starbucks rewards case study

Rewards Case Study: Starbucks Rewards

Starbucks is a staple coffee brand with more than 32,000 locations in over 80 countries around the world. It’s safe to say Starbucks has an abundance of loyal customers. The iconic brand has revolutionized the coffee industry and changed the way everyone consumes coffee. Starbucks took something that had been done the same way for decades and turned it upside down with effective partnerships, beautiful branding, and a variety of types of coffee drinks. They have been doing things differently ever since, including customer loyalty.

Starbucks Rewards is often regarded as one of the best retail loyalty programs in existence and one of the most engaged among its members. According to a CNN report, by October 2022, there were 28.7 million active Starbucks reward members. Giving Starbucks a 16% year-over-year growth in its loyalty program.

They have created a loyal following of customers both with their customer experience and revolutionary rewards program. But recent changes to its loyalty program have its members criticizing the new changes. It’s now going to cost more to earn that free drink and menu item, meaning customers will have to work harder to earn those stars.

Let’s dive into what makes Starbucks Rewards unique and what we can learn from its recent changes in loyalty.

Changes no one asked for

Starbucks Rewards has over 28.7 million active reward members and with new changes to its rewards program that went into effect last month in February, customers were not happy. Starbucks increased the amount of “stars” (loyalty points) customers will need to redeem items.

Here is the breakdown of what changed:

• What costs 50 stars increased to 100 stars.
• What costs 150 stars increased to 200 stars.
• What costs 200 stars increased to 300 stars.
• Hot coffee or tea, baked goods, and packaged snacks will be 100 stars, up from 50.
• Lattes, frappuccinos, parfaits, and hot breakfast items will be 200 stars, up from 150.
• Sandwiches, salads, and protein boxes are 300 stars, up from 200.

Currently, Starbucks reward members can earn 1 star per every dollar spent if members just pay with a credit, debit card, or cash in-store or pay in-app. Members can earn 2 stars per dollar if they preload money into their rewards account or register a gift card to pay with.

Idk if anybody told y’all BUT @Starbucks made their rewards about 50 stars more to redeem. It sucks a lot. What used to be 50 stars is now 100. Lol now I don’t even want to use them. 🥹 — AshCash ✌🏾 (@TechBaeAsh) February 16, 2023

With the recent changes, that free iced coffee or chocolate croissant will cost a bit more, $100 to be exact if you’re paying with cash or a debit card or $50 if you preload money in your account. To earn that free cold brew or a breakfast sandwich, you will have to spend $200 if you’re paying in cash or $100 if you preload your account.

The reason for the change is unclear if it's because of inflation or the rising cost of products everywhere. According to an Axios report, Starbucks said it was due to the changing needs of customers. “We occasionally need to make changes to ensure the long-term sustainability of the Starbucks Rewards program and to meet the changing needs of our members.” Members will disagree.

Starbucks really moved the reward levels back……..in this economy — Jobe Bean Bryant (@jeauxdeci) February 27, 2023

How Starbucks Rewards misses the mark

Starbucks Rewards is one of the best examples of customer loyalty and how to build a brand community. Based on its recent changes and the reactions from customers, there are a few ways Starbucks Rewards misses the mark.

1. Changes no one wanted

Why change something when it’s not broken? Starbucks customers have tweeted, commented, and made dozens of TikTok videos on the unwanted changes Starbucks made to its reward program.

Customers were given a few weeks' notice of these changes, which left many to have to use all of their points before changes went into effect. Starbucks really missed the mark here because so many customers voiced their dissatisfaction with the recent changes and Starbucks did not relent and went ahead with their changes.

@maddykim16 #greenscreen starbucks is a scam!! #starbucks #stars ♬ original sound - Maddy Kim

2. Current tiers don't create exclusivity

Tiered programs are an amazing way to encourage customers to spend more and engage more. Tiers challenge customers to reach the next level while also introducing an element of gamification that customers love. Tiers are also effective when the highest tier is reserved for only the most loyal and profitable customer.

Starbucks currently has five tiers of different rewards customers can redeem. If Starbucks turned those five tiers into different levels of earnings, meaning each level would double the points earned, it would incentivize customers to spend more to enter and remain in a certain tier. Customers love an incentive or something to reach for and if Starbucks brought their famous gold card back, this would be a perfect way to entice customers into different tiers for their reward program.

