Starbucks Rewards High Spenders

Starbucks is trying to stoke your appetite.
The coffee chain on last Monday announced its loyalty program will now reward customers for each dollar they spend at Starbucks, a shift from the previous setup, which gave customers points for each visit. Instead of encouraging people to come in for one cup of Joe each morning, the company is now trying to train customers to spend more money per visit. It will also provide a way for Starbucks to award customers points for buying Starbucks-branded goods at grocery stores or through partnerships with other companies like Spotify and Lyft.

The move is certainly a way to stoke sales. Starbucks says customers that are part of its loyalty program spend three times as much as non-members but that fewer than 1 in 6 customers currently belong to the program. And just as Amazon Prime has helped fuel growth at Amazon by giving that company a view into how people shop, Starbucks’ loyalty program also provides insight into consumer behavior, such as the time of day people come into the store, how they spend their money and what items they buy together most often.
Cooling Off
Year-over-year growth in Starbucks locations


Sales at Starbucks are chugging along pretty well, but its store growth has been slowing. It now has nearly 24,000 owned and franchised locations and will eventually have to figure out how to sell more at each store, rather than rely on new store openings for growth. The change in its loyalty program is one way to do that.
The company, which spent $100 million in 2012 to buy a California bakery chain it ended up closing, has long struggled to convince consumers to add on snacks and other food items. In 2014, it set a five-year goal to double its food sales at U.S. stores, partially by adding pastries, lunch sandwiches, and fruit and cheese plates, to draw people into Starbucks long after the morning coffee rush. It has also begun selling booze at some locations to attract evening customers.
Beyond Coffee
Starbucks sales mix by product type


Despite these efforts, Starbucks still gets roughly three-fourths of its revenue from coffee — a level that hasn’t budged in years. In fact, local doughnut sellers, delis, and coffee shops often strategically open near a Starbucks in order to get overflow crowds of Starbucks-addicted coffee drinkers who can’t find anything they want to eat at the coffee chain.
The new loyalty program could help entice customers to buy that sandwich at Starbucks, rather than making a second stop at McDonald’s or a local deli. Who says you can’t buy loyalty?

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