How Starbucks loyalty program grew to 30 million customers?
5 step framework for you to implement.
Starbucks has 30 million active loyalty program users, making it one of the largest loyalty program on earth. So, what really works for the brand & what startups need to keep in mind while building a loyalty program ⬇️
Quick Context 🗓
Starbucks introduced Starbucks Card in November 2001. Within 8 months, the over 4 million customers bought it. Customers wanted a simple way to buy their daily Starbucks coffee.
The initial insight for the brand was → convenience of the card to pay with minimal effort. But, the deeper insight came almost 8 years after.
Fast forward 2008 ⚡️
Starbucks implement first-ever rewards program, offering free refills on brewed coffee, a free drink with every pound of beans purchased and free drink customisation for loyalty program members. It blew up & 53% of Starbucks US revenue today is driven by the loyalty program.
So, what clicked, really?
And what everyone should keep in mind while building a loyalty program.
1/ High frequency use case 🔄
An average Starbucks customer drinks 1.2 coffees or $3.50 per day on Starbucks coffee. Plus, it’s a monday to friday use case ~ 250 days a year. That’s huge.
2/ Natural friction points 🐌
This high frequency use case results in mundane tasks. Go to a Starbucks → stand in queue → pay for coffee (cash) → get the change → pickup your order → commute to work. Think of it repeating ~250 times a year. The delta of moving is immense.
3/ The right benefits 💰
The loyalty program pitches “free coffee” apart from other things. This is inline with what they sell in the first place. The program is simple to understand. For every $$$ spent at Starbucks, members get “Star” points that they can redeem against free coffee, customisation options (imagine double espresso shot) & more.
4/ Solving for bachelors / couples without kids 😳
Starbucks is first of it’s kind brand that allows transferring the “star points” to other accounts and without no fees for doing so. The true liquidity of points make them really really valuable.
5/ Solving for true liquidity of points 😳
Starbucks is first of it’s kind brand that allows transferring the “star points” to other accounts & charges no fees for doing so. Plus, you can load your Starbucks wallet to gain Star points making them go to medium of payment.
So what’s the core framework?
First, does your product have high frequency use case? Repeat use case is lifeline of loyalty programs.
Second, do you have certain set of power customers? These customers will be the first to launch the program.
Third, does you core value prop align with the reward you are giving? It becomes insanely easy to build perceived value for the rewards. Otherwise you get into the vicious cycle of trying to build perceived value for random rewards. No wonder Jet miles just work.
Fourth, are you nailing the user experience and creating the smoothest flow possible for loyalty card holders? It helps them feel good and special compared to every customer you serve.
Fifth, don’t bu*ll shit your customers. No tricks, give them the aha moment they earned by doing actions you wanted them to do. No asterisk*
Sixth, pivot for driving behaviour. Initially Starbucks wanted to solve for frequency so the star rewards were given for multiple purchases but it soon realised that it needs to solve for average order value, and it incentivising bill value for gaining star points.
That’s about Starbucks loyalty program ✨
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