comprehensive customer journey mapping initiative, aiming to identify pain points in its customers’ experiences and develop solutions to address these issues. The company engaged in a cross-functional approach, involving teams from various departments such as marketing, store operations, and product development, to ensure a holistic understanding of the customer journey.

Understanding the Customer Journey

Starbucks conducted extensive research to gain insights into its customers’ interactions with the brand, both online and offline. The company collected data through customer interviews, surveys, and observations, as well as leveraging digital analytics and transactional data. This information was used to create detailed customer journey maps, highlighting key touchpoints, emotional states, and pain points.

Identifying Pain Points and Opportunities

The customer journey maps revealed several areas where Starbucks could improve its customer experience. Some notable pain points included long wait times, inconsistent product quality, and challenges in navigating the rewards program. The company also identified opportunities to enhance the in-store experience, such as incorporating digital technologies and personalizing customer interactions.

Developing a Customer Experience Roadmap

Armed with these insights, Starbucks developed a customer experience roadmap that outlined the strategic initiatives and improvements needed to address the identified pain points and capitalize on opportunities. Some of the successful implementations based on the roadmap include:

• Mobile Order & Pay: To reduce wait times and streamline the ordering process, Starbucks introduced the Mobile Order & Pay feature in its app. This allowed customers to place orders in advance and pick up their drinks without waiting in line, significantly enhancing the overall customer experience.
• Personalized Rewards: Starbucks revamped its rewards program to make it more accessible and user-friendly, tailoring offers and promotions based on customers’ preferences and purchasing habits. This personalized approach encouraged customer loyalty and increased engagement with the brand.
• Consistent Quality Standards: Starbucks invested in employee training and quality control measures to ensure consistent product quality across all locations. This focus on excellence helped reinforce the brand’s reputation for offering high-quality coffee and beverages.
• Digital Integration: Starbucks introduced digital touchpoints in its stores, such as interactive menu boards and mobile payment options, to create a seamless and engaging customer experience. These innovations helped bridge the gap between the online and offline customer journey.

The company’s attention to the entire journey has been a key factor in the development of the premium coffee category.

According to PeopleMetrics, Starbucks has been able to simplify and operationalize Customer Journey Mapping which has helped them unlock the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store.

Initiatives that have been uncovered through journey mapping exercises:

Starbucks is investing in its partners, creating personalized experiences for customers, and innovating its digital and retail strategy.

Investing in Partner Success

Starbucks is placing its partners at the core of its Reinvention plan. The company believes that investing in its partner base is key to delivering high-quality customer experiences, uplifting brand affinity and customer loyalty, and increasing value back to partners through wages, benefits, programming, and tools for continued personal growth. In fiscal 2023, Starbucks has identified a number of near-term solutions that will be implemented to ensure a thriving partner experience:

How to Improve Customer Experience

Wage and Recognition Innovation:

Starbucks is helping partners by giving them the hours they need, expanding digital tipping, and incorporating other opportunities to increase overall pay. The company is committed to paying partners competitively and has raised its starting wage in the U.S. to $15 per hour.

New Well-being Benefits:

Starbucks is offering enhanced sick pay, new savings and student loan management benefits, and additional mental health support to its partners.

Personalized Career Mobility:

Starbucks is introducing a new partner app and the development of personalized career paths to enable its partners to achieve their career goals.

Investments in Store Managers:

Starbucks is providing new leadership trainings, reinventing scheduling and decision-making tools, and creating career journey mapping to improve store manager retention and empower them to focus on core functions of the job that increase satisfaction and overall performance of their store partners.

These investments are aimed at empowering Starbucks partners to thrive at work, thrive as individuals, and thrive together. Stores managed by partners with over three years of tenure have 13% greater weekly sales and higher customer satisfaction, making it clear that investing in partner success is a win-win for both partners and the company.

Creating Personalized Experiences for Customers

Starbucks is committed to unlocking the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store. The company is investing in purpose-built store concepts, delivering beverage innovation, and expanding effortless digital convenience to create personalized experiences for its customers.

Investing in Purpose-built Store Concepts:

Starbucks is reimagining the store environment by introducing purpose-built store concepts that meet customers wherever and whenever they want and improve the partner experience. The company is investing an incremental $450M in the existing U.S. store base in fiscal year 2023 with continued investment in fiscal 2024 and 2025. Starbucks expects these investments will create efficiencies, unlock capacity for partners, and enable increased throughput to support increasing customer demand.

Digital and Physical Customer Journey Optimization

Delivering Beverage Innovation:

To improve partner and customer experiences, Starbucks has developed the Siren System, a proprietary new equipment innovation designed to meet the growing demand for customization of hot and cold beverages and warm foods. As part of the Siren System, Starbucks has redesigned its cold beverage station, which significantly reduces the time and number of steps to make cold beverages, unlocking productivity gains and ultimately freeing up time for partners to connect with customers.

