Starbucks changes its rewards program

Small spenders have the most to lose with new rewards program in Canada and U.S.

Starbucks is changing the terms of its rewards program so that people who just get a regular cup of coffee will have to spend significantly more to earn a freebie.

The Seattle-based coffee chain says its loyalty program will award stars based on dollars spent starting in April at all its Canadian and U.S. locations.

Currently, people earn a star for each transaction, regardless of how much they spend, and get a free food or item of their choice after earning 12 stars.

People will now have to earn 125 stars for a free item, with each dollar spent being worth two stars — meaning they have to spend $62.50 to get a free item. That means that people who now spend around $5 or less per visit are losing out.

For instance, someone who regularly gets a $2 regular drip coffee would currently earn a free item after spending around $24 over 12 visits. Someone who gets a large latte for $4.45 currently spends around $53.40 over a dozen visits before getting a free item.

Still, Starbucks says the change is the No. 1 request among loyalty program members and predicts it will lead to higher spending by customers eager to earn more stars.

The program will now include only two levels: Green and Gold. Those signing up for the first time will automatically be put into the Green level, instead of the former Welcome level.

Starbucks Canada spokeswoman Madeleine Lowenborg-Frick says starting in mid-April, those making purchases at the Welcome or Green level will be given Gold status for a year. While those who are already at the Gold level will have their status extended for a year.

Currently, customers can achieve the Gold status when they accumulate 30 stars. Starting in April, customers will have to hit 300 stars to obtain Gold status.

Once at the gold level, customers will have to have 125 stars before they can redeem a reward versus 12 stars under the old program.

Green level members receive perks like a birthday drink and free in-store refills on brewed coffee or tea. Gold members receive all the Green level perks and a free drink or food item after they accumulate enough points. They will also qualify for monthly double-star days and get a personalized Gold card.

In a call with analysts, Starbucks chief strategy officer Matthew Ryan said the vast majority of customers will earn rewards at an equal or better rate with the change. Without providing details, he said a “small minority” of customers will earn rewards at a slower pace.

The change is not an opportunity to “opaquely reduce” the value of the program, Ryan said.

The current rewards system can also increase waiting times in store lines, Ryan said, because some people try to get additional stars by asking to ring up multiple items separately. Such instances account for 1% of all transactions, he said.

The change comes as Starbucks has been pushing to get more people signed up for its My Starbucks Rewards program. Loyalty members spend three times as much as non-members, and help push up profit, according to the company.

Last month, Starbucks said it had 11.1 million loyalty program members in the U.S., up 23% from the previous year.

 

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