Starbucks can boast of having one of the best loyalty programs, which is also why some might consider it akin to a banking app. Starbucks is certainly more than just a coffee company. Today, we’ll delve into why the Starbucks app is perceived as more than just a typical coffee app and is likened to a banking app.
What Is a Loyalty Program?
Retailers and businesses often utilize loyalty programs to cultivate customer engagement and retention. These programs offer various incentives, such as discounts and special rewards, to foster repeat patronage and brand loyalty.
Customers receive perks based on their frequency of visits and spending habits, encouraging continued support for the merchant. Incentives range from exclusive access to new products and sales, to complimentary merchandise or enhanced services like expedited shipping.
Ultimately, loyalty programs serve the dual purpose of rewarding customers while incentivizing ongoing engagement with the brand.
Starbucks loyalty program
The Starbucks app has amassed an impressive user base of 31 million active users.
Customers have the flexibility to load funds onto their accounts using Starbucks gift cards or by linking Apple Pay or payment cards to the app.
Every transaction made via the app earns users loyalty points, known as Stars, which can be redeemed for various perks such as free extra espresso shot, nondairy milk or a dash of your favorite syrup every 20 stars, brewed hot or iced coffee or tea, bakery item, packaged snack and more every 100 stars, or even pick up an item with Starbucks logo on it.
A particularly ingenious aspect of this system is that customers who pay with funds stored in the Starbucks app receive extra loyalty points.
In the realm of customer loyalty, Starbucks consistently stands out for its exceptional rewards program, garnering a devoted following.
Thanks to the company’s stellar reputation, customers feel confident leaving money in their Starbucks accounts, knowing they can use it whenever they wish.
The financial figures are telling: in the previous quarter, the “stored value card liability and current portion of deferred revenue” totaled $1.8 billion—an impressive pool of unspent funds akin to interest-free capital for Starbucks. (Source)
Another noteworthy aspect is the variety of Starbucks gift cards available. It appears that Starbucks gift cards can serve as the perfect present for any occasion. Recently, they introduced new designs specifically for Mother’s Day.
Additionally, a portion of gift card funds is never redeemed by customers, allowing Starbucks to retain the full amount.
In the latest fiscal year, the company reported approximately $196 million in “breakage revenue,” representing funds that remain unused. While this constitutes less than 1% of Starbucks’ annual net revenue, it essentially translates to free income.
Encouraging users to utilize the funds stored in their Starbucks accounts for purchases also results in fewer payment processing fees for the company.
Starbucks’ rewards program serves as a pioneering example of a non-banking entity leveraging loyalty and trust to accumulate substantial customer deposits.
This innovative approach has led many to categorize Starbucks as a ‘neobank,’ ‘FinTech,’ or even ‘an unregulated bank.’
Source: This is why Starbucks app is actually a Bankingapp
What are the other ingredients in Starbucks’ recipe for success?
Starbucks’ marketing approach centers on delivering exceptional customer experiences, embracing digital advancements, ensuring product excellence, and championing sustainability.
One of Starbucks’ standout marketing strategies is its personalized “name-on-cup” initiative, which fosters engagement among customers and generates buzz on social media platforms.
The marketing mix at Starbucks encompasses Product (a diverse range of offerings beyond coffee), Price (premium pricing supported by loyalty programs), Place (a global network of stores and strategic partnerships), and Promotion (innovative campaigns and seasonal offerings).
The Starbucks mobile app has revolutionized the coffee industry by seamlessly integrating into the customer journey. It empowers users to place orders, make payments, and earn rewards with ease, thereby enhancing convenience and fostering loyalty.
Moreover, the app serves as a valuable source of customer data, providing Starbucks with insights into preferences and behaviors for more targeted marketing efforts.
Starbucks excels at building anticipation and excitement through its seasonal and limited-time offerings. Examples such as the Pumpkin Spice Latte (PSL) and the Unicorn Frappuccino have transcended coffee culture to become societal phenomena.
The introduction of these unique and time-limited beverages generates fervent anticipation among customers, driving both retention and acquisition. Starbucks’ commitment to offering distinctive products and continuous innovation is evident in its seasonal lineup.
Starbucks app
In November 2001, Starbucks launched a game-changing innovation with the introduction of the Starbucks Card. Initially distributed as a prototype to employees, its rapid success prompted a swift release to the public. Within the first year, millions of users had embraced the card, collectively depositing over $2.4 billion into their accounts.
As the Starbucks Card gained momentum, it evolved into more than just a payment method. Through continuous refinement, it transformed into the Starbucks Gold Card, offering additional perks and in-store benefits to the brand’s most devoted customers.
The culmination of these developments occurred in 2009 with the launch of My Starbucks Rewards, coinciding with the introduction of the Starbucks Card Mobile app. This groundbreaking application allowed U.S. customers to manage their balances, reload their cards, and review transactions on the go.
The success of Starbucks’ loyalty initiatives laid the groundwork for the iconic Starbucks Rewards program, setting a benchmark for fostering customer loyalty through enticing incentives. This program operates like many others, with customers earning points, or “stars,” for their purchases. What distinguishes it is its seamless integration with the Starbucks app, offering convenient features like pre-ordering, in-store payments, and exclusive music playlists.
This level of convenience has solidified Starbucks as a go-to destination for coffee enthusiasts, further reinforced by the opportunity to earn stars at twice the rate by topping up your digital rewards card through the app, a feature emphasized by Starbucks itself.
Such success catapulted Starbucks into a league of its own as their rewards program became hugely popular, holding a deposit size that, if Starbucks were a bank, would make it bigger than 90 percent of institutions covered by the US FDIC. (Source)
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