In addition, Starbucks is developing a new way of extracting cold coffee and espresso with the Cold Pressed Cold Brew system. This new, proprietary technology delivers cold press coffee in a matter of seconds and in fewer than four steps, a step-change improvement when compared to today’s cold brew which is steeped for 20 hours and takes more than 20 steps to make. The Cold Pressed Cold Brew will begin testing in stores in fiscal 2023.

Expanding effortless digital convenience

Starbucks’ Reinvention Plan aims to create a seamless and personalized experience for customers, making it easier for them to get their favorite Starbucks beverage when and where they want. The company has recognized the increasing importance of digital convenience in providing a better customer experience. The COVID-19 pandemic has also highlighted the need for contactless ordering and payment options. Starbucks has responded by investing in and expanding its digital offerings, such as its mobile ordering platform, Starbucks Rewards program, and Starbucks Delivers.

Growing Starbucks Delivers program with DoorDash and UberEats

One of Starbucks’ major initiatives for expanding digital convenience is growing its Starbucks Delivers program. The company has partnered with DoorDash to expand the program to a national scale alongside UberEats in fiscal 2023. This partnership aims to improve delivery efficiency, expand delivery areas, and offer more delivery options to customers. Starbucks Delivers is expected to be available in over 10,000 stores across the United States by the end of 2022.

Increase Customer Satisfaction with a Digital Customer Experience Platform

Starbucks Rewards program with Starbucks Odyssey

Starbucks is also evolving its Starbucks Rewards program with Starbucks Odyssey, a Web3-enabled experience that will bridge the physical and digital customer experience. Starbucks Odyssey aims to unlock a new generation of experiential benefits for customers. Through Starbucks Odyssey, customers will be able to earn and redeem rewards, access exclusive content, and become part of a digital community built on human connection. Starbucks plans to roll out Starbucks Odyssey to all customers in the United States and Canada by the end of 2022.

The CDO TIMES Bottom Line

Starbucks’ successful application of customer journey mapping demonstrates the value of understanding customers’ experiences for customers, partners and employees and using these insights to drive improvements and innovation. By identifying pain points and opportunities in the customer journey, Starbucks was able to develop a customer experience roadmap that addressed these issues and reinforced its position as a leader in the coffee industry.

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In this context, the expertise of CDO TIMES becomes indispensable for organizations striving to stay ahead in the digital transformation journey. Here are some compelling reasons to engage their experts:

• Deep Expertise : CDO TIMES has a team of experts with deep expertise in the field of Digital, Data and AI and its integration into business processes. This knowledge ensures that your organization can leverage digital and AI in the most optimal and innovative ways.
• Strategic Insight : Not only can the CDO TIMES team help develop a Digital & AI strategy, but they can also provide insights into how this strategy fits into your overall business model and objectives. They understand that every business is unique, and so should be its Digital & AI strategy.
• Future-Proofing : With CDO TIMES, organizations can ensure they are future-proofed against rapid technological changes. Their experts stay abreast of the latest AI advancements and can guide your organization to adapt and evolve as the technology does.
• Risk Management : Implementing a Digital & AI strategy is not without its risks. The CDO TIMES can help identify potential pitfalls and develop mitigation strategies, helping you avoid costly mistakes and ensuring a smooth transition.
• Competitive Advantage : Finally, by hiring CDO TIMES experts, you are investing in a competitive advantage. Their expertise can help you speed up your innovation processes, bring products to market faster, and stay ahead of your competitors.

By employing the expertise of CDO TIMES, organizations can navigate the complexities of digital innovation with greater confidence and foresight, setting themselves up for success in the rapidly evolving digital economy. The future is digital, and with CDO TIMES, you’ll be well-equipped to lead in this new frontier.

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Carsten Krause

As the CDO of The CDO TIMES I am dedicated delivering actionable insights to our readers, explore current and future trends that are relevant to leaders and organizations undertaking digital transformation efforts. Besides writing about these topics we also help organizations make sense of all of the puzzle pieces and deliver actionable roadmaps and capabilities to stay future proof leveraging technology. Contact us at: [email protected] to get in touch.

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An Analysis on Brand Loyalty: A Case Study on Starbucks

• Graduate Project
• Kumar, Kavita
• Yoo, Myongjee (Michelle)
• Singh, Dr. Neha
• Chesser, Jerald
• Collins College of Hospitality Management
• California State Polytechnic University, Pomona
• brand loyalty
• behavioral loyalty
• loyalty marketing
• attitudinal loyalty
• consumer behavior
• 2016-07-12T15:26:09Z
• http://hdl.handle.net/10211.3/173524
• All rights reserved.

Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.

The Success of Starbucks App: A Case Study

Starbucks has the most regularly used loyalty rewards app among major restaurant chains. But what keeps users coming back for more? This case study will look at the design of the app, its features, and the bold moves that the coffee chain has made to make the app a “must have” for consumers.

Updated May 12, 2023 

A recent study found that Starbucks has the most regularly used loyalty rewards app (48%) among a list of major restaurant chains. Why is the app so popular? What is it that keeps users coming back for more?   The answer is digital engagement .   From ordering and paying ahead of time to creating your own Spotify playlist, the Starbucks app provides a user experience that is both inviting and innovative, much like the coffee chain itself.   That digital engagement has paid tremendous dividends for the company. At a JPMorgan forum in March, Starbucks CFO Scott Maw said almost all of the company’s same-store sales growth has come from customers that have digital relationships with the company and those that are in the Starbucks Rewards program.    This case study will discuss four main reasons why the Starbucks app is a “must have, must use” app for customers:

• Easy Navigation
• Personalization
• Geo-location
• Mobile pay and ordering
• Integration with other platforms and services

1. Easy Navigation

The app's layout is simple, yet elegant, making the app appealing to the user. However, the platform's navigation is what makes it stand out. Navigating through the Starbucks app is quick and easy, making it conventient for users to place an order. 

Five menu options at the bottom of the app page give the user access to the major functions: Home, Scan, Order, Gift, and Offers. Having the menu at the bottom of the screen makes it easier for users to access the most important pages on the screen because it's well within reach of a user's thumb. 

Additionally, the Starbucks app is exceptionally innovative because it provides a similar experience to visiting the store . Many of us have stood in line at Starbucks thinking, “I should get a gift card for (insert person/occasion).” The Gift menu brings up a variety of gift cards for nearly every occasion, and even suggests cards for upcoming holidays.   Starbucks added the convenience functionality despite the risk of placing too many “bells and whistles” in the app. Chief Digital Officer Adam Brotman acknowledged that the company didn’t “ want the app to become too much of a Swiss Army knife .” 

However, the innovative features have been well received and have not overwhelmed users. The Starbucks app provides its users with a personalized experience. 

2. Personalization

Starbucks added personalization elements allowing the app to recall your favorite order, suggest what food items might pair well with that order, and where you’d like to pick it up.  Again, this simplifies the user experience and makes it especially easy to place an order. It keeps track of what you've ordered in the past and your favorite drinks to ensure that it's easy for users to place their order during their morning commute. 

3. Geo-Location

There are Starbucks everywhere, so it's important for users to be able to select which one they wish to visit when they place an order. The app uses geo-location to show where each storefront is located and how close a user is to each one. 

Using the geo-location feature, a user can see where the closest Starbucks locations are, the menu at each location, and even place an order that can be ready upon arrival. 

 If you often order from a specific location, the app will automatically select that location, limiting the number of clicks a user has to make to place an order. 

4. The Starbucks Rewards Loyalty Rewards Program Leads the Competition

The Starbucks Rewards program is a prime example of how to get customers to utilize a mobile app. Simply put, the more you spend at Starbucks, the more rewards points (or “stars”) you earn. Not only is this great for users on the app, but it also helps foster brand loyalty. With the promise of rewards, users are more likely to order from Starbucks in the future. 

The rewards program gives a number of benefits for app users. In addition to earning two stars for every dollar spent, rewards members get other benefits like free in-store refills, special member offers/events, and the ability to pay by phone and order ahead.

The rewards program also offers plenty of customization for users, including a free beverage on the user’s birthday and personalized suggestions based upon past orders.   In return, Starbucks solidifies an instant digital relationship with the 14.2 million active U.S. rewards program members. The loyalty program has seen hefty growth , with an 11% growth in users in Q2 2018. And Starbucks rewards program members in certain places actually spend more, representing 39% of the entire chain’s sales .   However, Starbucks recognizes that not all customers want to join the rewards program. Starbucks is planning to ramp up digital interactions by offering mobile order and pay options to all customers—not just rewards members. The company also will take advantage of Wi-Fi sign-ins at various stores to help drive mobile order and pay options.     The Starbucks rewards program encourages users to utilize the app to track purchases, as well as the stars earned. To facilitate their usage, stars have a limited shelf life—one year for basic (or “Green”) level rewards customers, and six months for upper-tier (or “Gold) members.   The app provides reminders about stars that are expiring, as well as the number of stars needed to maintain Gold status. Gold members also get special double-star days when they earn four stars per $1 spent.

