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Although they aren't guaranteed to drive loyalty, loyalty programs have become a staple for many companies.

But as the largest coffee chain in the US is learning, loyalty programs can be a source of frustration and criticism when changes are made.

On Monday, Starbucks announced modifications to its Starbucks Rewards program.

Previously, members earned points for their visits to Starbucks but in future the points they earn will be tied to the dollars they spend. This means that members who spend less will lose out.

Naturally, many of those Starbucks Rewards members are not happy and they've taken to social media to voice their displeasure.

According to Starbucks, "the new program reflects the #1 request we heard from members: more Stars awarded based on what you buy, no matter how often you visit." 

Given that Starbucks Rewards members who spend at least $6 per visit will benefit under the revised program – they can reach Gold status in 25 visits instead of 30 – it does stand to reason that some customers will like the changes, even if they aren't pleased enough to gloat about it on social media.

This obviously leaves the spotlight on negative buzz.

Lessons from the skies

Starbucks isn't the first company to grapple with complaints over changes to a loyalty program.

Airlines, for example, have come under fire for changes to their frequent flyer programs.

Interestingly, many of them have made changes similar in nature to that made by Starbucks: tying rewards earned to dollars spent. 

For instance, United Airlines last year overhauled its frequent flyer program so that members are rewarded based on the amount of money they spend on fares, not the number of miles they travel on flights.

Not surprisingly, that led to the type of criticism Starbucks is facing.

Of course, there's a lot of logic in tying rewards to dollars spent.

But as numerous airlines and now Starbucks have seen, moving from a structure that rewards frequency of purchases to size of purchases is not easy because such a change almost always produces winners and losers.

With this in mind, companies that are developing new loyalty programs need to be thoughtful about what behaviors they reward, recognizing that structural changes down the road can lead to customer backlashes.

Companies with existing loyalty programs obviously don't have the luxury of starting fresh, but they too should be thoughtful about how they make changes and how they unveil them.

Here, data can be a very helpful tool.

For example, loyalty program data can be used to model the impact of changes, allowing companies to ensure that the negative effects aren't too great.

And it allows them to highlight the benefits of the changes (e.g. "only 5% of customers will earn fewer points" or "40% of customers will earn more points") so that any negative buzz can be placed in context.

Patricio Robles

Published 25 February, 2016 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

Pete Austin

Pete Austin, CINO at Fresh Relevance

Behind the scenes, it seems Starbucks have changed from revenue sharing (rewards depend on total spent) to profit sharing (rewards are greater for more profitable customers). I understand the fuss, but profit sharing actually seems fairer.

It's entirely possible to do the same online, in email etc. Use so-called "cascading offers" and show different value coupons to different subscribers.
https://www.freshrelevance.com/features/coupons

7 months ago

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