Starbucks membership system disassembled!

Starbucks , a controversial brand.

At the product level, there are mixed reviews. But what’s interesting is that whenever a new player appears in the coffee industry, Starbucks is always used as a benchmark.

In terms of operations, it is undoubtedly the leader in the industry. Based on its brand, Starbucks may have taken advantage of its advantageous conditions, but we have to admit that in terms of membership marketing, Starbucks has shown us different results.

Although Starbucks is not the originator of the membership system and does not have dazzling membership marketing methods, just like all its business strategies, the "extremely simplified operation" thinking and "step-by-step" patience have enabled its members to create an impressive result of 36% of revenue.

01 Membership Begins | Membership system starting with Starbucks Rewards Card

For most catering brands, "promoting consumption + enhancing user loyalty" is the common goal of all forms of membership systems, and in general, membership relationships need to be maintained through two forms of stored value or points.

The first type is a simple and crude form of stored value, requiring members to deposit a certain standard of cash in their membership cards so that consumers can enjoy discounts during consumption. This form of membership requires "prepayment" so that customers will give priority to this brand for consumption over a period of time, thereby achieving the goal of improving user loyalty. But the disadvantage is that the scale of the "prepayment" amount is difficult to grasp. Too high a fee will discourage most customers, while too low a fee will not have much restraining effect on consumers' consumption will.

The second "points system" records the consumption frequency or amount of members, allowing customers who accumulate a specified number to enjoy discounts, such as redeeming gifts, discounts or even free meals, thereby promoting customer consumption to a certain extent. However, this membership system needs to set up reasonable "points benefits". If customers perceive the value of the benefits too low or the cost of obtaining them is too high, they will lose interest from the beginning.

Whether all of the above membership incentives can be truly realized, 80% of the determining factor lies in whether the customer's first consumption is properly utilized. To go further, two things must be done when a customer consumes for the first time:

• Screen customers. You must screen out customers with consumption potential and focus on promotion;
• Use appropriate "discounts" to attract customers into the membership system.

The Starbucks Rewards system achieves the above two goals through a subtle psychological incentive.

Before 2018, Starbucks customers needed to spend money to apply for a card in order to obtain some benefits.

It costs 88 yuan to apply for a Star Rewards Card, which comes with three benefits: three opportunities to buy one drink get one free, a breakfast invitation ticket, and a ticket for a drink upgrade. It should be noted that the card will only be valid after activation, and you cannot enjoy the buy one get one free or any of the above benefits when making your first purchase.

Therefore, if a customer chooses this Starbucks by chance or out of helplessness, he will definitely not participate in such "fan-gathering" activities as applying for a card, which requires prepayment and does not bring any discount to the current consumption.

Therefore, the "arrogance" of the Star Rewards Card serves as a reminder to many catering brands that like to lower the threshold for first-time consumption as much as possible in order to attract fans. For customers with no consumption potential, giving concessions for the first time is meaningless and will instead reduce profits for no reason.

But if the people who come happen to be frequent coffee consumers, this Starbucks Rewards card will definitely attract them. First of all, the design of the Starbucks Rewards Card is very stylish, and some people who are obsessed with appearance will be attracted to it; secondly, it allows you to intuitively feel the future discounts. The average cup of coffee at Starbucks is about 30 yuan, and you can earn back 88 yuan by getting three buy-one-get-one-free opportunities, and you can also enjoy extra coffee during breakfast and one free cup upgrade.

At the same time, Starbucks's promotional form is also very clever. It adopts the method of "small amounts and multiple times", and all of them are indirect promotions:

First, the benefits obtained in exchange for the 88 yuan paid in advance by the customer are split into five times by Starbucks. The discount obtained each time is actually very small, but when put together, it gives the customer a feeling of a lot of benefits.

Then, all the benefits are based on subsequent consumption. Buy one get one free means that customers still need to consume again to get a free cup of coffee, and who would drink two cups of coffee at a time? Customers will definitely bring friends along, which attracts another potential consumer.

Therefore, if members want to redeem benefits, the only way is to "consume again", otherwise they will lose all their money. Starbucks has achieved the goal of stimulating consumption through the strategy of "invisibly binding" benefits and consumption.

