Starbucks’ loyalty program had a great second quarter. And then the retailer made a big change.
The coffee giant added half a million Starbucks Rewards members in its Q2 2019, growing its total to 16.8 million active members in the U.S., up 13% year-over-year. President and CEO Kevin Johnson said the momentum had a “positive impact on results,” as Starbucks rewards members accounted for 41% of U.S. store sales in the quarter.
However, the company’s quarter ended March 31 and on April 16 it rolled out a new tiered rewards program.
“We are very pleased with the smooth rollout of our enhanced Starbucks Rewards Loyalty program that provides customers greater choice and flexibility in redeeming rewards,” Johnson commented on the company’s earnings call.
Prior to the change, members needed 125 stars for a choice of a free drink or food item. The new tiered program offers rewards at 25, 50, 150, 200, and 400 star increments.
“We think the new rewards plan runs the risk of alienating the core customers,” Bernstein analyst Sara Senatore wrote in a research note.
“With lower discounts on higher value items, the program should be margin accretive — assuming no change to customer habits,” the note said. “But customers are savvy, and higher spenders are likely to recognize that the effect reward rate is lower (as much as 50% lower on some items).”