Starbucks just changed its reward program: is it finally worth joining?

Photo courtesy of Travis Goodspeed

 

Just because a loyalty program is offered doesn’t mean that it’s a good idea to get involved. For example, I don’t recommend joining car rental loyalty programs.

And one program I’ve looked at for a while but never liked was the Starbucks “My Starbucks Rewards” program.

Chances are, yes.

Chances are, yes.

But the coffee titan recently announced a change to its program. So I did my research. After all, I’m a Starbucks fan. I don’t go there frequently, but I do go consistently. So if they had a loyalty program worth joining, I would be all over it.

Read on to hear what I discovered.

The program details

The plan as currently in place works as follows:

  • Earn one “Star” for every visit (meaning every time you ring up a sale)
  • 5 Stars in a year gets you the Green level, with some types of free refills and other goodies
  • 30 Stars get you the Gold Level
  • Every 12 Stars when Gold gets you a free drink

(They used to offer a free dairy-free option with the Gold level, which is right up my alley, but they eliminated this benefit a few years ago.)

But now, they are changing to the following:

  • 2 stars per $1
  • 300 Stars to Gold level
  • 125 Stars when Gold gets you a free drink
We shall see.

We shall see.

Going “revenue-based”

What Starbucks has done is gone to a “revenue-based” reward system. Whereas before you would benefit based on the number of times that you visited Starbucks, now all that matters is how much you spend.

Going revenue-based performs two functions:

  1. It reduces the ability for customers to take advantage of the system
  2. It rewards higher spend customers over lower spend customers

For the first point, it used to be that if you were buying seven items (say, for your office), you could ask a (very patient) barista to ring it up as seven different sales. Voilà! Seven Stars where there once were one.

Yes, I made this graphic. CC-by-SA plz.

It’s making graphics like this that make these posts take so long to write. But it’s worth it. CC-by-SA plz.

For the second point, you used to be able to get as many Stars for a cheap drink as an expensive one. So the person who ordered a $2 tea got as much benefit as someone who ordered a $12 triple venti frappumochamericanoccino.

No more. Now it’s all about the Benjamins. (Though thankfully, it’ll be a while yet before Starbucks prices get that high.)

Starbucks and the airlines, BFFs

I get why Starbucks is doing this. The bean counters want to encourage spend, and this seems like a way to do it.

Incidentally, this is exactly what the three major US airlines have done over the past few years. It used to be that you would earn frequent flyer miles based on the distance traveled (you know: “miles”). But these days, Delta, America, and United all give points based on how much you’ve spent (though with bonuses for elite customers).

This means that the exact same things that have happened with coffee and flights: people can no longer fly on cheap tickets to distant places and earn as many miles as an expensive trip. Spend more, earn more. That’s it.

(Pssst. Please don’t tell Alaska Airlines about what all the other airlines are doing. Thanks.)

Why none of this really matters

All of this analysis has conveniently left out one important and damning piece of the puzzle that’s not changing: In order to receive any Stars, you still have to use money stored on your Starbucks Card. There is no other way to earn Stars.

The Starbucks Card is a reloadable gift card-like product. You add money to it, and then you pay for purchases that way.

And this one crucial feature is why I can’t countenance the entire program: When you add money to a gift card, it induces you to spend more.

How a gift card induces you to spend more

If you go to a store and put $50 on a gift card, and then carry the gift card around in your wallet, you have divorced the pain of purchase from the pleasure of spend. And it is the combination of both happening simultaneously that can psychologically put a check on your spending.

But once you have money on a card, it feels like free money! Yay! Make that a venti!

On top of that, this is a gift card that needs to be used at Starbucks. So you are induced to spend money on Starbucks over other places. I get it, but that’s not playing nice.

Even if you hate Starbucks, this is an important lesson to keep in mind. There are situations out there that will induce you to spend money, and they are the situations to be wary of. If we’re not vigilant, we can be tricked into spending more money than we want to, sometimes in large amounts. Over time, these situations can sap your reserves, and keep you from being able to spend on the things that really matter and really benefit you and others.

Too bad

Make no mistake, there are no sour grapes here. I am a Starbucks customer who would have benefited from these changes. My Starbucks drink of choice is the grande soy chai tea latte, which is usually in the $5 range. That’s a high-ticket item, and I’d earn more rewards now than I would have under the old system.

But until Starbucks opens up its reward system to allow people to pay with whatever method of payment they choose, I will continue to not recommend using the program.

But by all means, keep going to Starbucks if you want to. Especially if you have accounted for it in this category. I know I will.

But enough about me. What do you think about the changes to the Starbucks reward program?

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

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Mike Pumphrey
Posted on March 7, 2016
  • IndianaAnna

    At face value, I am happy about the changes. I go to Starbucks about 2-3 times a month. Once in a while, I take my kids and we each get a drink. I am not the type of person to ask them to ring up each drink separately, so it kind of annoyed me to only get one star whether I treated my kids to a visit or just myself. I never pay for Starbucks with my own funds. I use credit card rewards a couple times a year to get a $50 gift card for $45 in rewards. Plus, friends and family will often give me Starbucks gift cards for gifts. I always take all these various gift cards and transfer the balance to my Gold Card. Having a high balance on my Gold Card has never made me go more often or order higher value drinks that usual, but I’m a pretty frugal person.

    • Nice. I think using gift cards received and putting it in your balance is the best possible move here!