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Can you imagine how different our twenty-first-century lives would be if there was no Starbucks? With its unique business strategy and wide usage in popular culture, Starbucks is arguably the biggest coffee shop in the world. Today, there is at least one Starbucks in every tenth of a square mile.
Even though the third wave coffee movement is increasing dramatically, Starbucks still commands a loyal customer base. Generating 40% of its revenue, Starbucks’ rewards program led to a 7% increase in sales in 2019. So, how has Starbucks created a loyalty program that helped them to secure a dedicated customer base whilst boosting their revenue?
In this blog, we’ll look at how the Starbucks loyalty program works and how you can take a page out of their book to scale your business and secure long-term brand loyalty.
Starbucks’ brand is iconic. To align with their brand identity and logo, Starbucks created a tiered loyalty program structure that consists of two levels: Green and Gold. To award their customers, they enabled them to earn “Stars” with each purchase. Through earning stars, customers then earn free products or free top-ups along with additional personalized rewards.
But that’s not all. Starbucks continuously revamps its loyalty program to match their customers’ needs. In 2016, Starbucks implemented a value-based loyalty scheme that awards customers two stars for every dollar spent. And, the customers who collect 125 stars were able to redeem a free drink and food.
Then, in 2019 Starbucks’ new rewards program enabled members to redeem rewards at 25 stars. They also eliminated the expiry of the points to enhance long-term brand loyalty, since shoppers are less likely to churn if their points don’t have a deadline.
Today, customers can directly download the Starbucks Rewards app to their phones and use it as a digital card in store. Members can access the menu and place orders before they even get to the cafe. To encourage customers to return to the store more often, the app also sends push notifications advertising promotions.
Recent research by Manifest revealed that of all mobile users who regularly use restaurant loyalty apps, nearly half of them (48%) use Starbucks Rewards. Increasing its user base by 11%, Starbucks reached more than 16 million active members in 2019. Alongside its tremendous number of stores and placement in popular culture, Starbucks’ rewards program is always at its core.
👉 The quick and easy answer is its ability to let members make payments and redeem rewards via the mobile app. It is known that 57% of consumers want to engage with their loyalty programs via mobile devices.
👉 Keep in mind that 77% of customers are motivated to join a loyalty program if the benefits are clearly communicated. Starbucks informs their customers about how they can earn points and redeem rewards via the app as well as a dedicated landing page on their website.
👉 To encourage members to repeat purchases and interactions, Starbucks shows its members’ current points balance and available rewards on their homepage.
👉 To increase engagement, Starbucks includes free music and games in their rewards program. Members who play the games in the app or on email are able to earn bonus stars.
👉 78% of customers become loyal to a brand if they’re individually recognized and rewarded for their loyalty. To show how much they value their members, Starbucks offers members free drinks on their birthdays.
👉 To boost engagement and acquisition, Starbucks allows members to send gift cards to other members and friends through the app.
👉 79% of customers feel that they are loyal to brands if they can unlock exclusive benefits. To delight and surprise their loyal customers, Starbucks announces seasonal promotions and new product releases to its members first. They also create double star promotion campaigns to reward their loyal customers.
Such benefits can easily create brand loyalty, however, the success of Starbucks’ Rewards Program lies in putting customers first and leveraging their data. Through centralizing its members’ purchase and behavioral data via the app, Starbucks began to provide a plethora of customized offers and targeted communication that powered them to build longer-lasting relationships with their members.
By following a similar strategy, you can easily convert one-off customers into loyal members, and scale up your business. For instance, to access a comprehensive analysis of your customer’s buying behavior, you can use your loyal program’s data.
First segment your loyal, at-risk, and churned customers. This allows you to deliver more targeted communications. To provide further personalized communications, you can then check the buying behavior of each customer. For example, to re-engage your at-risk customers, you can create a double points campaign. Or you could exclusively offer double points to one of your customers who has purchased from you several times in the last two weeks.
Let’s take an example to see how you can successfully adapt with Starbucks’ rewards program strategy in mind.
Having a big brand community just like Starbucks, Lively, a leisurée brand, created a tiered loyalty program structure that complemented their unique brand values.
Our loyalty program is an extension of this appreciation for our community and a way for us to show our current customers how much we value them.Michelle Cordeiro Grant, Founder and CEO at Lively
👉 Following Starbucks’ approach to align their program with their identity, Lively’s tiered loyalty program structure is made of three levels: “Bestie”, “Total Boss”, and “Powerhouse”.
👉 To clearly communicate about how their loyalty program works, how members can earn points, and what benefits they can receive, Lively also created an on-brand integrated loyalty page.
👉 When customers create an account and sign-in, they can directly see their current points balance, their available rewards, and the rewards that they can redeem in the future.
👉 Similar to Starbucks, Lively’s members can access everything through the rewards page. Members can follow the brand on social, sign-up to their newsletter or write a review with one click.
👉 To increase engagement, Lively’s members also earn a point per dollar spent. Then, to increase repeat purchase and spend, Lively offers customers two points per dollar spent if they move up to the second tier and three points for the third tier.
👉 To delight their loyal customers, Lively also offers birthday gifts and points on their member’s birthdays.
👉 To reward their members for their loyalty and make them feel valued, Lively provides early access to new styles and sales to their top-tier members. Members who are in the “Powerhouse” tier, also get access to exclusive events. Keep in mind that 66% of customers are motivated by experience-based rewards.
👉 Unlike Starbucks, Lively implemented a referral strategy that functions as a two-sided incentive. Lively encourages its members to make a referral by offering them 100 points and to convert the referred friend into a new member, they offer a $10 discount on their first purchase.
👉 Through identifying their loyal, at-risk and churned customers, Lively was able to deliver tailored communications for each segment. They created a double points campaign for their loyal customers. This personalization tactic led to a 37% increase in repeat purchase by loyalty program members.
And, for their at-risk customers, Lively sends personalized loyalty emails about their points balance to give them a reason to return to the store. These emails can be about available rewards or points expiry.
Your loyalty program is a natural extension of your brand, and it is the key to retain your existing customers. To pursue a steady growth for your business, you need to scale-up your strategies. Take a page out of Starbucks’ book and put your loyal customers front and center of your growth.
To learn more about scaling each stage of the customer journey, download the advanced “Look Forward: How to scale your ecommerce business” ebook or watch the panel-based webinars by industry experts.