Starbucks is about to make a controversial change to its rewards program and some customers will love it

Starbucks on Tuesday announced its quarterly earnings, and unlike a lot of other companies right now, things seem to be going well. The company beat expectations and reported that it saw its sales grow by 9 percent – despite the effects of inflation and the risk of a recession.

Starbucks appears to have avoided the problems other restaurant companies face, mostly because its customers continue to spend money on coffee drinks — especially iced and frozen drinks. This is good news for founder and third-time CEO Howard Schultz.

I think, technically, Schultz is the “interim” CEO this time around, but that hasn’t stopped him from launching what he calls “reinventing” the coffee chain. For example, Schultz announced that on the company’s upcoming Investor Day, it will make major changes to its bonus program.

“We have been working on a very exciting new digital initiative that builds on our industry-leading digital platform in new and innovative ways, all centered around coffee and, most importantly, loyalty, which we will reveal on Investor Day,” Schultz said during the conference. Connection.

The company’s Starbucks Stars rewards program has, by all accounts, been a huge success. The company has mastered the art of turning rewards into games for spending money in its cafes. Looking at the company’s results, it appears to be working.

Not sure why you’d want to mess with something good, but it looks like Starbucks can’t resist going into the latest frenzy. Schultz went on to explain:

We believe this new digital initiative powered by Web3 will allow us to build on the existing Starbucks Rewards engagement model through its robust approach to spending to earn stars while offering new ways to emotionally engage customers, expand our digital third place community, and offer a broader range of rewards, including experiences Unique you can’t get anywhere else, and combine our Starbucks digital rewards system with Starbucks branded digital collectibles as a reward and a community building component.

There is a lot to unpack in this quote. First, Starbucks says it is launching a “new digital initiative that supports Web3.” It’s a risky move for a brand like Starbucks. Web3 is controversial, to say the least.

Mostly because – for a lot of people – Web3 is synonymous with cryptocurrency, which is basically a scam at this point. That’s not to say there aren’t things other than cryptocurrency going on in the Web3 world, it’s just that no one would consider stopping at Starbucks on their way to dropping a kid at soccer training thinking any of them.

At the same time, there is another group of customers who will likely love this one. The key phrase is “digital holdings”. Or, in other words, Starbucks is preparing to incorporate NFTs into its rewards program. Instead of cashing in the stars for a free large caramel frappuccino, you can exchange them for something less useful like a digital representation of frozen coffee stored on the blockchain.

The goal – for Starbucks – is to create “new ways to emotionally engage customers”. This is the whole point of Starbucks stars in the first place. It is a great strategy.

One of the most powerful things you can do to create brand loyalty is to emotionally engage your customers. Starbucks has always been about more than just selling coffee. It has always been about creating an experience – a feeling – an emotion.

The thing is, emotions go both ways. There are few things that generate emotions as powerfully as Web3. Some people will not like this movement at all. That’s a risk Starbucks seems willing to take.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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