How Starbucks might reward its most loyal customers

Some of Ron Lieber's ideas make sense; others would be tough -- if not impossible -- to implement. But he's right that Starbucks ought to do something special -- more often -- for its best customers. (Yes, I know that it occasionally surprises with a bonus $5 or so added to my registered card.) Here are a few of Lieber's proposals:

* Make the first drink under $5 free each month after someone has spent $100 in the previous month.

* "Reserve seats next to the electrical outlets for folks who spend the most money at the chain, rather than letting total randoms hog the powered tables for the price of a small drip coffee? And let’s throw some free wireless in once in a while to boot." (Webmaster: It should be free all the time; you're way behind the curve on this, Starbucks.)

* "If I spend a lot there, I want to be able to use a special, shorter line."

* "Throw a members-only party when new products come out."

* "Starbucks should have some Aeron chairs in each outpost and save them for its elite customers." (Webmaster: I want to be there when they try to throw a "non-elite" out of the chair.) (Read Ron Lieber's blog post)

Comments

[imabarista]

Sheesh!
What a selfish self absorbed me me me kind of guy.

None of those ideas would make money for the stores. All of them would cost money. Especially for the bouncers who would have to kick the hoi polloi out of the special chairs when the hoity toity
deign to sit in the store.

Perhaps adding some spare change to the card after a set limit is reached is a good idea. If it is not billed as a cost to a particular store.

I know this type of guy. Comes in, buys a small coffee in a Venti, fills it with H&H and walks out with all the free newspaper he can carry.

Get a life.

It is about the coffee.

[Darleen]

Are you kidding me? Is this guy serious? Talk about entitled. I don't think that a customer who spend 3.50 for a drink is any better than the customer who comes everyday and gets a brewed coffee. A loyal customer is a loyal customer, period.

[ex-sbuxmanager]

How about just having an outlet for every table? That's not too expensive and relatively easy. It's ridiculous that in most stores there are only 3 or 4 places to plug in.

[Darleen]

How about just having an outlet for every table?

That's an awesome idea, I agree with you.

[Melody]

Starbucks is not an airline industry. I don't think pre-boarding is ever going to work in a coffee house! A special shorter line for frequent fliers? That's not effective for a 3rd place environment. It's a coffee house, not an airport terminal. Big difference.

There are just a couple of ideas that I'd like to see, but they're old ones that I'd like to see [i]return[/i]:

From Pour Your Heart Into It (p. 256)

"In the weeks after each opening, we often set up a reward system to thank our customers for their repeat busienss. Starting in 1993, we issued passports that entitled customers to a free half-pound of coffee once they had taken a world tour by trying coffee beans from different origin countries. In other cities, we invited them to try five different beverages, after which they were given a free local market tumbler."

^ I remember the customer passports very well, because it IS the thing that made me a repeat Starbucks customer. It was a heavenly experience. You went in, figured out what new beans you wanted to try, the barista scooped them out and gave them to you, and then you got a sticker in your book designating the new bean you tried. When the book was full, you went back for free coffee.

I have no memory of the 5 different beverage promo, and I wonder if that was outside of the City of Seattle.

My two-cents: Bring back what already worked.
Melody (Long time Starbucks Coffee customer)

[Hirayuki]

How does high money outlay correlate with a need for electrical outlets? Many regular customers who visit every day, if not more than once a day, likely get their (sometimes big and expensive) orders to go or via DT. In fact, I'd say it's the outlet (or simply seating) hogs who try to get away with staying there the longest on a single espresso or bottled Frappuccino.

[John]

The only idea I agree with is free Wi-Fi spots. Having to pay for wireless internet is an old idea carried over from when it was first brought to the public. Where I live, I cannot think of any other establishment where I have to pay for wireless internet access.

Rewarding loyal customers is a great strategy, but it's counter-productive to essentially treat some people as A-List celebrities. Imagine the reaction if someone is kicked out of their seat just because another person spends more on coffee.

[maggiemunkee]

starbucks doesn't have free wifi in all places right now because, as one of the first places to offer wifi, we got stuck in a hyooooooge contract with t-mobile. i would be shocked and appalled if we don't have free wifi once that contract expires.

