Starbucks will add more ways to pay, earn rewards this fall

Dive Brief:

Starbucks plans to update its Starbucks Rewards loyalty program beginning this fall in company-operated U.S. and Canada locations, according to a blog post shared on the company’s website Tuesday.
The update includes more payment options and ways to earn Stars through the Starbucks app. Members can scan their app and then pay with cash, credit/debit cards or select mobile wallets to earn Stars toward free items. These payment methods can be saved in the app, alongside the current Starbucks Card.
In a statement, CMO Brady Brewer said the update was made in response to customer feedback requesting more options to pay and earn Stars in the app, in addition to the Starbucks Card.

Dive Insight:

Starbucks predicts the expansion of payment options will appeal to a wider audience, which could add even more loyalty members to the company's robust platform. As of the end of M arch, there were 19.4 million active members in the program, a 15% year-over-year increase.

Adding new ways to pay to the app removes a level of friction for customers, who will no longer have to load money onto the Starbucks Card. According to research from Fundera, while just 10% of consumers make all of their purchases with cash, 88% use cash at least sometimes. Further, 76% of consumers have at least one credit card, while debit cards account for 67% of card payments. Catering to this consumer behavior could help the chain strengthen relationships with existing loyalty members and entice a new swath of customers.

Starbucks has a strong loyalty program in place to begin with. During a presentation to investors in June, Patrick Grismer, CFO and EVP at Starbucks, credited the program for helping the company navigate the COVID-19 crisis.

"The more recent loyalty offers and enhancements to digital that we've launched coming out of COVID have really reengaged customers and have helped to drive sales, as evidenced by a meaningful increase in average weekly downloads and activations of the Starbucks mobile app since the campaign started in early to mid-May," he said.

Loyalty members accounted for 44% of U.S. tender during Q2 2020 with "evidence of continued growth in the current environment," he said.

Now could be an ideal time for brands to make their loyalty programs easier to use. Consumers that are loyal to a company are more willing to refer that brand to others and spend more with that brand, a big deal for an industry reeling from an unparalleled crisis. Grismer said Starbucks loyalty program increases both frequency and average spend, so adding more members is a "strategic imperative."

Other major QSRs are beefing up their loyalty offerings, as well. Earlier this month, Taco Bell announced its latest loyalty iteration, Taco Bell Rewards. Wendy's announced Tuesday it is launching a new loyalty program as well, called Wendy’s Rewards. The program gives customers the opportunity to accumulate points no matter how they pay based on purchases tracked through Wendy's app.

In addition to generating more spend and frequency, these loyalty programs are also hitting on another trend accelerated by the pandemic: digital ordering. As Chipotle’s chief reputation officer Laurie Schalow told Forbes, "It makes sense that people would want to get a benefit from their purchases as more people started using the app for digital orders during the coronavirus." In the first month of the crisis, membership enrollment in Chipotle’s rewards program jumped from 8.5 million to 11.5 million.