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Starbucks' rewards program changes could alienate customers: Bernstein



Last week, Starbucks announced changes coming to its North American loyalty program in an effort to attract new members. But Bernstein said in a paper published Friday that the adjustments could indicate existing Starbucks Rewards members. [Div] group> p: first-child "/>

The Seattle-based company has been experiencing slowing foot traffic at North American stores as the coffee market grows more competitive, Starbucks has been focusing on ways to keep customers coming back every day, like investing in its cold beverages and switching up the loyalty program. of its daily transactions.

"We think the new rewards plan runs the risk of alienating the core customers," Bernstein analyst Sara Senatore wrote in the research note.

Members still earn two "stars" for every dollar they spend However, the updated program eliminates Starbucks Rewards' two tiers and gives members of wider range of redemption options, from 25 stars to customize a drink to 400 stars for select merchandise or at-home coffee.

"We Matthew Ryan, Starbucks chief marketing officer, told CNBC when the changes were announced. "We want members more engaged out of the gate."

The current iteration lets customers exchange 1

25 points – earned by spending $ 62.50 at the coffee chain – for a free food or drink item. When the changes go into effect in several weeks, members will have to redeem 150 stars – the equivalent of spending $ 75 – for a handcrafted drink, hot breakfast or parfait. A lunch sandwich or salad will set customers back even more: 200 points or $ 100.

"With lower discounts on higher value items, the note should be marginal accretive – assuming no change to customer habits," the note said. "The effect reward rate is lower than 50% lower on some items."

When Starbucks last changed its rewards program in 2016 to encourage customers to spend more, some consumers protested the changes on social media. The same backlash has not happened yet for the latest round of tweaks, which will not go into effect until April 16.

Starbucks did not immediately respond to a request for comment from CNBC.


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