5. Starbucks’ Mobile App Makes Online Ordering and Paying Easy

Since launching the initiatives in 2015, Starbucks has become the standard bearer when it comes to mobile ordering and payments. Mobile Order and Pay is a feature that let customers order via Starbucks’ app and skip the line.   At first, the growth of Mobile Order and Pay caused some congestion issues inside stores for customers while picking up their coffee and/or food. As one customer stated, “Why should I order ahead if I just have to stand in line to retrieve my order?” 

Starbucks responded by adding dedicated stations for mobile order-ahead customers, distinct from existing in-store registers, and giving baristas new tablets.   The mobile ordering system acts as a digital marketing tool, allowing customers to see new items ahead of time. Coupled with notifications from the app or email blasts, Starbucks creates interest in new menu items long before the customer sets foot in the store. Often, these digital tools create a sense of urgency for customers to sample the latest offerings.   Starbucks also enabled orders via Amazon's Alexa, and the feature has also been integrated into Ford vehicles.   The coffee chain also expanded its My Starbucks barista, a feature integrated into the Starbucks app, which allows customers to order via voice command or messaging. The goal was to boost speed and convenience.   In-store payments are also encouraged through the app, which utilizes a Starbucks gift card to process the payments. This creates seamless transactions, as the gift card can be automatically or manually reloaded using a credit card, Apple Pay or Google Pay, or even with the balance from another gift card. The app screen can be scanned at the register to process the payment.   For iOS users, the app integrates with the Apple Watch, producing a bar code that also can be scanned for those on the go.

By offering a wide variety of functionalities, Starbucks’ Mobile Order and Pay allows users to order and pay in the way that is most convenient for them – which encourages greater sales.

Starbucks’ App Exemplifies Loyalty App Success

The Starbucks app is the center of the company’s digital ecosystem, bringing together loyalty, mobile payment, and content partnerships, all seamlessly integrated into one convenient application.    Restaurants can follow Starbucks’ example to create a successful restaurant loyalty rewards app.

David 'DJ' Oragui

Founder & Lead Growth Engineer at Grow Hack Scale, Balanced Narrative and Balanced Life Academy Group., Grow Hack Scale

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Ecommerce tips, strategies, and news – all without ever having, [case study] build customer loyalty like starbucks + costco.

Building customer loyalty is a primary way to increase conversions and multiply profits. Below we explore two case studies in how to build customer loyalty, featuring Costco and Starbucks.  But first, we cover customer loyalty program basics, including how to define customer loyalty, why it is important, and ultimately, the types of loyalty you can build. If you would like to skip the theory and head straight to the case studies , click here .

What is customer loyalty program marketing?

A customer loyalty program, often called a rewards program, is a customer retention strategy that focuses on repeat purchases. Customer loyalty programs are designed to incentivize customer actions. Programs can offer many types of benefits such as rewards, points, cash back, gifts, free shipping and more.

Next we will see the benefits of customer loyalty, including improved add to cart rates, conversions, and AOV.

Why is customer loyalty important in eCommerce?

Returning visitors dramatically increase profitability. In our study on New vs Returning customers , we found that retained visitors

• Added items to carts 65.16% more than first time visitors
• Converted 73.72% more than first time visitors
• Spent 16.15% more per transaction

Further studies confirmed these benefits of customer loyalty. One study by Harvard Business School found that "Loyalty leaders - companies at the top of their industries in NEt Promoter Scores or satisfaction rankings for three or more years - grow revenues roughly 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns over the next 10 years." And another study by  ZenDesk found that 75% of customers are willing to spend more from companies that give them a good customer experience, while 50% will switch to a competitor after one bad experience.

Image Credit: Zendesk's 2021 Customer Experience Trends Report

How to build customer loyalty?

There are two major types of customer loyalty. The first is transactional loyalty, and the second is emotional loyalty.

How to build transactional customer loyalty

The first is transactional loyalty. This type of loyalty is rational in nature. Customers perceive it is in their best interest to stay with this company based on repeated past experiences. For example, they may believe that the brand is the least expensive, most convenient, or least risky option. Famous brands who have built their business through transactional loyalty include Walgreens and CVS. In fact, certain industries compete primarily on transactional loyalty, including pharmacies, gas stations, and grocery stores. There are many ways to generate transactional loyalty. Below are few principles.

• Loss aversion: Customers value losing more than gaining. By incorporating rewards, points, and bonuses you can influence customers to continue shopping with you else they lose the points they have earned
• Recency Bias: Customers overweigh what has happened most recently. Brands can take advantage of this by introducing daily deals or other tactics to boost
• Reciprocity: Finally reciprocity is a well documented social norm where people respond to a positive action with another positive action. (link to Wiki). Brand can create transactional loyalty by leading with value, such as a gift or credit, which can spur customers to want to respond.

