Customers not feeling “a little love back from Starbucks”

Candy StripeStabucks UK has a lot of unhappy customers today after the company decided to change the terms of their loyalty program. The previous rewards card offered a free drink for every 15 transactions and a discount on filter coffee. Now it seems that Facebook is buzzing with caffeinated complaints because of the changes as consumers post everything from their disappointments to threats of shredding their loyalty cards. One of the most significant changes only gives customers one reward point per transaction as opposed to one point per item purchased. Starbucks claims it just holds up the checkout lines, while customers are in a tizzy because they earn far fewer points now and still spend the same amount of money.

Do you think loyalty programs enhance the overall value of products and does it help to motivate buyers into making their next purchase? At least 75 percent of consumers have at least one loyalty card and one-third of shoppers have two or more cards, but many people say the whole shebang is just not worth it. CMO Council, a research group stated consumers have been backing away from reward cards because of the “barrage of irrelevant messages, low value rewards and impersonal engagements.” In 2011, 66 percent of consumer respondents stated that loyalty programs do not make them more likely to shop at one place simply because the programs become too problematic and people are just less motivated to figure it out. I happen to have a loyalty card at CVS; I have yet to figure out their rewards nor do the short expiration dates on my receipts ever coincide when I need something from the store. Now when I need something from a drug store, I use whichever one is closest to me.

Managers have to constantly evaluate the benefits of loyalty programs and compare the costs with the presumed benefit. Where the ideal outcome is to help bond a customer to an organization by offering additional incentives, it’s difficult to predict buyer behavior. The programs do not necessarily encourage customers to spend more, but the database from these programs can help a business figure out who is or isn’t loyal and reward those with the best spending habits. On the other side however rewarding shoppers for spending more doesn’t necessarily build a company’s market share. Organizations only grow by getting more people to buy their products not just getting current customers to purchase products or services more often.

We’re in the age of instant gratification, and we all want to say we got something for nothing – but is anything ever free?

photo credit: HereStanding

2 Responses to “Customers not feeling “a little love back from Starbucks””

  1. Maria Elena said:

    Jan 15, 12 at 12:31 am

    Although customer preferences have become unpredictable, still, people would respond to incentives as these are extra values they get out of the money they spent. Earning points or getting something in return out of the purchases made still counts. But if stores have been sacrificing more than what they should give away for these incentives, perhaps they should device a new plan in order to come up with a win-win situation for the company and the customers.

  2. Joe Roselle said:

    Jan 15, 12 at 4:38 pm

    Cheryl,

    Here’s the straight skinny on loyalty programs. They have to be simple and very easy for customers to understand. If you confuse customers, you lose them, it’s that simple. By lose here I mean they won’t be interested in your program.

    You must commit to a loyalty program as a marathon and not a sprint! If done correctly, you will build customer loyalty,which is more important than market share. Market share is like pushing a string. It keeps changing shape and is unpredictable. Customer loyalty is like pulling the string. It retains it’s shape and is predictable. Having said this, I agree with you that you always want more customers to grow your business, but remember it costs about 10 times as much money to acquire a new customer as it does to maintain your loyal followers. So, best practice is to work hard to maintain loyalty at the same time your working to build market share.

    The added bonus of loyal customers is cost free advertising.

    So, here’s the easiest, most effective and fairest,loyalty program to implement.

    It’t generally called a “13” buyers club. The customer makes 12 purchases in your store. They either keep the receipts or associates write the amount on a card. After 12 purchases, they receive a 13th product “free” based on the average price of the 12 purchases. No time limit. Remember it’s a long term commitment, not a promotion!

    In a business with a 50% markup on retail, it comes out to an 8.5% discount. You figure the discount based on your particular markup. The cost is usually charged to advertising expense.

    Voila! Simple, easy to understand and it works!