Caffeinated rewards: A look at rewards programs for coffee

AP News
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Posted: Mar 30, 2016 4:42 PM
Caffeinated rewards: A look at rewards programs for coffee

NEW YORK (AP) — Some Starbucks customers are vowing to take their money elsewhere after the company said it was overhauling its loyalty program, but finding an alternative may require a little homework.

The changes announced by Starbucks last month essentially rewards bigger spenders, while those who stop in for a regular $2 drip coffee lose out. But even if some people are grumbling, the Seattle-based chain is betting that they will get over it.

"A lot of times, customers quickly forget stuff," said Brad Marg, chief operating officer at Clutch, which provides consulting on loyalty programs and customer retention.

That doesn't mean there aren't options for people who don't want to make coffee at home. Dunkin' Donuts is scrambling to catch up on the loyalty front, and Panera has long touted the popularity of its program. Smaller coffee shops also usually offer perks to their regulars, although they're more likely to be in the form of a paper punch card that lets people earn a free drink after around 10 purchases.

Cups, an app that launched two years ago, also offers "prepaid plans" for coffee across various independent shops. For instance, people can pay $11 to get five cups of regular coffee or tea at any of the participating stores within six months. About 200 of the roughly 260 locations are in New York City, said Chris Schrader, marketing manager for Cups.

Of course, there are some who welcome the change by Starbucks.

Starting April 12, the company said its "stars" will be rewarded based on how much people spend. Right now, people got a star for each transaction, regardless of what they buy. For people who get pricier drinks such as Frappuccinos and packaged sandwiches or a baked good, that system probably did not seem fair.

Starbucks said some customers even ask to have items in their orders rung up separately so they can get a star for each of them.

Here's a look programs at how the new Starbucks program works, along with what Dunkin' Donuts and Panera offer. McDonald's, which has more than 14,000 U.S. locations, does not yet have a loyalty program but says it plans to test one by the end of this year.

STARBUCKS

HOW IT WORKS: Earn two stars for every dollar spent, and get a free item after earning 125 stars. That means you have to spend around $62.50 to earn a reward. To start earning those rewards, however, people first have to collect 300 stars (i.e., spend $150) to reach "gold level."

EXPIRATION: Stars don't expire in the current program, but with the overhaul, they will expire after six months for gold members.

REWARD: Any food or drink item.

EXTRAS: Once a month, Starbucks says gold members will be able to earn double stars on a surprise day. The company has also said it's working on ways to let people earn stars outside of its cafes. That includes an upcoming Starbucks prepaid card that can be used anywhere Visa is accepted. The company says the card will be out by the end of the year, but has not yet said what the rate of rewards will be.

LOCATIONS: More than 12,000, including licensed locations in places such as airports and Target stores.

DUNKIN' DONUTS

HOW IT WORKS: Earn five points for every dollar, and get a reward after 200 points. That means people have to spend around $40 to get their reward. People do not have to reach any particular status before earning points toward a reward.

EXPIRATION: Points expire after 90 days.

REWARD: A beverage of any size. Customers can't pick a food item as their reward.

EXTRAS: People get coupons for a free drink for enrolling and on their birthday.

LOCATIONS: More than 8,300 locations. Without providing details, the company says the "vast majority" of its locations, which are run by franchisees, participate in the program.

PANERA

HOW IT WORKS: The program is a mystery, with customers not knowing when they will get a reward or what it will be.

Janet Reinhardt, a Panera representative, said the company "doesn't disclose its secret sauce to its model" and that there are many factors at play in determining when customers get a reward.

REWARD: Panera's website says members can expect free bakery items, but Reinhardt said the rewards are broader and include "free menu items and dollars off."

LOCATIONS: 2,000, with both company-owned and franchised locations participating.

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Follow Candice Choi at www.twitter.com/candicechoi