Dive Brief:
- Starbucks and Bank of America are partnering on new loyalty features, the companies announced Thursday.
- Participating customers who link an eligible Bank of America card with their Starbucks rewards account can earn 2% cashback on qualifying purchases and one star in the Starbucks rewards program for every $2 spent at Starbucks, in addition to the benefits and stars they already earn.
- Starbucks rewards members have shown considerable loyalty to the brand. High frequency loyalty members prevented the chain from experiencing an outright decline in traffic in recent months as some occasional customers deserted Starbucks reportedly in response to the chain’s stance on the Israel-Hamas war.
Dive Insight:
Starbucks Rewards operates on the basis of bankable points, earned at a rate of one star per dollar on most purchases and two stars per dollar for cash preloaded onto a Starbucks digital card or from a registered gift card, according to the coffee giant’s website. As such, the new reward represents a 50% increase over the base rate of accrual and a 25% increase over the accelerated rate available on some purchases, a sharp change in the possible accrual rate that is likely to drive frequency and increase loyal customer’s perception of the chain’s value.
The program is open to current and new members of Starbucks rewards who are also Bank of America cardholders. The offering is part of BankAmeriDeals, a cashback program with more than 45 million participants.
Ryan Butz, vice president, loyalty strategy and marketing at Starbucks, said in a statement the arrangement represented, “the latest example of how we are continuing to invest in our most loyal customers to deepen engagement and connection by offering benefits and experiences that can't be found anywhere else.”
Such a steep jump in the rate of star accrual raises the possibility, however, of over-discounting, since Bank of America’s vast number of cardholders will likely overlap significantly with Starbucks’ 34.3 million active rewards members in the United States. In 2022, Starbucks began partnering with other national brands to link loyalty and rewards programs through a program called Reward Together. Delta’s Skymiles program was one of the first national brand rewards programs included in that partnership.
Starbucks rewards members’ spending accounts for much of the chain’s revenue, “with tender reaching an all-time high of 59%,” in Q1 2024, according to the company’s latest earnings call. Starbucks did not respond immediately to a request for comment on the scale of adoption or the possibility of over-discounting.
While loyalty partnerships like this increases the importance of loyal consumers to the brand, Starbucks is trying to woo back occasional customers. The chain is in the process of developing three drink platforms targeted specifically to occasional customers in the afternoon daypart, where the chain is likely to face increased competition from McDonald’s new brand CosMc’s in coming years.