How Starbucks Rewards raises the bar-ista

For a loyalty program contributing 55% of the company’s revenue, Starbucks has clearly locked in loyalty and a brand community. With an increase in prices in every industry, loyalty has become a key to growth and recession-proof for Starbucks. So what is Starbucks Rewards doing so well?

1. Outstanding mobile experience

Starbucks has become a global brand worth billions of dollars and we can take lessons on what great things they do in loyalty and rewards. Their top quality is their outstanding mobile experience.

How a customer interacts with a loyalty program can often make or break that program. Starbucks’ app makes its loyalty program more interactive and more effective. The app makes it easy to see how many “stars” (points) you currently have, as well as make orders and payments right from your phone. You can even use the service to find the nearest Starbucks location.

Starbucks mobile app, drive-thru, and deliveries generate over two-thirds of orders and up to 26% of sales from mobile apps alone. The app gives Starbucks Rewards an edge that other standard loyalty programs do not have. In today’s competitive environment, just having a loyalty program is not enough. You have to make an effort to differentiate your program from others.

2. Omnichannel retail

This leads to the second top quality of Starbucks Rewards and that is their omnichannel presence throughout the apps and physical retail locations and across their marketing. Not only can you pay on a mobile device or through in-store locations, but you can also shop online, order drinks through the app, or have an experience visiting different locations in any country. You know what you will get no matter where you are in the world.

From the rise of new services such as BOPIS (buy online, pickup in-store) to the conveniences of ordering from an app. Surprisingly, how we collect and receive our purchases are also different. Starbucks has expanded into delivery through its partnership with DoorDash which it tested in California, Florida, Texas, and Georgia last fall.

3. Experimenting with partnerships

The third top quality and characteristic of Starbucks Rewards are its partnerships. Starbucks has recently been experimenting with new partnerships in loyalty programs, going a step further with established brand partnerships. After testing its delivery partnership with DoorDash , Starbucks will expand nationwide in all 50 states by March 2023.

View this post on Instagram A post shared by Starbucks Coffee ☕ (@starbucks)

Starbucks is expanding into the NFT market with its program Odyssey. According to Starbucks, ”selected participants will be able to engage in Starbucks Odyssey ‘Journeys’ which are a series of entertaining, interactive activities to earn collectible ‘Journey Stamps’ (NFTs) and Odyssey Points that will unlock access to exciting new benefits and experiences.”

View this post on Instagram A post shared by Delta Air Lines (@delta)

What’s better than one loyalty program? How about two loyalty programs? For those frequent travelers, Starbucks and Delta announced a partnership where members can link both of their loyalty programs and earn points. “Link your Delta SkyMiles and Starbucks Rewards accounts to start earning 1 mile per $1 spent at Starbucks.” This is another way Starbucks can in a way gamify their loyalty program, while also offering more to its customers.

Gold Stars for Starbucks Rewards

With almost 30 million program members, Starbucks Rewards is a top standard for loyalty programs that any ecommerce business can take lessons from and be on their way to replicating. Whether it's building an awesome omnichannel strategy or delivering a fantastic mobile experience or partnering with other brands in your industry, Starbucks can deliver lessons to all of us.

Editor’s Note: This post was originally published on July 24, 2017 and was updated for accuracy and comprehensiveness on March 13, 2023.

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Starbucks Loyalty Program Case Study

Starbucks, renowned as one of the foremost coffee brands globally, owes its success not just to its exceptional range of products. A significant contributor to its widespread acclaim is its highly popular loyalty program , which has been an inspiration for many U.S. restaurant chains and retail stores. Launched on December 26th, 2009, the Starbucks rewards program has amassed over 30 million active members, contributing to nearly 60% of the brand's total revenue. The program effectiveness was strikingly evident in 2019, with Starbucks reporting a substantial 7% increase in sales primarily attributed to the efficacy of its rewards program.

Program type 

Points system.

• Points for rewards
• Coalition Loyalty

Starbucks Rewards leverages a points-based system ingeniously designed to enhance customer engagement and loyalty. Members accumulate 'Stars' with each purchase made via their registered Starbucks Card or through the Starbucks mobile app.  The program is structured to encourage varied forms of engagement, enhancing the overall customer experience and brand loyalty.