[sk*nny b*tch]

"First off, don’t make me wait in a long line first thing in the morning or during the afternoon rush. If I spend a lot there, I want to be able to use a special, shorter line. If other customers are jealous, that’s tough; let them spend their way into the short line."

I think I'd rather ring at the long line. And, wow, he does say "me" a whole lot!

[x]

"If I spend a lot there, I want to be able to use a special, shorter line."

Oh that's just sheer genius! Let's create a customer caste system where legendary service goes to the highest bidder!

[barstar]

As much as it bothers people, I think it makes sense that Starbucks doesn't offer free Wi-Fi. By not offering free wireless we avoid multiple customers taking over tables for hours at a time, and can maintain an average turnover of about 20 minutes. Starbucks doesn't gain anything by offering the service for free.

[Ron Lieber]

Hi X -- I'm Ron Lieber, and if you cared so little, you wouldn't be posting, would you?

Folks, the feedback is terrific. I meant the post as a conversation starter, so I'm glad people are responding. I have a lot of this wrong, but you don't start solving problems until you have the courage to air out half-baked ideas.

Yup, Maggie, I do think about myself a lot when it comes to how I spend my money and time. I'll bet lots of you do too. Why can't we admit that about ourselves and not be ridiculed for it?

Thanks for the clarification on Wireless, good to know that the fee will be gone everywhere soon enough. Free wireless seems like table stakes these days, and Sbux should be embarrassed that they don't have it.

To the person who thinks the $3.50 ticket-price person isn't any better than the daily drip person, you may be right. It all depends on how profitable those beverages are. If I'm running Starbucks, I want to encourage people to buy more of the high-margin stuff more often. So maybe a straight dollar-amount-based loyalty program is the wrong way to go.

And FWIW, I don't steal H&H but see no problem with walking out with free newspapers. Isn't that what they're there for -- for people to take them? What am I missing here?

Ron

[Ron Lieber]

X, my apologies -- a post I thought was from you said "Who is Ron Lieber and why does anyone care what he thinks?" It's no longer there (does Jim remove pointless posts?), but I can't edit my last post.

R

[Cindy]

The main problem I have with most of his ideas is that Starbucks strives to be a third place for ALL of its customers. It's not really in keeping with that welcoming atmosphere if people who can afford to drop hundreds of dollars a month get special treatment right in front of all the "non-elite" customers.

One of the reasons that I think the $5 to registered Starbucks cards is a good idea is because it's much more subtle than a velvet-roped section of the cafe and it rewards loyalty over big spending. Anyone with $5 can get a Starbucks card and register it; that's welcoming, and it doesn't favor one group of customers who can afford to spend more.

I know that Starbucks is a business and therefore primarily concerned with turning a profit, but as Howard is so fond of saying: they're not in the coffee business, they're in the people business. The majority of these elite measures seem to assume that each Starbucks is kept afloat by a small cadre of regulars who spend the most, and that isn't true. There are plenty of people (far more than big-spending regulars) who come in a few times a week to grab a drip coffee and who would happily go elsewhere, I'm sure, if Starbucks seems to treat them like their patronage isn't as important as someone else's. Rewarding big spenders makes sense, but shoving it in the face of everyone else doesn't.

[Cindy]

Oh, and Ron? The newspapers are there for purchase. My market used to charge $0.35 for the local paper and $1 for the NYT, $5 on sundays.

[STARBUCKS GOSSIP webmaster]

Ron -- I did delete X's post because, yes, it was "pointless."

[Liberty]

I agree with some of Ron's statements. SBux does need a loyalty program, but some of his ideas would be difficult to enforce.

Nearly everyone now drinks coffee, whether it be at home or out. What's convenient usually works best. I am a SBux customer, but when Caribou was on my way to work, I stopped there. Before than, I went to an independent, because it was on my way to work. Point being - we get used to the taste of whatever we're drinking.

When I went to the independent- she gave me a free drink after I purchased 10 - boy I loved when I got to 8 - only 2 more to 10! When SBux opened around the corner, I didn't move over to there - because she had me with a loyalty program. She's retired now and moved from my area - so now I'm a SBux customer. I like the coffee, there is 1 new place that just opened closeby and if that place around the corner comes out with reload cards and a program that gives me a free coffee with every 10 - I'm there.