02 Motivating Growth | Member Growth System

The essence of the membership system is to allow customers to shop with a purpose. The key to changing customers from casual shopping to shopping with a sense of mission lies in the design of membership level growth.

Starbucks has three levels of membership.

The initial level is Silver Member:

Then keep shopping and you can upgrade to a Jade Star Member:

If you keep drinking, you will become a gold-level member:

Why are so many customers willing to buy coffee from it? In fact, this is due to Starbucks’ membership level setting skills - making members feel that upgrading is very simple!

For example, when you have used up the three buy-one-get-one-free coupons in your junior membership and are about to buy your fourth cup, the store clerk will tell you: "If you buy one more cup, you can upgrade to a Jade Star Card member and get a free coffee coupon."

It only costs 250 yuan to go from silver star to jade star, and only 1,250 yuan to go from jade star to gold star. In order to reduce the perceived difficulty of upgrading for customers, Starbucks also launched the "Little Star" strategy.

Little Stars is a way to earn points, using stars to replace the amount of consumption. For every 50 yuan of consumption, one star will be generated (similar to virtual points).

In the Starbucks App, you can also see how many stars you have. The visual upgrade progress will encourage you to shop at Starbucks more frequently.

When you collect the corresponding number of stars, it means you can unlock the privileges of the next level. Starbucks’ tier privileges are simple yet full of tricks, always giving you a sense of great value.

Good membership privileges mean that customers feel it is a great value while merchants can also make money "very quickly". Starbucks is a master in designing membership privileges. Silver-star privileges are mainly aimed at cultivating consumption habits of new members; Jade-star privileges are mainly aimed at increasing the total consumption of members; and Gold-star privileges are mainly aimed at increasing the number of consumption times of members.

A mature membership growth system: the ingenious design of level division, upgrade threshold, and rights corresponding to each level. Every step of membership growth is precisely designed by Starbucks. The psychology of members is grasped in every link of membership growth, and members are subtly guided to continuously upgrade their consumption through the setting of level rights, allowing Starbucks to "reap the benefits while sitting back and watching the self-growth of members."

03 Fine Operation | High-Value User Management

Starbucks' membership system actually starts with member screening. They want to select those who like and love Starbucks, so their Silver Star members are actually equivalent to passers-by (with almost no rights), Jade Star members are actually ordinary members, and Gold Star members are loyal members.

Secondly, Starbucks focuses its membership management only on these Gold Star members. It only pleases the most important members. For other members, it just hopes that you can upgrade as soon as possible.

Finally, for Venus members, it has established a loyalty program. On the one hand, it is completely inclined towards the design of benefits, and on the other hand, it allows members to obtain benefits by earning points and accumulating stars after purchases, and then use the benefits they have obtained to drive more purchases, forming a positive cycle.

Starbucks' focus on high-level membership is very suitable for brand companies to learn and draw lessons from. After all, a company’s resources are limited, and it is worthwhile to use limited resources on members who can contribute the most value.

04 The icing on the cake | Points system

We know that the core purpose of membership management is to increase customer orders and repeat purchases. The basis for increasing customer orders and repeat purchases is to manage member loyalty well. Therefore, points have become the preferred loyalty management tool.

Because points are not a right that can be used immediately, their acquisition and use need to be tied to user behavior. Through guidance and incentives, users can gradually build up habits and gradually establish user loyalty to the brand.

The characteristics of points also determine that it is a right that we need to earn. The implicit assumption here is that we will cherish things that we have earned, and the results obtained will give us an extra sense of satisfaction with what we have obtained.

For example, I used 9 stars to exchange for a free medium cup of coffee, and I couldn’t help but post it on WeChat Moments. For example, when we are with friends, they all buy them with money, but I exchange them for free with points. This kind of secret joy and silent self-recognition makes me feel a little happy inside.

At the same time, points are directional, and the things that can be redeemed for points are already designated. This will help brand companies effectively manage and control costs. For example, if I use one star to exchange for the privilege of upgrading my cup size, from a medium cup to a large cup, I get a 4 yuan discount on the price, but for Starbucks, the cost may be only 1 yuan.

There may be various rules for earning points. For example, we often do activities like this: buy designated new products and get double points. But there is only one main way, that is, you can earn points at a certain ratio based on the amount you spend.