• Earn 1 Star per $1 spent when you pay in cash
• Earn 2 Stars per $1 spent when you preload your digital Starbucks Card
• Earn additional bonus Stars through special promotions
• Earn double Stars on Delta Airlines travel days
• Earn double Stars on promotional days
• Points expire after 6 months

Starbucks Rewards allows its members to redeem their accumulated Stars at various levels, each unlocking distinct rewards. This structure caters to diverse preferences, allowing customers to either redeem their Stars for immediate benefits or save them for more substantial rewards.

• 25 Stars: Redeem for a free drink customization, such as extra flavor, espresso shot, or alternative milk.
• 50 Stars: Get a complimentary hot coffee, tea, or bakery item like a bagel or croissant.
• 150 Stars: Choose a free handcrafted drink, hot breakfast, or a parfait.
• 200 Stars: Earn a complimentary lunch item, like a salad, sandwich, or protein box.
• 400 Stars: Exchange for packaged coffee beans or select Starbucks merchandise.

Coalition loyalty

Starbucks and Delta Airlines have embarked on a partnership, merging the world of coffee with the skies. Linking your Delta SkyMiles® and Starbucks® Rewards accounts opens up a new realm of earning opportunities and exclusive benefits.

• Travel-day perks: Double Stars on Delta travel days
• Everyday earn: 1 mile per $1* spent at Starbucks
• Exclusive offers: More opportunities to earn Stars and miles

Interesting takeaways

Multi-channel communication.

Starbucks leverages multiple channels to communicate about its rewards program, ensuring widespread awareness and engagement. The use of a dedicated landing page, mobile app, points balance reminder emails , company blogs, and social media platforms creates an ecosystem where information about the program is readily accessible and consistently updated. The clarity and frequency of updates, including press releases for significant changes, demonstrate Starbucks’ commitment to transparency. This approach not only keeps existing members informed but also attracts new participants by clearly outlining the program’s benefits. Good communication is likely a significant factor in the program's high membership numbers.

Program simplicity and incentive structure

The simplicity of the points system (earn points and redeem for rewards) is user-friendly and easy for customers to grasp. This clarity enhances the appeal of the program and encourages participation. The structured nature of rewards incentivizes customers to accumulate more points to access greater rewards. This gamification element adds an extra layer of engagement, as customers are motivated to reach the next level. As customers get closer to a significant reward, their motivation to attain it increases. This psychological aspect of goal setting and achievement is a powerful tool in enhancing customer loyalty and encouraging more frequent purchases.

Incentivizing preloaded payments

Starbucks ingeniously incentivizes customers to preload their Starbucks account by offering double points for purchases made using a preloaded Starbucks Card. By preloading their accounts, customers commit themselves financially to future purchases at Starbucks, which effectively guarantees a degree of customer loyalty and repeat business. This strategy turns occasional visitors into regular customers, as the preloaded funds will likely be used exclusively at Starbucks locations. From a financial perspective, this strategy is beneficial for Starbucks. When customers preload their accounts, the brand receives cash in advance, improving its cash flow. This tactic also promotes increased engagement with the Starbucks mobile app, where preloading and tracking of rewards can be easily managed. 

Coalition program with Delta Airlines

The partnership with Delta SkyMiles is a strategic move that broadens the program’s appeal. By collaborating with an airline, Starbucks extends its reach beyond the typical coffee shop customer. This alliance allows both companies to tap into each other’s customer bases, potentially attracting new customers who are loyal to one brand to become interested in the other. It’s a creative way to expand market reach without direct competition. For customers who already patronize both brands, this coalition loyalty program reinforces their loyalty and increases their engagement with both Starbucks and Delta. It creates a more integrated customer experience and can deepen the sense of brand loyalty.

Areas of improvement

The removal of the tiers system.

The previous iteration of the program had a 'Gold' tier, which was a smart way to acknowledge and reward the most loyal customers. By offering them the ability to earn points faster and providing exclusive benefits, Starbucks recognized and cherished its most valuable customers. This tier system not only incentivized increased spending but also gave a sense of exclusivity and status. While simplifying the program might make it more accessible for new customers, it risks diminishing the perceived value for power shoppers. The elimination of the tier system could lead to a decrease of engagement from these highly valuable customers.