[JMW]

These are bad ideas -- the last thing Starbucks needs is to turn into an airline. They already ventured into serving airline-quality foods. Now they need "frequent drinker" programs? :)

Indie shops sometimes do the "buy 10 get one free" cards. But, in my experience, usually not the good ones -- and they do it because they aren't Starbucks and don't command the _brand_ loyalty.

Likewise, airlines have frequent flyer/elite/etc programs because they generally have little brand loyalty. The air travel industry is an oligopoly and mostly people want cheap seats; they don't identify with Continental, American, etc. The "incentives" offered by FF programs compensate for the lack of a brand with "lock-in."

Starbucks doesn't lack a brand. The minute the company "needs" a frequent drinker/elite system, they are basically a commodity and have much, much worse problems to think about. Let's hope things aren't that bad yet.

I remember the customer passports-people LOVED them! If we want to know what will encourage customer loyalty-ask the customer-then do what makes sense! $700 chairs-maybe not so much, IMHO...Stamp cards for a free drink every so often...maybe-it worked FINE in the past...Just remember: it's about the customer AND the coffee.

[EXTRA FOAMY]

Starbucks already rewards loyal customers with the "third place" and legendary service, not to mention JSY..These are the reasons for return and loyal customers, because of the quality they get from Starbucks..we should go back to these roots, and train and implement these practices as well as improving the quality of our products more than appealing to a persons greed. Customer's should recieve the same service whether it is their first visit or their ten thousandth visit. What a great idea, lets selecet a portion of our customer base and let everyone else know how much more we value their visit, and drive away another portion..

[Jewels]

I don't know about other stores, but in my store, there is a subtle "shorter line" for regular customers. If a customer comes in regularly enough for us to know them and their drink, we will start making it as soon as we see them walk in the door or sometimes when their car pulls in the parking lot- even when it's busy. So they still have to wait in line to be rung up, but not usually for their drink.
This occasionally frustrates "non-regular" customers, but usually it's so quick and subtle, they don't notice.

[ron lieber]

good stuff jmw -- though i'd argue that starbucks has lost much of what made it unique and special. it isn't as good/fun/neat as it used to be, and competitors of all sorts are squeezing it from above and below. it is approaching commodity status, and putting a loyalty program into place is much easier than getting that specialness back.

Ron,
One of the things that *$s has lost along the way IS a customer loyalty program!!! We had it in '93. Bringing it BACK isn't selling out, it's getting back to the specialness that we once had.

[BOSTON STARBUCKS REBEL]

I agree. Regular customers should be recognized and receive their beverages before other customers. I think that is a reward for coming into Starbucks so often. Being recognized by name, beverage and having prepared ahead of time. Thats the best way. Thats being legendary. The other ideas as listed above are just plain stupid.
Also, people with Starbucks Duetto Visa Cards constantly receive rewards on there.

[Kittymoose]

Regarding the free drink after 10 idea...

At my store, we have a few regulars who come in every single day, sometimes two or three times a day, for their drink (usually drip or tea). Every so often, we tell them that their drink will be on us. Its not really a "rewards program", but it does reinforce the friendly atmosphere. Surprise and delight :)

[SoCalSnowBunny]

You've hit it on the nose, Ron. It would be easier to put in a loyalty program, much easier than getting back to our core. But I think these easy decisions are what got us here in the first place. Customers wanted more retail merchandise, so we provided it. Customers wanted breakfast sandwiches, so we provided it. Customers wanted speed, so we provided it (through automation).

The problem is, we don't have a "core" customer. Our customers transcend all demographics and socioeconomic status'. What that means is that what one customer desires, the other despises. That makes it really difficult to just "go to our customers and they can tell you what to fix".

For this reason, we need the right leader in place to make the right calls, set the right vision, and for all of us partners to understand that while we may have an occasional customer provide feedback that they don't like this or that, that we are open and listen, and not minimize how they feel. But it is also really important for us to share with our customers that they transcend so many demographics that it forces us to make some hard choices, sometimes.

I also love the coffee passport option for customers, which I believe ties into the core, and doesn't discriminate against any particular demographic.

[Supposed Eric]

If you burn the customers who haven't demonstrated their loyalty yet, they won't become loyal.

Don't discriminate against new customers. Your loyal customers are going to die someday.