How to build emotional customer loyalty

The second type of loyalty is emotional loyalty. As the name implies, this type of loyalty is not based on a "rational" calculation that being loyal is better for the customer, but instead is based on an emotional connection. Typically, this connection takes the form of status, the brand becoming part of the customer's identity, or the brand being used to express their identity. Because of this, they are much less likely to be influenced by competing offers and brands may enjoy higher price elasticity when they set their pricing strategy . Again, there are a few principles at work that eCommerce stores may take advantage of to maximize customer emotional loyalty. There are many famous examples of brands that have created emotional loyalty with customers, including Apple, Disney, Starbucks, Coke, and Pepsi.

We've covered how Starbucks creates loyalty through their omnichannel-retail strategy here .

Customer loyalty examples: tactics and strategies from top companies

Below we break down examples of customer loyalty programs, and call out specific tactics these companies make in a running list.

How Costco creates customer loyalty

Costco is a multinational company that operates membership big-box retail stores. The company has grown to 152.7 billion dollars annually, and makes for a fantastic case study on customer loyalty. As their management states in their latest 10-Q filing , "We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket)."

“We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket) ” - Costco 10-Q, 2021

1. Cross subsidizing with a membership model

Costco's loyalty program begins with their membership business model.  Members pay an upfront cost to be able to enter the store and purchase goods. In return, Costco provides low, competitive prices, private label items, and other exclusive perks.

“Our membership format is an integral part of our business model and has a significant effect on our profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. ” - Costco 10-Q, 2021

2. Using loss leaders to promote transactional loyalty

Part of Costco's loyalty strategy is to "provide members with quality goods and services at the most competitive prices." Instead of maximizing profits per transaction, they focus on maximizing each customer's lifetime value to the company. This is exemplified most clearly in their gasoline service.  "We believe that our gasoline business draws members, but it generally has a significantly lower gross margin percentage relative to our non-gasoline business." Costco takes measures to ensure members will always save on their gas bill. They are able to do this because of their membership business model, which doesn't rely on profits in gasoline to fuel the business.

3. Using unique, private label products to increase loyalty

Private label products increase customer loyalty in a number of ways.  First, it distinguishes Costco. Instead of competing in purely commoditized products, Costco can offer exclusive options for their members.  Further, as customers become habitualized to these products, it improves their membership retention rate . If customers want to enjoy these products, they must continue shopping at Costco.

Because of the exclusivity and collapsing the supply chain, these product are often more profitable on a unit basis as well. 

Image Credit 

4. Maxime loss leaders with creative financing options

Finally, Costco compliments their product offering with a branded credit card. They have tailored the rewards card to maximize customer loyalty, highlighting some of the biggest reasons to be a member.

• 4% cash back on Costco gas
• 2% cash back on Costco purchases
• Costco membership is bundled with the price of the card

How Starbucks improves customer loyalty

Starbucks is another premier case study of how to improve customer loyalty.

5. Cross channel marketing

Starbucks does an incredible job driving customers into their loyalty program. We've covered before in our case study of Starbucks' omnichannel strategy how they tie in different channels, all leading to subscribing to their renowned loyalty program. Below we see a clear example. Once subscribed to their email list, customers receive member exclusive offers. If they would like to partake, they must enroll in the loyalty program.

Starbucks extends their Rewards program to lower margin grocery items as well. The rewards themselves help drive traffic to their in-store locations, increasing frequency, lifetime value,  and accessing a whole new group of customers.

6. New product development

Starbucks also drives repeat purchases through new product development.  With a steady stream of new options, customers are nudged to come back and try their latest creations. These new products often embody other aspects of the business, in this case Starbuck's new relationship with OATLY.

“We recognize that we are a beverage-forward concept. Beverage is our key point of differentiation.” - Pat Grismer

7. Create urgency with limited time products

Additionally, seasonal holiday beverages create excitement in their customer base and provides a sense of urgency to come into the store. In fact, there are now many seasonal beverages that customers pine for, including Pumpkin Spice Latte, Peppermint Mocha, and Irish Cream Cold Brews.

Further, Starbucks constantly rotates in limited run premium products.  Combined, holiday and limited time products give a reason to return.

8. Unique experiences for Rewards Members

Finally, Starbucks routinely creates rewards member engagement campaigns. These often take the form of exclusive games and rewards Starbucks Rewards Members can participate in. Below is just one example. In Starbucks For Life, Rewards Members collect game pieces that can earn them rewards ranging from a $500 gift card, Bose  Earbuds, and of course, the namesake grand price, free Starbucks for Life.

Next Steps...

Starbucks and Costco are great case studies in how to build customer loyalty.