Lack of personalized engagement or rewards

In the current market, personalization is key to customer engagement. Starbucks’ generic approach to rewards and communication, without considering individual customer preferences and behaviors, is a missed opportunity. Personalizing rewards and communications could significantly enhance customer loyalty and encourage repeat business. Leveraging customer data to offer personalized rewards and product recommendations could not only improve customer satisfaction but also drive product discovery and sales.

Limited post-purchase engagement

Post-purchase engagement is crucial in maintaining a connection with the customer even after they leave the store. This ongoing engagement is essential for converting first-time buyers into regular customers. While Starbucks has started initiatives like Starbucks Odyssey , which offers additional ways to earn rewards through digital journeys, its integration with the main rewards program appears to be lacking. A more seamless integration could enhance the overall experience and effectiveness of the loyalty program. Recognizing that some of these initiatives are in their early stages, there is potential for growth and improvement.

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The Science Behind Starbucks’ Massively Successful Customer Loyalty Program

Starbucks has completely revolutionized the coffee business. It took on something that existed from ages and completely overhauled it from its core. Today, Starbucks is regarded as the world’s largest coffee house with high regards for its customers.

The Starbucks success is a story of taking every business aspect differently. They have time and again challenged conventional business methods in the food and beverage industry. And, today we are going to discuss one of the aspects that they completely revolutionized, Customer Loyalty.

A little history of the Starbucks loyalty program

Starbucks entered the customer loyalty space with its Gold program, where customers paid an annual fee of $25 and got 10% off on all offerings throughout the year. But as time proceeded, the program started fading away. So, Starbucks had to come up with a new program .

• Customers earn “Stars” by paying with a registered Starbucks card or the Starbucks mobile app, or by entering Star codes, one transaction equals one Star.
• Welcome level — just register your card and get a free birthday drink, plus a free customization for your first drink.
• Green level — earn five stars to add free in-store refills to your Welcome perks, and 2 customization to your drink instead of one.
• Gold level — earn 25 stars in 12 months to get all of the above benefits, plus a free drink or food item after every 10 Stars, special email or text offers, and a Starbucks gold card.

Starbucks Rewards Customer loyalty program

Upon implementation of the Starbucks Rewards customer loyalty program , Starbucks reported an increased revenue of shocking $2.65 billion, with brand executives pointing towards their reward program as one of the major enabler for such an increase.

We are going to discuss 3 factors that we think made their customer loyalty program one of a kind.

Superb Mobile experience

Consistent customer interaction is very crucial for any customer loyalty strategy. If the interaction is of low quality, there’s a high chance of customers never discovering the program, let alone using it. Starbucks knew this and therefore targeted devices that are most used by its customers, apart from targeting just email or their website, they aggressively went after the mobile ecosystem.

The Starbucks app puts the power and comfort in the user’s pocket. The app is available for all major mobile operating systems around.

Since the adoption of smartphone in the last decade, Starbucks gradually shifted every aspect of their loyalty program to the mobile platform. The app can be completely linked with your loyalty program. This allows a lot of Starbucks Rewards members to use their account to full potential. Even if they forget to carry their membership cards with them, they can easily use their app to make a purchase without losing on any reward points.

Go beyond the retail outlets – Collect points for Starbuck’s products at grocery stores

Starbucks even expanded their customer loyalty program beyond their retail stores. You can purchase their assorted coffee bean collection from any grocery store around US and other countries. Not just that, but you purchase tea, K cups, ready to enjoy drinks, etc and make points of it as well.

A shopper just needs to look for a star code on the participating product and enter the code into the app. This really makes me fall in love with their loyalty program, because no matter where you are, if you’re buying a Starbucks Rewards product, you can redeem bonus points from their app or their web portal.

Exclusive Gold Card status

When I first got my starbucks membership, one true motivation behind getting a membership was getting hold of that elusive gold card, which you can earn after earning 30 stars ( 5 stars to reach green level, then another 25 to reach gold level).

And why not?