The round-the-world program described above is a nice idea and can be equally beneficial to new customers and loyal customers.

[Melody]

Kittymoose, I've definitely had that happen to me a number of times where I've gotten a free drink here and there, just because the baristas see my face so very very often.

But in the end, the thing with the cards and a free drink after 10 beverages, is that it does cost in the end. Someone pays the cost, and it's a program subject to abuse. So what if I buy 10 short lattes, and my free drink a quad-venti-too-much-syrup-bizarro-drink? There really is nothing free in life: we pay somehow for it somewhere.

Socalsnowbunny: Yep - I favor the coffee passports for customers - yes there is a cost associated with it, but I think the benefits are so very high, it's worth it. It ignites enthusiasm for coffee beans, which is something Starbucks very much needs to do right now. And of course, anyone can participate in buying coffee beans: It's not totally a demographic driven program. Lastly, you know what you're getting when you finally get your free coffee beans - there's limited room for the same kind of abuse as with the 11th drink is free dynamics.

Sigh, I do miss those customer passport books. I remember them so well, and would not be a customer today were it not for them.

My last comment, if you're heading to an indie coffee shop really because you get an 11th drink free, it gives me pause for thought. Frankly, I think that Starbucks can create an experience where it is unnecessary to have such gimmicks to retain customers. Someone above captured the touchstone of this argument: Airlines desperately need to rewards programs because of low brand loyalty, but Starbucks is simply not in the same category of businesses.

[SoCalSnowBunny]

Melody you are quickly becoming one of our favorite (and most rational) customers! I was attempting to somehow capture your last point (regarding the gimmicky appearence of loyalty rewards program) and you said it perfectly!

I have the Duetto sbux visa and can tell you that I rarely EVER have to pay for drinks (even if I didn't have the partner discount). I use it as my primary credit card (always pay it off same month) but through charging my vacation costs, school tuition, whatever, I always have a balance of $50-$125 of duetto dollars to use. As well, I just received a note in the mail a few weeks ago that "as a surprise and delight" they added something like $7-8 dollars onto my account. For no reason (other than being a loyal patron).

So, there are definitely ways to maximize the rewards programs already set up and in place, I think we just need to share this knowledge with others.

Free newspapers create enough loafters in our stores. Free wireless could only exponentially exacerbates the problem. Perhaps lowering the price to give at least the illusion of value could be a better strategy.

[Legendary or Bust]

Can I ask what an independent coffee shop is? Is SBUX the largest independent coffee shop? Define.

[SoCalSnowBunny]

I agree Anon- I think free wi-fi is DEFINITELY not the blanket we want to provide. Now, free wifi with a minimum $5 purchase, I think that is reasonable (your 1 day id and password could print out on your receipt, perhaps?).

But it makes no sense at all to provide the free wi-fi with no customer tie in. I have visited way too many stores whose lobbies are FULL now, and these are paying customers!

[BOSTON STARBUCKS REBEL]

*FLASH*
Will Howard give us the new 32 GB iPod touch?
*FLASH*

This is how I reward great regulars:

I remember their drink(s), take a personal interest to their lives, recognize them the second they walk into the store, and have their drink ready for them regardless of the long line. I don't need a gimmick or free samples, or even customer appreciation parties.

And fyi, I'm a partner at one of the busiest stores on the east coast. If you come in everyday and drop money on the table for Starbucks, you better believe that I'll remember your drinks and provide first class customer service.

[ron lieber]

right on, 12:52

if only there were more partners like you (or you weren't so preoccupied with high-class egg mcmuffins), sbux might not be in such a fix...

I think the only thing there should be a seperate line for, is poor folks like me, that just want a cup of coffee, and had to wait in line for all these people that have drinks that take 10 minutes to order, I just want a damn cup of coffee!

I love all this first class service - and this is how you reward loyalty - but read back to your posts on tips. Cash in you pocket means something to you - it means you're recognized. Cash in my pocket means the same thing to me. Thanks for making my drink, recognizing me, etc....but drop some cash on the card.

SBux needs a good loyalty program - that doesn't have to do with facial recognition or legendary service - because bottom line....the dollars always count.

An Indie shop, for example, is Happy Beans in Podunk - and although SBux is independently owned, its also franchised and there is one every corner.