At it's core, customer loyalty is about providing a better experience. While there are many ways to improve customer's experience in an eCommerce context, the primary ways revolve around creating personalized, relevant experiences and offers across all channels. Below are a few resources we have put together to help.

• Advanced eCommerce personalization examples  - In this guide, we showcase numerous personalization examples, including digital first brands such as Thrive Market and Third Love. 
• Triggered email examples and best practices  - Email remains the best channel for driving profit. In this guide, we showcase how top brands like Nike, Amazon, and Google use triggered emails to increase AOV.
• Database marketing examples  -  Finally, leveraging first party data on your customers is the best way to create better offers. We've found RFM analysis to be especially useful here.

Lastly, we help hundreds of premier eCommerce stores generate customer loyalty and repeat purchases. If you would like to see if we can help your store, schedule a personal demo here .

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Starbucks: A successful gamification case study

Starbucks’ gamification wasn’t there from the beginning of its story but it made it a success. Starbucks’ first store was inaugurated in 1971 at the Seattle Pike Place Market. Entering the shop, you were able to find fresh coffee beans, tea, and spices from around the world. According to the company, this flavour journey and the coffee trade traditions are used during this flavour journey and the coffee trade traditions are, according to the company, at the origins of the name “Starbucks”. This Mobi-dick character name reflects perfectly the worldwide ongoing success. By 1987, Starbucks had become a coffeehouse and it expanded to Chicago, Vancouver, and other cities across north-America. Later on, It opened stores worldwide like in Japan, Europe, and China. Hence, nowadays, Starbucks is the meeting place for millions of customers each week. Let’s discover the marketing secrets of such success!

I. Engaging the Senses: Starbucks’ Gamification Strategy Unveiled

A. Gamification in Loyalty Programs

Gamification has emerged as a popular strategy to revitalize loyalty programs and make them more engaging for customers. Starbucks is one company that has successfully implemented elements. Such Elements are reward points for purchases, level-ups based activities, and challenges for customers to complete. As a result, Starbucks has seen a significant increase in customer retention. Their customer retention rate is of 44%, significantly higher than the industry average of 25%. The gamified loyalty program has also increased customer engagement. Customers are more likely to make repeat purchases and try new products. In fact, they are incentivized through the gamification elements to reach new levels and earn rewards. Businesses can benefit greatly from incorporating gamification elements into their loyalty programs. Gamification marketing keeps customers engaged, happy, and coming back for more.

B. Star Dash and Starbucks for Life

Starbucks has introduced two popular loyalty programs to incentivize customers and increase customer engagement. The Star Dash program encourages customers to visit Starbucks more frequently. It offers bonus stars for a certain number of purchases made within a specific timeframe. While the Starbucks for Life program provides customers with the chance to win free coffee for a year, a month, or a week by completing challenges and earning game plays. So, by incorporating gamification elements and offering unique rewards, Starbucks has created an immersive and entertaining experience for their customers, keeping them engaged and coming back for more. These innovative programs have increased customer retention, engagement, and satisfaction, establishing Starbucks as a leader in the coffee industry.

C. Summer Game, Starland, and Roastery Challenge

Starbucks has created other even more innovative gamified loyalty programs to enhance customer engagement and satisfaction. The Summer Game program incentivizes customers to win prizes by completing unique challenges, while Starland enables customers to collect stars and earn rewards by making purchases. Launched during the pandemic, Starland provided a fun and interactive way to connect with the brand during a difficult time. Finally, the Roastery Challenge is a VR and AR experience that encourages customers to explore Starbucks’ roasteries, enhancing their knowledge and interest in the company. These programs, alongside Star Dash and Starbucks for Life, have successfully established Starbucks as a leader in customer engagement and retention.

II. The Café Games: Starbucks’ Use of Gamification Inside Shops

A. Coffee Education

Starbucks uses gamification techniques to make the coffee education experience more interactive and enjoyable. In the Coffee Passport program, customers earn stamps for trying different coffee blends and receive a free coffee bag once they fill up their passports. Also, the Coffee Master program for baristas incorporates gamification by using badges to reward achievements in coffee knowledge, brewing techniques, and tasting skills. Baristas who complete the program earn a special black apron. Finally, in the Coffee with a Barista program, customers attend virtual or in-store sessions to learn about coffee brewing techniques and participate in a quiz to win a free drink.

B. Interactive Art

Starbucks uses gamification techniques to increase customer engagement and foster a sense of community within its stores. The “user-generated content” gamification element is used in the chalkboard mural where customers are encouraged to interact with the brand by drawing and writing messages. Similarly, the “social interaction” gamification technique is employed through the use of community tables to encourage customers to engage with each other through conversing and playing together. Finally, the “progression and rewards” gamification element is used in the digital flywheel program. It is a gamified loyalty program that rewards customers for their purchases with progress bars, rewards badges, and personalized offers. These techniques provide customers with a sense of achievement and reward, motivating them to keep engaging with the brand.

