Starbucks Stretches Its Loyalty Program: What Can You Learn?

The extremely popular, closely watched business model will expand beyond Starbucks stores starting in May. What can you learn from the dominant coffee chain's innovative use of loyalty cards?

It’s so familiar, it feels like it’s been around forever: Get a card, add some money, and get some perks beyond the cup of java you just bought.

But as it turns out, Starbucks’ popular loyalty-card program, My Starbucks Rewards, has only been around since 2009.

With associations always on the lookout for new ways to reach, understand, and personalize programs for members, Starbucks’ model could offer some insights:

A boost in brand loyalty: The cards help build brand loyalty in a big way. According to an October 2012 study from Mintel, Starbucks outperformed every other coffee brand in the industry, with 40 percent of respondents going to Starbucks versus 21 percent who went to smaller chains or independent coffee shops. Among the company’s secrets for success? Innovative discounts and a consistent experience. While other implementations of the loyalty model exist, such as the iPad-powered Belly Card, Starbucks’ version helped set the standard for the rest of the industry.

A versatile, tech-friendly approach: Rather than simply embracing the cards by themselves, Starbucks has also used the loyalty program to stay atop tech trends. In recent years, the company has gone beyond using physical cards: Now, many customers use smartphones and scannable bar codes to buy their lattes, complete with the perks that come with the rewards program. The approach led some fans of the brand to try their own unique takes on the model—including Jonathan’s Card, a 2011 effort by programmer Jonathan Stark to encourage a pay-it-forward mentality to Starbucks cards.

A willingness to expand: And now, Starbucks is preparing to expand the program beyond its own stores. Earlier this week, the company announced it would soon allow consumers to earn points when buying Starbucks products outside the coffee-shop environment. This is partly an extension of the company’s technology initiatives, according to Starbucks CEO Howard Schultz. “Over the past two years, we’ve been witness to a seismic change in consumer behavior due to technology,” he explained at the company’s annual shareholder meeting. “As a result of that, we’ve been able to do things almost no other consumer brand has done before.” (The new system may take some time to polish, however: Rather than allowing consumers to use the cards at the checkout, the system instead utilizes product codes on packaging. That’s a little more complicated than how it works at the company’s stores.)

By making these changes, Starbucks hopes to expand the loyalty program, which currently has 4.5 million members, to 9 million by the end of the current fiscal year. The system is adding 80,000 consumers weekly.

According to a recent Deloitte study pointed out by Associations Now’s Katie Bascuas, brand loyalty is low in the hotel and airline industry, and it’s important to focus instead on what is “personally meaningful” to customers.

If anything, Starbucks’ approach has taken that to heart, going beyond the simple point system and instead offering discounts and versatile individual benefits—benefits that smaller coffee chains will find it a challenge to match.

How can associations use creative loyalty programs to keep members coming back? Let us know your thoughts below.

(Global X/Flickr)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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