[Equal Among Equals]

"putting a loyalty program into place is much easier than getting that specialness back"

Exactly, and that is exactly why this is a difficult time for the company. I think that for Howard this transition has become personal - cost will not be an issue, he will do all he can to bring the company back to the fundamentals. Sure, it may involve the introduction of loyalty programs, but this transition will be more than just flashing lights and gimmicks. Things I could imagine seeing, within the next 2 years:

- Free wi-fi
- Fresh ground COW
- Manual style bars
- at least one ground breaking new beverage, as influential as the Frappuccino.
- A comprehensive revamp of the food program, focusing on components that actually taste good with coffee.

Just some ideas for the "five specific, bold “consumer-facing” initiatives that will be a major catalyst for change and transformation," that Howard was talking about. I used to think manual bars would never be back, but I honestly think Howard might be just crazy enough to try.

What are your predictions guys?

[BOSTON STARBUCKS REBEL]

I think you're right. He definitely will try to identify the stores which could use them. If those stores do come into play, I'll definitely ask to transfer to them. We can rock it out.

I hope the Clover machines go worldwide!!

Ron, while I appreciate your support of 12:52's statement, it completely negates your whole premise, so I'm left scratching my head here.

It kinda supports our premise that sometimes (dare I say?) our customers aren't the best source for making decisions. It's not that I don't value your opinion, but can you imagine if we went through all of the work/cost of implementing your original premise, when we could have met your needs in the way that our 12:52 partner suggested?

Fresh ground COW is actually being implemeted. No more pre-packs. If I remember right, with in the next couple of weeks even. As far as the manual machines...they don't really work so well anymore with the high volume we get. It does take a lot longer to make a drink that way. I think a good idea would be to have both a Verismo (what most stores use now) and a manual machine. Cause there's the customer that wants their drink RIGHT NOW and then there's the customer that wants higher quality. I've worked with both machines and it IS harder to get a good quality shot out of a manual because there are so many more factors involved...so we'll have to re-train EVERYONE...And then I hope that all of the baristas on bar actually care about that single (or double) shot that they are pulling and don't forget when they were supposed to stop the shot. Don't get me wrong...I do love the manual machines...but how often do you wait in line for your drink for longer than you think is necessary...and then when it's explained that we had to grind the coffee, tamp it, insert it, then pull the lever and count before just the espresso for your drink could be made...oh, you ordered a quad? That will be the same process another time...nobody will listen or believe the poor barista that they were just trying to make sure you got the best quality espresso in your drink. If we weren't so busy, it would be fine, but I work at a drive through and there is NO TIME for that.

The last poster at 3:39:43 PM said just what I was thinking.

I don't think we'll ever go back to manuals. Didn't Starbucks make a promise not to go back? It would not only be extremely expensive to get new machines, but to train the baristas too. Customers might be confused, not understanding why the method matters, just hoping for the consistent flavor.

[Jewels]

BSR-

I think howard will be giving US those 32 gig ipod touches, thankyouverymuch.

ha ha... just kidding. you know there's no way any store can win through honest, hard working measures. someone is bound to cheat.

it's been great fun trying, though!

A shorter line for 'loyal' customers is the most preposterous thing I have ever heard.

[Equal Among Equals]

I used to agree with you about the manual machines, but if you've been into another cafe recently there are a ton of labor saving devices that are incorporated into new machines to help make the process easier and more consistent. Sure, they're more work, but if we are going to try to separate ourselves as a premium brand, we need to produce premium product. It would be difficult, but I think Howard takes it that seriously. Honestly, I think a majority of our customers would prefer it. It's a long shot, but I think it may be on the long term agenda (AKA as the Verismos are financially depreciated).

As far as pre-packs going away, the note about grinding COW was not an official announcement, but rather a "be prepared to receive bullets...". The rest of the memo was about changing process at the roasting plant designed to keep the freshest coffee available in the stores. I read it more as "If we have bullets, you get bullets..." I think going back to bullets and fresh ground coffee would involve more than just using the current methods. Once again, other cafes have machines that at the push of a button freshly grind coffee to the appropriate weight, directly into the brewing basket. In fact, I think they may even have that type of device at 7-11.