C. Digital Games

Starbucks has created several digital games that use gamification techniques to engage customers and increase loyalty. “Starbucks Pairs” is a memory game featuring Starbucks products that can be played on mobile devices. Players earn rewards for completing the game, such as discounts on their next Starbucks purchase. “Starbucks Bingo” is another popular game that encourages customers to make multiple purchases. Customers fill out their virtual bingo cards and earn rewards. Finally, the “Starbucks Nitro Cold Brew Game” incorporates a unique element. This game requires players to physically shake their phones to create a virtual Nitro Cold Brew. The game rewards players with discounts on their next purchase. All three games utilize gamification elements such as rewards, progress bars, and personalized offers. This strategy incentivizes customer engagement and increases brand loyalty.

III. Brewing Success: Starbucks’ Gamification & Partnerships

A. Pokemon Go Partnership

Starbucks partnered with Pokemon Go to transform their stores into PokeStops and Gyms, encouraging customers to visit, catch Pokemon, and battle other players. Accordingly, they added gamification elements like badges, rewards, and time-limited challenges to make the experience more engaging. Customers can earn rewards like free drinks or merchandise by completing certain tasks or winning challenges. Therefore, this innovative strategy successfully blends physical and digital worlds to create an immersive experience that keeps customers coming back for more.

(Discover Pokemon Go gamification techniques)

Starbucks and Spotify ‘s innovative partnership incorporates gamification elements to offer a unique customer experience. It offers a music trivia game that rewards customers with free music downloads. Indeed, Starbucks encourages customers to engage with the brand and showcase their knowledge and enthusiasm for music. The interactive game successfully promotes brand engagement and loyalty. Additionally, Starbucks could enhance the experience further with additional gamification elements like leaderboards and badges. Overall, Starbucks and Spotify’s partnership successfully blends brand engagement with a fun and interactive game, creating an exciting and memorable experience for customers.

C. Coca-cola

The Coca-Cola Arctic Home campaign is a successful partnership between Coca-Cola and Starbucks. It creatively incorporates gamification elements to promote environmental awareness and raise money for the World Wildlife Fund. By purchasing specially designed cups featuring polar bears, customers can donate to the WWF while enjoying their favourite drinks. Furthermore, customers can participate in a virtual polar bear hunt game on their mobile devices, earning points for prizes through the simple yet engaging technique of shaking their phones. This campaign is a prime example of how gamification can be utilized to promote positive causes while creating an interactive and memorable customer experience.

Conclusion:

In conclusion, Starbucks’ success story is a result of its innovative marketing strategies. They are including gamification techniques to increase customer engagement, retention, and satisfaction. By incorporating gamification elements in loyalty programs, inside stores, and partnerships, Starbucks has created an immersive and entertaining experience for their customers. It resulted in making them one of the leading companies in the coffee industry. Basically, through the use of rewards, progress bars, and personalized offers, Starbucks has successfully motivated their customers to engage with the brand, fostering a sense of community and loyalty. Other businesses can learn from Starbucks’ gamification strategies and implement them into their marketing plans to increase customer engagement and retention.

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Gamification Effect of Loyalty Program and Its Assessment Using Game Refinement Measure: Case Study on Starbucks

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• Ooi Wei Xin 33 ,
• Long Zuo 34 ,
• Hiroyuki Iida 34 &
• Norshakirah Aziz 33  

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This paper explores the advantage of loyalty program in the domain of business, while Starbucks is chosen as a case study. It focuses mainly on the point system that provides a certain degree of gamification effect. It considers a game progress model of My Starbucks Rewards to derive a game refinement measure for the assessment of gamification impact. The assessment results indicate that the game element of point system in My Starbucks Rewards shows motivations towards the normal purchasing activities. On the other hand, the point system shows the decreasing of motivation effect towards customers’ purchases over the time. In short, customers are experiencing unsophisticated game experience in a point system which is proved to be a short term incentive that is useful to motivate customers in the early age for a short period of time. Starbucks incorporates both point system and tier system in its loyalty program, targeting to attract new customers as well as retain them for a long time to come. However, the current study only examines the point system of Starbucks. Further research might explore more on structure of loyalty program in restaurant or food industry.

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This research is funded by a grant from the Japan Society for the Promotion of Science (JSPS), within the framework of the Grant-in-Aid for Challenging Exploratory Research.

