Starbucks Finds Massive Success with Digital Rewards

Need to Know

• First introduced in 2009, the Starbucks Rewards Program allows customers to place orders, accumulate and redeem points, take advantage of personalized offers, and pay for purchases all within the app.
• Members earn “2 Stars” for every $1 spent. Stars are then redeemable for everything from drink add-ons to sandwiches and merchandise.
• Starbucks reports over 16 million US members, a growth of 25% over the last two years.
• Rewards transactions accounted for 40% of tender in US stores in the past two years as of December 2018.

Analysis

Loyalty continues to win with Starbucks. With one of the most popular programs in the industry, the coffeehouse chain’s in-app value adds and customer convenience have them growing where it really matters—sales. 

Starbucks boasts over 16 million US members in its Starbucks Rewards program. Membership has grown more than 25% over the past two years alone. Starbucks says that its Rewards transactions accounted for 40% of tender in US company-operated stores in the same time frame and report US same-store sales increased 6% in the chain’s fiscal fourth quarter.

“We know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully,” CFO Patrick Grismer told investors in a recent meeting. 

Since its introduction in 2009, the rewards program has undergone a series of revamps. Most recently, the chain put redemption in the hands of its customers by increasing options and allowing users to begin redeeming immediately. The rewards program also uses machine learning to better understand the behavior of its customers, allowing them to introduce enhanced personal marketing. 

“Since introducing Starbucks Rewards ten years ago, we’ve experienced tremendous growth and continued to evolve the program to meet the changing needs and purchase patterns of our customers,” said Matthew Ryan, Starbucks’ chief marketing officer. 

With their payment integration systems and direct marketing advantages, direct-to-consumer apps are growing in popularity. Domino’s Pizza and McDonald’s both use the tech to interact with their customers and provide unique experiences like pizza trackers and McCafe perks, but still remain behind Starbucks in terms of downloads, members, and related sales.