Points are usually used in two ways: one is mid-term redemption, for example, every time you reach 9 stars, you can redeem a free cup of coffee. Based on a consumption frequency of 2-3 cups per week, it is completed in one month, which is equivalent to a free cup every month. One is to redeem stars over a long period of time, accumulate a lot of stars, and then redeem them for Starbucks peripheral gifts.

Both of these methods represent that Starbucks points are not a stimulus for short-term satisfaction, but have long-term rewards, so points are a long-term rewards program. The more you accumulate, the more valuable the things you can redeem are. It actually encourages members to delay gratification.

If the membership system is the trunk, then the points system is the branches and leaves. The two complement each other and together cultivate a thriving evergreen membership tree.

05 Adapting to change | Membership system adjustment

From the changes in Starbucks membership level settings in 2018, we can see:

• The registration threshold has been lowered, which has increased the number of members in the membership pool and greatly increased the number of fans that can be operated;
• Under the same price conditions, more stars can be accumulated, and the purpose of vigorously promoting Feikuai services and APP can be achieved by accelerating the accumulation of stars through bundling;
• The 98 yuan benefits package raises the barrier to member loss;
• The difficulty of upgrading is reduced, allowing members to reach high levels faster, focusing on high-level member operations

On the other hand, there are changes in membership level benefits:

• Added Venus in Sight drink coupons to increase the temptation of upgrades;
• Add promotional drink coupons and shorten the validity period of all coupons to 7 days (originally 90 days);
• Remove the free benefits of buy three get one free and get a drink for every 10 purchases, and replace them with paid free drinks with 9 stars to eliminate the practice of taking advantage of others;
• Increase the probability of free drinks expiring without being used, saving financial costs.

In 2018, in order to promote upgrades, the difficulty of upgrading was reduced; in order to save costs, daily benefits were cut; in order to quickly build private domain traffic, the company vigorously promoted its own APP; in 2020, in order to reduce points inflation, more points redemption products were opened up.

The adjustment of Starbucks’ membership system provides the beverage industry with a new way to “attract fans”: greater benefits, clearer points goals, and a clearer “growth path” for members.

On the one hand, higher star-accumulating benefits enhance the value of membership, make consumption more rewarding, and the surprise of redemption can also bring deeper emotional connections.

Among Starbucks' "deep users", some are loyal "Star fans" who are keen on accumulating stars and purchasing peripherals. For these "players", the upgrade of the membership system will undoubtedly enhance their loyalty. Another group of high-frequency users are business people who use Starbucks stores as places for business meetings and offices. They often have a large number of stars “lying” in their membership accounts. When these stars can deliver “extra surprises,” they develop a deeper emotional connection with the brand.

On the other hand, redemption for members has spawned more consumption scenarios, not just a cup of coffee. When members can redeem more merchandise by accumulating stars, they will also develop more consumption habits.

The consumption scenario for members has evolved from a cup of coffee to a lifestyle: coffee + desserts/meals/coffee beans/cups/utensils. You can have a richer experience in the store, or you can brew a cup of coffee at home. The growth path of members starts from points upgrade, redemption product upgrade, to consumption scenario expansion, and ultimately growing together with the brand.

From a business logic perspective, the logic of point redemption is not a buy-one-get-one-free promotion, but rather long-term value return. This is Starbucks’ “fan-attracting” rule: it does not focus on the “fan-attracting” ability of a one-time promotion or a hot product, but instead uses a long-term, lasting redemption system to continuously provide members with a sense of value and gain, thereby completely “circling” fans.

06 Conclusion

Designing a membership growth system with a long life cycle is an issue that all mature catering companies need to consider, especially when there is fierce competition among peers.

It is crucial to formulate a membership system based on the company's operating goals, use level growth divisions and match corresponding rights and interests to encourage members to grow themselves, and use the points system to expand the boundaries of member consumption.

The membership system is a dynamic system in the business ecosystem. Only by adapting to changes, adapting to the ever-changing user needs and competitive environment, and meeting the phased needs of its own development can it fight its way out of the fierce market competition and continue to create benefits.

Author: Yunxi Shuying

Source: Yunxi Shuying