A Gold card level member is entitled to a lot of perks at any Starbucks retail outlet. A few perks that a Starbucks gold member gets is –

• Free Beverage customizations on all your drinks – Up to 2 customization per drink for free.
• Free tall drink on purchase of 250gram of whole bean coffee.
• Free size upgrades for featured beverage during the first 2 weeks of its launch.
• Free drink after every 10 stars you earn.
• A personalized one-of-a-kind Gold Card.
• And more seasonal special offers.

I feel this is the true motivation behind Starbucks Reward program offering. If you’re frequenting a Starbucks store, then earning your way to gold card is a no brainer. There is so many things on the table for free that you just can’t let it go.

Another factor is the brand value that Starbucks emanates off. Starbucks loyal customers shares a lot of their experiences over social media. This is something that you don’t find with other coffee house loyalist. They feel a sense of pride when they move to a higher level and when they compare it to other coffee houses. And that’s why the Gold card is so effective. It hits 2 targets with one arrow, first one being, keeping the customers happy and the other increasing brand value via word of mouth and social media.

The gold card, simply put, is a way to state that you are a Starbucks elite and you have a status symbol to uphold now. And, that is the true motivation behind why one should get enrolled into the Starbucks rewards program.

Many marketing and business experts rank Starbucks reward program as one of the best customer loyalty program, ever to be executed by a brand.  It’s a great strategy from a business standpoint as well as a very attractive offering for customers as well.

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UX Design Lessons From the Starbucks App

Everyone but me seemed to be using the Starbucks app. I set out to investigate what’s up with that.

The first free coffee I scored through the Starbucks mobile app had nothing to do with the rewards program.

Here’s how it went down: My wife had ordered a grande blonde roast from her office in downtown Chicago. Except, in a flurry of pre-trial planning amid a global pandemic, she neglected to update the pick-up location in the app. She is an extremely thoughtful person, so she gave me a phone call, suggesting I pick it up at the location a block from our house.

“I don’t want it to go to waste,” she said. “You might as well drink it.”

Ten minutes later, I walked up to the counter and said, “Order for Sarah.” I stood in one of the little social distancing circles behind a glass partition. “Colors” by Beck was  playing in the background.

The masked barista gestured to a cup on the counter with Sarah’s name on it. I grabbed the coffee and off I went, no questions asked.

I found my iPhone full of new apps: Postmates, Toast, Dunkin’, Panda Express. How many of these apps, I wondered, would survive the pandemic?

Isn’t this a less-than-perfect example of mobile ordering? Well, right. It didn’t go as planned. And perhaps, from time to time, coffees ordered ahead through the mobile app get snatched by the wrong Ben, forgotten about or even stolen . But I imagine cases of lattes gone missing are fairly rare.

In a past life as a freelancer, I spent quite a bit of time at Starbucks, writing or catching up on emails on days I got sick of being alone in the house. But neither I, nor my wife, had done much mobile ordering until restrictions at area restaurants briefly required curbside pick-up for purchase. Suddenly, I found my iPhone full of new apps: Postmates, Toast, Dunkin’, Panda Express. How many of these apps, I wondered, would survive the pandemic?

But perhaps Starbucks was different. I had learned in an earlier interview with Janelle Estes, chief insights officer at UserTesting, that the company’s mobile ordering experience is considered a best-in-class model — an example of an intuitive menu design with simple pay options that performs well in usability tests.

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Why Starbucks Is Killing It at Curbside

The usage and sales data would certainly seem to support that view. David Oragui, in a case study published on Medium , writes that “ Starbucks has the most regularly used branded loyalty rewards app ,” based on a 2018 survey of 500 smartphone owners. Fifty percent of those surveyed used restaurant loyalty apps — more than double the share who used food delivery apps such as Postmates and Uber Eats — and among those who did, nearly half used the Starbucks app.

In a fiscal statement from Q3 2020 , Starbucks reported mobile order and pay made up a record 22 percent of transactions , with 16 .3 million active U.S. rewards program members representing 46 percent of all sales .

