March 1, 2016

Loyalty: Do you understand the tie that binds?


Image source: Starbucks.com

Starbucks is changing its longstanding rewards program.

Some people are upset, even very upset. Other people don't get why.

I think the change—and the subsequent negative reaction—provide a useful reminder about loyalty and relationships.

Image source: Starbucks.com
Not familiar with the change? Here are the basics.  Previously My Starbucks Rewards card members (a free membership) earned a free food or beverage option after every 12 visits or purchases … regardless of the amount of purchase during each visit.

The new system taking effect in April requires 125 stars for the same benefit. Customers earn stars at the rate of two stars for every $1 spent during a visit. Starbucks says a visit's avg. purchase amount is $5 so only an additional visit or slightly larger purchase is required.

While people are complaining about the mechanics of the new structure, I think the underlying issue is the one worth noting.

The previous system fostered loyalty through interaction regardless of what happened in that interaction. It also offered both tangible and intangible benefits: Visit your Starbucks fairly regularly and not only do you get a concrete reward (food or drink free), but you also become a recognized guest, one more likely to receive a familiar greeting from your regular barista.  In this sense, Starbucks really can feel a bit like a Third Place.

By shifting to a monetary-based system, Starbucks has knowingly created a transaction-based exchange … even though this was an underlying premise of the previous system.  Even if we receive the same benefit for about the same number of visits, the terms of our loyalty relationship is one now based on dollars.  Starbucks will be loyal to you so long as you express your loyalty via appropriate financial thresholds. Starbucks has always wanted to make as much money off of us as it can, but that unstated truth is now front and center.
Rightly or wrongly, people feel cheated: "I've been loyal all this time and this is how you treat our relationship?
The change in metric really is a change in meaning: in how the value of our relationship is defined and the terms of the loyalty "contract."  Every organization needs to understand the agreements (explicit or implicit) it makes with those with whom it hopes to create loyalty. Does yours?

Interesting to note that the new program is simply called Starbucks Rewards versus the original name, My Starbucks Rewards. It perhaps unintentionally reflects the shift (real or perceived) in the power dynamics of our relationship with the company.