As a marketer obsessed with brands, it is easy to understand why I fell in love with loyalty programs at such a young age. I remember the first time my mother introduced me to Starbucks, a worldwide purveyor of coffee and pioneer of the growing American coffee shop culture. My mother, a self proclaimed coffee junkie, refuses to “Get her fix” from anywhere besides the green mermaid. In early 2008, her coffee addiction awarded her a Starbucks Gold Card, a significant milestone given to the most loyal of customers. Back in 2008, I wasn’t aware of this significance for loyal customers who spent well over Starbucks’ expected customer life amount in a matter of months. When paying with her brand new gold card, I was amazed that a huge company, with thousands of locations, would recognize my mother for being such a loyal customer.As of late, it seems that the Starbucks Gold Tier rewards program has lost its way. Pre-April 12th 2016, earning “Gold” status required 30 visits within one calendar year, regardless of dollar amount spent. The new Starbucks rewards program modeled the one utilized by Dunkin Donuts. Rather than include their own loyalty model with the new offering, Starbucks wiped away the frequency rewards in favor of the dollar-spent model. Essentially, anyone who spends $62.50 or more will instantly be awarded the perks of Gold status regardless of how long you’ve been a loyal customer.
Under the old rewards program, anyone who made 30 purchases in a calendar year was awarded gold status. This devaluation caused a large uproar from current gold members who threatened to frequent Dunkin Donuts in favor of a brand that maintains their rewards status quo. With some critics of the program saying Starbuck’s previous rewards program was overvalued since the start, this devaluation, essentially returning it to an industry standard valuation, wasn’t much of a change. While the program now rewards customers for dollars spent, there is a lingering feeling of distrust between the ex elite and the coffee giant.Taking advantage of the strife felt by Starbucks gold members, Dunkin Donuts fired right back. Dunkin sought to capitalize on its own successful loyalty program to capture disgruntled customer’s business through clever social media campaigns. It worked.The rise of loyalty programs has become both a blessing and a curse. Often, those customers in the higher echelons of loyalty programs feel a larger sense of entitlement. This feeling of entitlement, speaking in terms of bringing a rewards program valuation back to industry standards from an inflated high, offended long time clients who enjoyed their exclusive-elite status. In a time when one person’s dollar is worth the same as the next, it is up to large brands to create loyalty programs for their frequent visitors and generate demand for their products. With customer acquisition costs skyrocketing, companies such as Starbucks can’t afford to lose market share simply because the company overvalued its rewards program and only now decided to make such a drastic devaluation. A devaluation intended to increase brand engagement and reach can backfire on those who supported the initial rewards program, propelling them to choose to frequent competitors who have listened to the call of the consumer. The importance of creating and retaining a higher-level loyalty program for members that will be sustainable throughout the growth of the business is becoming more and more important in today’s customer centric world.
Garrett Meccariello is an aspiring brand manager based out of NYC. In his free time he can be found building the next great brand, exploring the city, and eating a lot of cured meat and cheese.