A separate 2018 eMarketer study, meanwhile, showed more than 23 million customers in the United States use the app’s pre-loaded payment system for proximity mobile payment. For comparison, that’s higher than Apple Pay (22 million), Google Pay (11 million) and Samsung Pay (9.9 million) — and Starbucks is forecast to remain on top through 2022, according to the study. (Apple Pay caught up with Starbucks late last year. )

There are a number of apparent reasons for the app’s success. Oragui points to the user-friendly design and a loyalty program that rewards customers two stars for every dollar spent, along with perks like in-store refills, birthday rewards, gift-giving options, member offers, and integrations with Spotify and Lyft.

The app can “recall your favorite order, suggest what food items might pair well with that order, and suggest where you’d like to pick it up. ”

Beyond this, the app learns the user’s preferences over time. You can quickly see where the closest location is, view currently available food and drink selections, and see how many minutes it will take until your drink is ready.

“From highlighting what’s ‘now playing’ overhead in Starbucks stores, to personalized beverage and food offers, the content is highly relevant to customers,” Oragui wrote. The app can “recall your favorite order, suggest what food items might pair well with that order, and suggest where you’d like to pick it up. ”

Ease of ordering and payment is another reward for users, according to a report on App Samurai — especially when it means reducing in-store wait time. The app uses a Starbucks gift card that can be loaded with funds from a credit card, Apple Pay or Google Pay, and scanned at checkout for payment.

But the App Doesn’t Get Everything Right

Despite the app’s consumer popularity and accolades from  UX professionals, it’s fumbling on some fundamental design features that could improve the user experience, said John Zimmerman, a professor at Carnegie Mellon’s HCI Institute who teaches courses in user experience design, service design and innovation.

1. Difficult Payment Onboarding

The first problem is that paying is harder than it needs to be. “When the app first came out, my biggest problem — which they’ve never addressed — is the app never learns who pays for their coffee with the app,” Zimmerman said. That is, “it never lands you on the pay tab. When you launch the app inside a Starbucks, you have an SSID from the Wi-Fi that tells the phone it’s in a Starbucks. Like, it knows with great certainty where it is. And to me, this is low-hanging fruit for a very simple inference.”

That inference being: If you’re in the store, you’re probably ready to pay. Why require the user to choose the pay tab manually?

“So early on, you would have people really struggling to get to the pay tab to show the barcode to pay for their drink, which slowed the line down, unnecessarily,” Zimmerman said. “Eventually they added a shortcut key to the home screen you could push to get to it. But it’s sort of like, ‘Why else am I opening my phone inside of a Starbucks?’”

“Early on, you would have people really struggling to get to the pay tab to show the barcode to pay for their drink, which slowed the line down, unnecessarily.”

When new users struggle to make a payment, Zimmerman told me, it can create a cascading sequence of negative consequences: not only does the line behind the customer grow, but those in line become increasingly impatient.

“You’re putting a lot of pressure on the customer who’s using the mobile payment system, and that’s not good for you,” Zimmerman said. “You want to drive people to use this. And [you’re] sort of not fulfilling the thing that makes the transaction better for the customer.”

2. Complicated Menu Architecture

A second shortcoming he points to is the design hierarchy of the menu. Broad categorical groupings — Hot Coffees, Cold Coffees, Frappuccino Blended Beverages — don’t mirror the thought process of most users. “If you think about how people express themselves, it’s more like, ‘I want a tall Americano now,’ right? So they’ve artificially forced a choice on you in a sequence that’s not necessary. It’s tedious to make all those selections,” Zimmerman said.

This isn’t necessarily an easy fix, though. Because of the high level of customization Starbucks offers, the design language needed to communicate with a customer about what they want, and that they’re going to get it, can be highly complex.

“Very early on, when you only had like three or four drinks, the barista would translate what you ordered into Starbucks talk, right?” Zimmerman said. “And they would put the cup upside down or right side up. They had all these little indicators to reduce a breakdown in communication between the person at the cash register and the barista making the beverage.”

As drink and customization options became more expansive, however, “when it was like, ‘I need a half-caf or a skinny latte,’” the company needed more expressiveness to convey these variations. “And they kept updating their system as they changed their suite of offerings,” Zimmerman said.

In short, translating the model of fast consistency and virtually unlimited customization to a phone with limited screen real estate presents a daunting challenge.

