Category: Loyalty Programs

A Closer Look at Starbucks Rewards Program Redesign

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Changes are coming to Starbucks Rewards. On April 16, Starbucks Rewards will be expanding its reward structure to five levels. A few other changes will be made to the program too. Will these changes make this leading loyalty program even better? What might be motivating these changes? How will the changes affect the program and its members? In this post, I attempt to dissect these changes and offer my assessment of the new Starbucks Rewards program design.

What Changes Exactly?

The biggest change to the program is the addition of more reward thresholds. Instead of a single reward threshold of 125 stars, it will feature five levels of rewards ranging from 25 to 400 stars. The new program will also erase the current difference between a Gold member and a base member, allowing both to enjoy the same set of benefits. The table below compares the current vs. the new program structure.

More Complex Reward Thresholds

The new design significantly expands the reward structure of the program from one to five levels. What could be driving this change?

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Research Focus: Who Benefits in a Coalition Loyalty Program?

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Many loyalty programs do not stand alone. Frequent flyer programs and hotel loyalty programs take on partners such as other airlines, hotels, restaurants, banks, and retailers. Other programs, such as Fuel Rewards in the US and Air Miles in Canada, are by design a coalition of businesses that come together to share a common program currency and reward structure. For consumers, such coalition programs are great because they allow consumers to earn points faster through many different means. But what about the participating businesses? Is it worthwhile to be part of such a program? If you do, should you set a generous point earning and redemption policy? In today’s Research Focus feature, I find some answers in a recent Marketing Science Institute Working Paper (Report No. 19-101) by Professor Stourm and her colleagues.

What Did They Do?

The researchers looked at a credit card based coalition loyalty program in Europe. In the program, card holders earn points by shopping at various partner businesses. Each participating business decides its own reward ratios, from less than 1% up to 3%. When a preset reward threshold is reached, consumers are automatically issued a reward voucher that they can use toward future purchases. Participating businesses can choose whether they accept reward vouchers or not. Accepting reward vouchers comes at a short-term cost as the program operator reimburses only 90% of the values of the vouchers.

In their analyses, the researchers focused their attention on one particular European city. They studied 1,636 consumers that used their card at least once across 40 partner stores located in the city. The research team was interested in finding out whether offering rewards created positive or negative impact among these partner stores, what businesses benefited, and how point devaluation as a result of an overall program policy change affected the landscape.

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Research Focus: Gamify Your Loyalty Program

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Author’s note: With this post, I am restarting a previous tradition on my blog to report from time to time the findings from a single research paper. Now named “Research Focus”, these slightly shorter posts will summarize each research paper in accessible and practically relevant lingo. The focus is on what the research findings mean to practice. The research papers featured will be chosen from recently published or soon-to-be-published work as well as significant working papers that I consider to be highly relevant to loyalty marketing practice. The goal is to facilitate the dissemination of scientific research, build practice knowledge, and speed up the scientific discovery to practice cycle time. I hope you will enjoy the feature!

Loyalty program is everywhere, yet engaging consumers in a loyalty program remains elusive to businesses. Look at your own wallet or key ring, and you are likely to see at least a few loyalty cards that you no longer use. You are not alone. The 2017 Colloquy Loyalty Census reports that as many as 54% of loyalty program memberships in the US are inactive. A more recent loyalty program engagement survey of 1000+ consumers by CodeBroker shows that 65% of those surveyed are engaged with less than half of their loyalty programs.

The loyalty program (dis)engagement problem has various possible solutions. One solution is gamification, that is, introducing gaming into a loyalty program. Examples of this approach abound in practice, offered by familiar brands such as Victorial’s Secret, Domino’s Pizza, and Starbucks (see the picture at the beginning of this post for a screenshot of the currently running Starbucks Bonus Star Hopscotch game). In today’s Research Focus paper, to be published in Journal of Business Research, Professor Jiyoung Hwang and her colleague studied when and how gamification helps in a loyalty program context. Continue reading “Research Focus: Gamify Your Loyalty Program”