What Associations Can Learn From the Starbucks Rewards Backlash

The coffee giant promises more flexibility in its revamped rewards program, but consumers are smart enough to realize when a deal isn’t as good as it used to be.

When it comes to rewards programs, you have to give your audience some credit—or prepare for a major backlash.

Such is the situation facing Starbucks this week as it switches to a rewards program that offers benefits on a more granular level—you can use a small number of points, or “stars,” to get a discount on a drink add-on like an additional espresso shot, for example—but requires users to spend more before they can redeem stars for more expensive items.

The company is marketing the revamped program as a net positive for its customers, but that’s not necessarily how customers are seeing it—especially those in the “green” member tier, who lost their stars and and were automatically upgraded to the “gold” tier.

Others saw their benefits diminishing in value. “When I went to bed last night I had two reward sandwiches coming, this morning I wake up and I have one,” stated one Facebook commenter, as highlighted by Business Insider.

Your members know how to do math. Don’t hide a price increase from them.

Confused yet? Lots of people are, and for associations that offer loyalty-style features in their member benefits programs, there are several lessons here, including:

Consumers are smart enough to figure out when they’re getting less. Simply saying a member rewards program is better than what came before does not make it so, and consumers can figure out whether they’re actually getting a better deal. As New York magazine notes, you now have to spend $75 to get a free drink (other than drip coffee), an increase of $12.50 from before. Your members know how to do math. Don’t hide a price increase from them.

Don’t penalize your customers when making changes. So what about the lost points for green-level customers? Starbucks’ argument is that it advanced those members to the next level, gold, so they would immediately be eligible for benefits. But the way it handled this change led to customers who hadn’t reached the gold tier losing the benefits of the points they had earned previously. “The removal of one’s points is one of the most painful First World issues many humans can face,” Inc. contributor Chris Matyszczyk put it. “It feels like your pocket’s being picked, while someone’s telling you how much they love you.” There’s an easy solution to this: Don’t take away customer benefits if you don’t have to.

Flexibility can’t come at the cost of value. Starbucks appears to be betting that it can make more money by discouraging big-ticket reward redemptions in favor of smaller ones. But Sara Senatore, an analyst with Bernstein Research, argues that the change is “moving in the wrong direction,” according to MarketWatch.  “We believe Starbucks’ traffic deceleration reflects a diminished value proposition,” Senatore wrote last month. “We think the new rewards plan runs the risk of alienating the core customers.” Associations should be sure that any changes to their member benefit programs don’t sacrifice value.

(edfuentesg/iStock Editorial/Getty Images Plus)

Ernie Smith

By Ernie Smith

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

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