Starbucks supercharging loyalty scheme to fend off competition
Coffeehouse kingpin Starbucks has announced a revamp of its incredibly popular loyalty scheme, hoping that a tactic which has served it well in the past can help push it even further. The company made the announcement ahead of Wednesday’s shareholder meeting, and in response to increasingly sophisticated coffee offerings from competitor restaurants. Those include some of the biggest names in the US fast food scene, like McDonalds, Burger King, and Dunkin’ Brands. A better loyalty scheme, Starbucks hopes, will give it the ability to keep growing membership as it rolls out its successful delivery option.
Starbucks’ share price has appreciated by 13% so far year to date
Source: Yahoo Finance
Starbucks’ CEO Kevin Johnson hinted at the revamp as early as the company’s first quarter earnings call – but now, we have more details, and an official rollout date (April 16). Here’s the deal: for every $1 spent at Starbucks, customers receive two “stars”. At present, they can swap those stars for a food or drink item once they’ve amassed 125 – but under the new loyalty scheme, Starbucks will be lowering the number of stars needed to start swapping to 25. Here’s how the “menu” looks:
25 stars will get you an espresso shot, dairy substitute or additional flavour. 50 stars can be redeemed for a brewed hot coffee, hot tea or bakery item. 150 stars can be exchanged for a “handcrafted” drink, hot breakfast or parfait. 200 stars will get you a lunch sandwich, protein box or salad. And, for the princely sum of 400 stars, you can receive “select merchandise or at-home coffee.”
The new loyalty scheme comes at a time when Starbucks has struggled to attract new customers and competitors are making more of an effort with coffee. That said, the company continues to grow, retaining its market-leading position, and its app and delivery service are proving to be incredibly popular. At present, the company’s loyalty scheme covers around 40% of its long-term customer base – so it’s an important incentive to retain and capture customers.
Starbucks’ chief marketing officer, Matthew Ryan, signalled confidence in Starbucks’ loyalty program, saying the company didn’t have any concerns over its competitors attempts to muscle in on its space: “We have established the definitive loyalty program in our space. They're trying to be the best, it's a little hard for them to catch up to where we are right now.”
Dominion holds Starbucks in its Global Trends Managed Fund.
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