Starbucks' controversial new rewards program launches today - here are the major changes you should know about
StarbucksToday, Starbucks' revamped rewards program goes into action.
Starting Tuesday, customers will earn reward stars based on the amount of money they spend at Starbucks. Customers previously earned one star per visit with My Starbucks Rewards, no matter how much money they spent.
With the new program, rebranded as simply Starbucks Rewards, customers earn two stars per dollar spent, receiving a reward after earning 125 stars. That's more complicated math than that of the previous program, which required just 12 stars, the equivalent of 12 visits, to get a free drink or food.
In an effort to make the revamped program more appealing, Starbucks is upgrading customers to Gold rewards status automatically if they make a purchase using their Starbucks card or app between April 12 and May 2. If customers who are already Gold (a status typically reserved for frequent users that allows for exclusive perks) make a purchase during the period, their statuses are extended for another year.
Starbucks says the change is based on requests by customers. But, it's an adjustment that clearly better serves customers who spend big at the chain - not customers who regularly purchase inexpensive items like a $2 cup of coffee.
While once thrifty customers could spend $24 and get a free drink after 12 trips to Starbucks, they now have to spend $62.50 to get a free item. That's 32 cups of plain coffee.
When the change was announced in February, many customers reacted negatively. The company's "buzz" score dropped 50% in eight days, following the announcement that rewards would soon be based on how much money customers spend, according to YouGov BrandIndex, reports CNBC.
"Gotta spend $75 to earn one free drink ... you guys need to look into Dunkin Donuts rewards program," reads one comment on Starbucks' Facebook page posted soon after the announcement. "So much better, you actually get rewards that are worth it."
Starbucks responded to the comment by listing the correct figure of $62.50 needed to earn a reward and saying most customers would "get there faster because there are so many other ways to earn stars."
Those other ways include participating in special offers, purchasing Starbucks products in grocery stores, and visiting Starbucks on monthly "Double-Star Days," when Gold members can earn four stars for every $1 spent on eligible purchases.
Starbucks Facebook
"If you occasionally buy a food item - like breakfast, lunch, or a pastry - with your usual beverage, you'll likely earn free rewards just as fast or faster than you do today," Starbucks' website says.
While many customers responded negatively, analysts said the change would likely be positive for the company.
"The more money spent, the more stars earned… which is, all else equal, more incentive to spend more money," Nomura analyst Mark Kalinowski wrote of the revamped rewards program in a research note. "From many customers' perspective, it probably is viewed as being more fair - somebody spending $6 should earn more stars than a different customer spending $3."
Starbucks
The new rewards program is also key to expanding Starbucks' rewards program far beyond coffee.
In March, Starbucks announced it would be releasing a prepaid Visa card by the end of the year that allows customers to earn rewards points, or 'stars,' towards free coffee, food, and an increasing number of other perks every time they use the card.
"We're bringing customers to the world of stars everywhere," Starbucks COO Kevin Johnson said at Starbucks annual meeting, when the card was announced.
Starbucks' rewards program today has more than 12.1 million active users. The popularity of the rewards program has helped boost the chain's mobile sales, which now account for about 6 million orders a month.