[CoffeeMan]

I had suggested this once before....not really sure how to make it work, but offer free wi-fi for valid Starbuck's Gift or Duetto Card users. Great perk! (pun intended).

Another idea would be a frequent user point system. Instead of buy 10, get one free....maybe offer discontinued merchandise, bring back the tee shirts (!), or offer soon-to-be expiring bags of coffee; stuff that's going to be thrown out anyway - most customers would appreciate the gift (most, not all, unfortunately). I'm sure there's a way to do this on gift or Duetto cards. Provide a print out with receipt....you now have 25 points and are eligible for a variety of 12 ounce bags of coffee we have on sale at this store.

Loyalty. Just some idle thoughts.

[Just Sayin']

I, too, agree fully with what the person at 12:52 stated.

Our most loyal customers KNOW they are loyal simply based on the fact that we know their drink, their cars, their kids, their pets, where they went on their last vacation. We know how much foam and that they want it steamed to 140 degrees. They know that once we look up an see them in line, we've already begun their beverage...even if they happen to be the 4th or 5th person in line.

I've talked about service to these individuals. What we see as work and making our lives easier by remembering drinks, they see as them being something special. And they SHOULD feel that way. Starbucks is a luxury item, even if "every one" consumes it. There have been numerous times where we've told regulars "It's on me" today...but even that's not what brings them back. What brings them back is the feeling of being in the "third place." I cannot tell you how many graduation parties and other various get-togethers our customers have invited us to because they felt we were as close to them as friends...or family.

It isn't just about striving to create brand loyalty, it's about treating each customer as an individual and giving each and every one of them special attention. THAT'S what brings our customer base coming back each and every time...even if that regular only comes in once a week.

[DallasSM]

I think a frequent customer card would be a great idea as long as it were available to all customers. The purpose is to create more regulars. If we have a VIP line, we risk upsetting people who may be new to our stores.

Frankly, the idea that Starbucks is headed in the general direction of offering a loyalty program is absurd.

First, let's look at this from a cost standpoint: Starbucks HAS the customers. Even if the quality were to decline a few more shades, the majority of Starbucks customers would still flock to the stores. Starbucks has defined coffee culture for literally millions and they think of Starbucks when they think of coffee. People go to Starbucks more times than not for quick, polite service and not artisan-quality beverages. The cost of instituting a loyalty program would be expensive and provide extremely little in the way of a return on the investment. Plus, you have the risk of alienating a group of customers. Those who don't qualify for the "elite status" certainly wouldn't go elsewhere at first, but why tempt fate and put off some customers with a lame-brained program when you don't have to.

Next, I believe Howard decided to nix a lot of how the Marketing Department works. The promotions that have rolled out of Marketing in the recent past have been trite, expensive, ineffective and unfocused. Throwing a promotion/ program out like a loyalty program rings of all of those things. Customers would look at it and ask themselves why they need this deal, how it can benefit them and is it even worth the time or effort? The majority would answer a simple no and the return to Starbucks would be nil.

Howard would never suggest such a horrible idea; part of his return includes a refocus on Starbucks' core: coffee and the customer. An ill-formed loyalty program neither focuses on coffee nor would be good for the customer.

Finally, the sheer of idea of having a segregated store for a Starbucks "highroller" is laughable. The cost of cafe seating is already prohibitive considering the cafe area only costs the customer and provides little fiscal benefit. You could honestly have the bar and enough room for people to line up and the store would cost the company less cash. Less store = less needed real estate = lower costs. Having to duplicate seating for a "VIP area" costs more real estate and having to decrease already available seating proves to be less attractive to the customers who do go to Starbucks for that sort of thing. Frankly, knowing I have a VIP seat because I spent more cash last month/ quarter/ year is not enough to make me want to spend the cash in the first place, either.

Starbucks knows it needs to appeal to the mass consumer. While making your brand more exclusive can work for some companies, a mass merchant like Starbucks cannot survive with that business model. (And, yes, Starbucks is moving into a mass merchant category.)

Playing intelligent moves like a direct, smart focus on the customer (better training, more efficiency, better products and services, etc.) and the coffee (better quality, innovative drink recipes, etc) will be the best thing Starbucks can do for itself.

Implementing poorly thought out strategies that only prove to alienate your customer will only negatively impact your business.