Starbucks Loyalty Changes Won’t Cut Benefits: Execs

Starbucks' loyalty program will soon reward bonus points based on money spent rather than recognizing individual purchases, a change designed to ease workflow and increase participation rather than dilute benefits, company executives said Monday morning.

Starbucks customers currently earn one point, or "star" per purchase and can redeem 12 stars for a free food or drink item. Starting in mid-April, customers will get two stars for every $1 spent and require 125 stars to get a free item.

"What I can tell you is there are a small minority of people who will either be advantaged or disadvantaged here," said Scott Maw, CFO of Starbucks, who was answering a conference call question about whether the changes would cause the coffee chain to lose consumers who make smaller purchases.

Starbucks contends the math works "the same way" for the new program. Customers currently get a star for each transaction, which averages a little more than $5, the company said. In both the old and new model, the reward is triggered at just over $60.

"As we switch the mechanics of the program, we are not using it as an opportunity to opaquely weaken the rewards program," said Matt Ryan, Starbucks chief strategy officer.

The U.S., Canada and Puerto Rico are the initial markets for the program, though it may expand to other markets over time.

About one in six of the 75 million people who enter Starbucks locations each month are loyalty members. Starbucks hopes the change will boost the uptake percentage, which Ryan said is "far lower" than companies in other industries, though the actual number of loyalty members is larger than most retailers.

Ryan and Maw several times mentioned "transaction splitting" as a reason for the change—Starbucks hopes to stop consumers from requesting that individual purchases be rung up separately.

"This is challenging for other customers who are forced to wait and to our baristas who have to perform extra work, a burden on them that adds cost to our [profit and loss] by extending transaction time," Ryan said, adding about 1% of Starbucks total transactions are from customers who request two or more separate purchases at the point of sale.

Starbucks also uses its mobile app, which includes pre-ordering and mobile payments, to reduce wait times. Starbucks gets more than one in five payments through its mobile app, and mobile ordering is about 15% of its mobile payments volume, Maw said.