Why Retailers Like McDonald’s Should Take Note of Starbucks’ Loyalty Program Misstep

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For many of us, it’s vital to have a hot cup of coffee in our hands to start the day — and it’s equally important where we buy it. People are certainly loyal toward the particular type of coffee that they consume as part of their daily ritual.

Coffee giant Starbucks recently received a ton of backlash from customers after changing the mechanism of its My Starbucks Rewards program from frequency-based rewards to dollars spent. Once its new program is in effect, Starbucks will essentially assign more value on the carpooling soccer dad stopping in once to get Frappuccinos for his carload of kids than on the loyalist who visits every day.

Meanwhile, McDonald’s is now stepping up with a loyalty program of its own in an effort to retain loyal customers and potentially poach some of those that Starbucks has lost.

While this battle for breakfast unfolds, one thing is certain: the retailer that best uses technology to personalize the customer experience and address 100% of its customer base will likely win.

What’s Best for Customers Is Best for Business
Consumers have endless options, so it’s important for brands to make the entire customer experience as personal as possible. Personalization can potentially make every customer feel appreciated, regardless of how much they’re spending — and this is where Starbucks dropped the ball. As McDonald’s builds out its loyalty program, it should think about creating offers that can be tailored to each customer, striving to increase both spend and value from every relationship. Loyalty programs can also serve as a platform for driving favorable actions. Some examples to this effect include:

  • Targeting frequent visitors who always buy a medium black coffee to upgrade to a large or add on an Egg McMuffin to increase basket size.
  • Changing the buying habits of morning visitors by offering them an afternoon snack.
  • Creating offers to get big-time-spending “occasionals” to visit more often (e.g. turning the soccer dad from our earlier example into a regular customer).

Brands That Can Execute on the Promise of Personalization Will Win
Personalized content will also lead to increased impulse buying decisions while customers are inside the store. A recent CreditCards.com survey found that only 6 percent of “impulse buys” happen online, while a whopping 79 percent actually take place in the physical store. Directing customers to in-store promotions via mobile tools and loyalty apps enhance the likelihood that these impulse buys will happen. Retail brands can also utilize personalized offers when a customer trends “negatively” — for instance, if their visit frequency slows down or they stop coming in altogether. Instead of giving up on these customers, brands can send them personalized offers to lure them back in.

Flexibility Is the Future
As big retail brands jump into the digital loyalty space, it’s important that their loyalty programs (whether they’re building their own or working with a partner) are flexible. Flexible platforms are much quicker to launch and allow for real-time customer data compared to legacy systems. Brands should also consider omnichannel programs so that their customers can still earn points when they engage in-store and online.

Starbucks stated that customer requests prompted its loyalty program changes, but nonetheless the customer response has been overwhelmingly negative. McDonald’s and other brands can learn from this by considering a phased approach to loyalty program updates instead of a widespread change. Customers treat their points like money. By adjusting the points structure (or the length of time to actually earn that free drink), customers feel like they’ve been cheated and that their previous actions are of lesser value.

Brands that put their customers first by offering truly personalized customer journeys will come out on top. While it’s unclear yet how big a hit Starbucks will take from the company’s changes, there’s certainly plenty to learn from how their moves play out.

JB_IMG_0579Jenny Beightol is director of words & reputations at Belly. Her expertise in brand identity and customer loyalty comes in handy when playing the “Loyal Brands” edition of Trivial Pursuit. She can be contacted via Twitter at @jRoseBeezy