Public Relations & Social Marketing Insight

So why fix something that not only isn’t broken, but which has been the most significant driver of Starbucks’ top and bottom-line growth, according to their CEO (see one of numerous Howard Schultz quotes here)? Because some clever users figured out a way to optimize their spending to get over rewarded.

Starbucks does sell some items priced at around $1, so a user could have spent as little as $30 over 30 visits to achieve Gold status. After reaching that Gold status, that user would be entitled to any of the most expensive drinks on the menu, like a venti Frappuccino, for free — after only 12 more visits totaling a spend of only $12. So in response, the brilliant change Starbucks made to the loyalty program was to make it spend-based. And they also increased the stars-gathered requirement for a free item to about a bazillion stars.

This is broken on so many levels, but there are already enough rants out there about the new loyalty program. What really bugs me is how they missed a few simple points:...

It’s hard to believe that loyalty programs once weren’t an industry standard. Loyalty programs, in their current form, didn’t truly emerge until the 1980s. Even still, it took another decade for the card-based loyalty programs that most consumers currently utilize to gain popularity. Today, the trend is in full force: from retailers to restaurants to hotels, there isn’t a customer-centric industry that hasn’t embraced the concept. But these programs aren’t cheap and the question of whether they pay back is a widely debated topic.

What can’t be debated is that loyalty programs provide the ability to track your customers over time, understand their behavior, and establish a one-to-one communication channel with each individual customer. This targeted communication channel is where the secret to monetizing your loyalty program lies.

The purpose of a loyalty program can be condensed into a simple sentence: Loyalty programs help you figure out who your best customers are and provide them with right incentives to spend more money with you. It sounds straightforward, but in practice, most companies struggle to achieve this goal.

The challenges associated with this goal are clear when we focus on three key phrases in the sentence: “best customers,” “right incentives,” and “spend more money.”Let’s dive into each of these aspects:...

Tesco announced recently that it had been running a trial at its new concept store on Villiers Street in central London, in which digital discount coupons were pushed to the smartphones of 40,000 shoppers who had ether passed by the store six times during a two-week period or walked in and out of nearby Embankment station.

Customers could redeem their coupons by scanning them at one of the store’s self-service checkouts. Tesco described the trial as an attempt to use the ever-increasing popularity of mobile to address some of the challenges to maintaining customer loyalty that have been created in recent years by the growth of omnichannel retail....

According to the research survey, 62% of U.S. consumers join retail brand loyalty programs to get discounts but only 36% have received a reward or promotion from the program that actually made them come back to the brand. One reason might be the fact that, according to the survey results, 81% of brand loyalty program members don’t understand the benefits they’re supposed to get from the program or how the program works at all.

Brand loyalty programs can provide a lot of benefits to marketers but the more the program is customized for each customers needs the better chance of success.Loyalty is different for each customer. The key is to provide enough loyalty experiences that your best customers are appreciated. As we all know, the 80-20 rule holds true for most retail and restaurant businesses. Find those 20% and figure out what makes them loyal, get to know them. Acknowledge different customers by basing your loyalty program on services that you provide each time they visit. Give your customers something to work towards by offering a tiered program where the best customers receive more points per purchase in appreciation for their long-time support of your business....