Back in late February when it was first announced I wrote about Starbucks’ revamped rewards program. And how it seemed to me just another way to appease Wall Street’s insatiable profit and revenue demands by cajoling more people to spend more money at their local coffee hangout.
Since that post the Twitterverse has erupted with snarky comments and “goodbyes” from rewards program members. Based partly on the unfavorable reaction – and the timing as rival Dunkin’ Donuts rolled out its own loyalty program – a major Wall Street analyst gave Starbucks a well publicized downgrade. The stock fell – but partially recovered.
You may recall the rewards program was changing from one star per visit – a transaction-based system – to a dollar-based plan. 2 stars for each dollar spent. You used to achieve gold status (which you need for your rewards) with 30 stars. So buying one small coffee each day would give you gold status in about a month. After that you needed just 12 stars (or 12 visits) to get your free extra large caramelized honey latte – or whatever. Now gold status takes 300 stars. And then 125 stars for each reward. Big difference.
So Starbucks barged ahead. April 12th was the big changeover. Since then stores have been plastered with gold-lettered signs urging coffee lovers to join the rewards program, buy something and get one year of gold status virtually immediately. Current gold members would automatically get another year of gold. Of course I jumped at that. Even though I knew I was being bribed. Maybe a lot of other disgruntled rewards members did the same. Or a lot more new members signed up. This week in its second quarter results Starbucks said membership jumped 16 percent year on year and 8 percent from the previous quarter.
But wait. There’s more. In those same second quarter results the coffee giant reported revenues somewhat below analysts’ expectations. And after just matching profit forecasts – warned of weaker earnings for the current quarter. Of course the stock fell again.
Flopuchino! As CNBC so elegantly captioned it on TV.
Hmm. Maybe all those potential freebies to keep people like me happy will actually hurt Starbucks’ bottom line? But isn’t that just what the new rewards program was designed to change?
You mean after enraging its loyal customers to keep Wall Street satisfied Starbucks had to backpedal to keep those same customers from walking away? And then find a way to make the now more expensive rewards program attractive to newbies? And keep both groups away from Dunkin’ Donuts? At least for the short term. Which is all anyone cares about these days anyhow. And which is why Wall Street bid down the stock again.
And which is why for Starbucks right now – it’s a kind of a zero sum game. At least as far as the rewards program goes.
OK. Sounds good. More stars = more free food = faster Gold status (which is what GIVES you the free food. And drinks).
Now it’s no secret I love Starbucks coffee. Although I don’t love much of their food and I really don’t love the overly sweet, overly caloric cakes and brownies and such. Beyond the banana bread which thankfully was retained when Starbucks bought another bakery a while back and changed all the snack food.
Well – back to my email. So now, says Starbucks, I’ll earn 2 stars for every $1 spent on coffee, food, mugs etc. Well that’s way better than 1 star a visit isn’t it? The email says it’s the #1 request from members — stars based on what you buy. $$ you spend.
I kept reading. There must be a catch somewhere. Big successful companies don’t just give things away on a regular basis. And of course — they won’t.
Now I get one star per visit. And a star for each package of Starbucks coffee I buy at the supermarket. I can just buy a basic grande coffee or maybe splurge (calorically) on a cafe mocha with whipped creme. 30 coffees or – say – 25 coffees and 5 bags of packaged coffee and I have 30 stars. And I’m gold for another year. Then I need just 12 stars earned any which way – for a reward. One free ANYTHING in the store I can eat or drink. As many rewards a year as I can earn.
In April I’ll need 300 stars to make Gold. And 125 stars for that free reward. It will take much longer to get there buying just one coffee per visit. So obviously Starbucks is gambling that it’s loyal customers will spend a lot more on food now to reach the gold levels faster. Hey – Starbucks hopes you will say — let’s have a Starbucks sandwich for breakfast or lunch instead of going to McDonald’s. Making Starbucks’ lagging food products more popular. Boosting revenue. Making Wall Street happy.
Now I know what happened. And why. I came back home from my summer university teaching in Prague, went to my local Starbucks, held up my iPhone with its Starbucks app to the scanner and settled down happily to enjoy my coffee in what I expected would be the usual warm, comfortable atmosphere. Then I realized something had changed. Where was the mood-setting music mix of new and old, jazz and rock? Manager’s choice music which varied from store to store to fit the customer mix? Background music which – like that of a lounge pianist – created a sense of belonging, of social interaction in an otherwise sterile, masculine-colored brown and tan, oblong strip mall space. What I heard now was more like the old Muzak. Boring, genre-less, insipid elevator music. It was like an Invasion of the Body Snatchers. Or maybe the Stepford Wives.
I asked the baristas. We hate it too, they said. I emailed the regional manager. I’ll tell my boss, she emailed back. I even filled out a customer complaint form on the Starbucks website. We’ll pass on your comments, came the stock reply.
Today I found out the truth. What really happened. In a way it was an Invasion of the Body Snatchers. Spotify and Starbucks had partnered to create what they called “a next generation music ecosystem”. In all 7000 company owned US stores. I must have missed the announcement last May. Had I known I might have stayed in Prague. Where the body snatchers haven’t ventured yet. And Starbucks is still Starbucks.
There’s nothing in my local New Jersey store saying something like “Music by Spotify. Plunk down your 10 monthly bucks to subscribe.” There’s just nothing. Musical nothingness.
I wonder if it’s because most of Starbucks’ employees are just too young to remember Muzak. Or all the jokes. Or maybe out in Seattle – where corporate Starbucks lives – they never had elevator music. It’s the West Coast after all. And the living is —- different.