During the JPMorgan Gaming, Lodging, Restaurant and Leisure Management Access Forum earlier this month, Scott Maw, Chief Financial Officer and Executive Vice President at Starbucks, talked extensively about the role of personalization and its impact on brand loyalty.
 
“What we have driven over the past several years is significant growth and, over the last couple of years, almost all of our same-store sales growth from those customers that we have digital relationships with and those that are in our Starbucks Rewards program and last quarter those grew 11 percent,” Maw explained. “They are growing their spending rate somewhere between mid- to high-single digits. So you are getting both revenue per customer growth and the number of customer growth.”
 
Maw focused on personalization.
 
“If you think about where we are in personalization, most of that growth is coming from personalization, but we have really only been capturing spend data and learning about spend data for a couple of years now,” he explained. “So we are pretty early on in the optimization of that process. And so we set a target out there sort of in that mid-single digit hopefully every quarter on spend growth and at least double-digit on number of member growth. What’s a little bit new, and we have been talking about recently and people have been asking about recently, is we have got 75 million people coming up through our doors each month, and 15 million are in the Rewards program. What about the other 60 million? We know you will convert a million or two every year into Starbucks Rewards, but what can you do beyond that? We have talked about, and the big reason people don’t join the Rewards program is they don’t know about the benefits of the program. We have done a lot of customer work on this. They don’t understand that when they engage with Starbucks and they bring their spend through the program, they basically get a 7 percent to 8 percent discount. It’s one of the best loyalty programs out there. We can offer that because of the nature of preloading a card, because of the nature of our product and the margin that we have, because of the frequency of customers, because of the incrementality we have been driving with 1-to-1 personalization. And so we have got to find a way to continue to get people to know about the program more.”
 
For the first time, Maw said, Starbucks is starting to capture digital relationships “so that we can use digital marketing assets, including personalization, at the end of the day to get non-Starbucks Rewards members or we like to say, customers outside of the Rewards program, just so that it’s a positive.”
 
Converting lapsed members is another area of focus.
 
“We have 15 million 90-day active members, a pretty narrow active window,” Maw said. “But, we have millions of what we call lapsed active or inactive members that are 91-plus days and we have been marketing to those folks and they have been a source of growth in the Starbucks Rewards program.”
 
Jon Siegal, VP and General Manager at Stellar Loyalty, told Loyalty360 that digital relationships cannot be one-size-fits-all.
 
“Personalization is what ultimately drives loyalty and Starbucks understands this,” Siegal explained. “Brands have to build, deepen, and expand those digital relationships by using a variety of customer experiences and program tactics. Successful brands use long-lasting, mainstay programs like Starbucks Star Challenge promotion, then augment and spice things up with unique, one-off offers such as exclusive, member-only events that capitalize on customer preferences. By combining mainstay and one-time tactics, brands keep their digital relationships fresh.”
 
Evan Magliocca, brand marketing manager for Baseman Insights & Marketing, told Loyalty360 that he believes Starbucks can benefit in a couple of areas.
 
“First, and most importantly, is data capture,” Magliocca explained. “So many brands don’t have high capture rates and they’re missing out on many potential members. As Scott Maw said, what about the other 60 million customers that aren’t in the program? That’s a huge pool of customers that could drive incremental sales for the company.”
 
Second is opening some of the benefits to all customers. 
 
“Mobile order is a great opportunity for Starbucks to engage more frequently with customers, which, in turn, will make them more likely to join the loyalty program because of their proximity and frequency to the brand,” Magliocca added. “It also makes the customer experience more positive and makes lines and operations more efficient for their staff—it’s really a win-win situation.” 

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