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Xin, O.W., Zuo, L., Iida, H., Aziz, N. (2018). Gamification Effect of Loyalty Program and Its Assessment Using Game Refinement Measure: Case Study on Starbucks. In: Alfred, R., Iida, H., Ag. Ibrahim, A., Lim, Y. (eds) Computational Science and Technology. ICCST 2017. Lecture Notes in Electrical Engineering, vol 488. Springer, Singapore. https://doi.org/10.1007/978-981-10-8276-4_16

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Starbucks’s case at the Supreme Court is a venti lose-lose for the company and the burgeoning unionization movement

On Apr. 23, the Supreme Court heard Starbucks’ challenge to a court ruling that mandated the coffee company to rehire seven employees at its Memphis, Tennessee café after a federal agency found that these employees were terminated for supporting unionization.

After Starbucks dismissed the employees for a safety violation in 2022, the National Labor Relations Board (NLRB) determined that the company had unjustly fired them for backing unionization. Following this, the NLRB requested an injunction to force Starbucks to rehire the employees, a request granted by a U.S. District Judge in Memphis.

Starbucks Corp. v. McKinney is the first case to reach the Supreme Court involving an ongoing nationwide campaign to unionize Starbucks stores.

Why it matters

The legal issue in the case is the standard courts should use when deciding whether to issue an injunction. Starbucks argues that the lower courts used a relaxed standard, while other federal courts have used a tougher standard.

“The NLRB continues to use the federal courts—which are split—to obtain remedies before the merits of a case are fully evaluated,” according to the company. “In this case, the U.S. Court of Appeals for the Sixth Circuit applied a relaxed standard that allowed the NLRB to obtain a preliminary injunction—despite evidence refuting the NLRB’s allegations. That’s why we’re asking the Supreme Court to reconsider the standard some lower courts use to evaluate NLRB injunction requests.”

This case is at the epicenter of the ongoing battle between Starbucks and their employees—and the potential implications of the Supreme Court’s decision are significant. It’s not an overstatement to say that how the Supreme Court decides this case could be a game-changer in unionization efforts not only at Starbucks but at other major companies as well.

If the Supreme Court supports Starbucks’ position here, it might establish a precedent that makes it harder for the NLRB to obtain court orders requiring businesses to address violations of labor laws.

Yet as attorney Sean Domnick points out, “The Supreme Court has the power here to put significant weight behind the rights of employees to unionize, especially when challenging a company as powerful as Starbucks.”

By upholding the decision of the lower courts, the Supreme Court would be sending the message that when companies such as Starbucks actively work to subvert unionization, it merits close judicial scrutiny.

How it’s going to play out

From what was asked and answered in Tuesday’s oral argument, it seems pretty clear to me that it’s going to be somewhere around 6-3 in favor of Starbucks. The justices seemed nonplussed with the looming reality that this decision would make it more difficult for union organizers to get their jobs back. Such a decision would have a chilling effect on the unionization movement at Starbucks which would be a step backwards in both the history of the company and the ability of workers to form a union where it’s the best option.

Because Starbucks so badly mishandled these unionization efforts, the company has only breathed new life into them. What started small at a Starbucks in Buffalo truly became a movement.

Since 2021, more than 360 Starbucks locations in the U.S. have voted to unionize , representing about 4% of the company’s total U.S. company-owned footprint. The unionization movement has been characterized by a push among Starbucks workers across the United States to address concerns such as low wages, set hours, and other workplace issues.

Part of what the Supreme Court will discuss in their deliberations is Starbucks’ tactics. The company denies wrongdoing and says it respects the right of workers to choose whether to unionize. However, because the Starbucks business model was never envisioned to work with unionized employees, tactics such as reducing the weekly hours of workers at stores where unionization votes were successful and closing 23 stores to deter unionization efforts were designed to bust the union movement at Starbucks but instead propelled it to have the Supreme Court review foundational questions that will chart the future path of the company.

In itself, that is a massive achievement for Starbucks workers. The more Starbucks turned up the pressure, the more the burgeoning union at the heart of the dispute, Starbucks Workers United, continued to advocate for the rights of the workers.

So while the Supreme Court’s decision to hear a challenge by Starbucks to a judicial decision requiring it to rehire seven union activists in Tennessee reflects the importance of the case in the context of the ongoing national debate about labor rights, for Starbucks, the future is all about picking up the pieces of the company’s cultural implosion it catalyzed.

In March, the company and the union announced a breakthrough agreement on a framework for negotiations. Right now, for a company given so many opportunities to reverse its course and work with the internal unionization movement, that the Supreme Court of the United States needed to get involved is a massive lose-lose: Starbucks obviously loses if the Court sides with the unionization movement, but they also lose if the Court rubber stamps how Starbucks destroyed its own culture.

Aron Solomon, JD, is the chief strategy officer for Amplify. He has taught entrepreneurship at McGill University and the University of Pennsylvania.

This piece has been updated with comments and clarification from Starbucks.

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