3. Order Fulfillment Confusion

While the mobile app may be making it easier for order-ahead customers to get their drinks quickly and made to order, Zimmerman believes it runs the risk of simultaneously damaging the experience of those who order in the store and feel ignored. In fairness, Starbucks has added dedicated to-go bars for mobile customers and tablets for baristas to accept payment, according to Oragui, but Zimmerman said these haven’t fully solved the problem.

“The experience for the in-store customer,” he said, “can be very much like, ‘These people are jumping line.’”

I Decided to Investigate

A few days after picking up a free coffee courtesy of my wife’s location miscue, I decided to download the Starbucks app to experience it myself. Consistent with what Zimmerman said, payment was not immediately intuitive. Before I could place an order, I had to create a profile and register a Starbucks Card. The option to load the card with funds from Apple Pay was obvious, but how to add a credit card was less apparent, tucked away in a sub-menu.

The barista showed remarkable patience in helping me figure this out.

Though the option to order was readily apparent, the first choices displayed were featured drinks. Naturally, they looked delicious — almond-colored Frappuccinos drizzled in caramel, a nitro cold brew with salted honey cold foam, a creamy pink iced guava passionfruit drink that looked absolutely incredible. But I just wanted a tall blonde roast, so I navigated to the menu tab and selected the Hot Coffees icon. There it was, a few rows down, among other selections in the Brewed Coffees list.

While the menu may have taken some time to navigate, it was certainly pretty and well-curated. Isn’t menu browsing, after all, its own kind of window shopping?

In any case, I had made my first official Starbucks mobile order, earning 150 stars thanks to a summer rewards promotion. That was enough for a free handcrafted drink, a hot breakfast or a parfait. Waiting for my drink, I played the Starbucks Summer Game, an in-app fixed-screen video game that involves dropping a ball through a labyrinth of spinning gears into a cup — and potentially earning more reward points. It reminded me, vaguely, of Plinko from The Price is Right .

None of the walk-up customers who placed their orders in the store seemed too bothered when my coffee arrived on the bar a moment later. Then again, it was 2 p.m. and there was no line.

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Zimmerman, it’s worth noting, is not an incorrigible Starbucks basher with an axe to grind. The app’s apparent flaws come as a surprise, he said, from a company that historically “has done an excellent job innovating in service and changing the meaning of the beverage” from an unremarkable add-on to a democratized form of “self-reward.”

Through its widespread appeal, Starbucks also has also contributed to a broader cultural shift, he said. Where Zimmerman grew up in the Pacific Northwest, it was deemed socially unacceptable for men to add milk to their coffee. Now he sees construction workers pull up to job sites, Starbucks beverages with whipped cream on top in hand.

“That’s kind of amazing,” Zimmerman said.

But Zimmerman believes the app could have benefited from more extensive prototyping, and that, as a result, it is missing some “low-hanging fruit” that could help smooth the migration of the Starbucks in-store experience to the smartphone.

1. Recognize and Infer Payment Patterns Through Machine Learning

Starbucks tracks your in-app behavior, he told me, whether you purchase a drink, give someone a gift card, or listen to music through the Spotify integration. Existing geolocation data from your mobile phone, meanwhile, allows Starbucks to pinpoint where you are. Together, these tools could streamline payment processing by making machine learning inferences.

“If, every time you open the app in the store, you immediately navigate to the pay tab, why can’t the app just do that work for the user?” he asked.

Uber’s rider app, he told me, already does this to great effect. For a frequently made trip, such as a ride home from the local airport, it suggests the destination. “It doesn’t just say, ‘Where to?’ it says, ‘Do you want to go home?’ It gives you that shortcut because it’s making the inference from your pattern of behavior.”

2. Improve Voice-Enabled Ordering

A second area for improvement — voice-enabled ordering — is something Starbucks itself has identified as a priority in its pipeline, according to a briefing on the company’s website . In January of 2017, the company beta tested voice-ordering options for one thousand customers. Select users could place orders using the My Starbucks barista feature within the mobile iOS app or through a skill on Amazon Alexa. More recently, Starbucks expanded the service to make it available for Google Assistant, and on Alexa-enabled devices, including some Ford vehicles.

“You experience hunger and the store is coming toward you. But that is not the point at which I want to be navigating a mobile app.”

Zimmerman said Starbucks’ gradual roll-out of voice-enabled ordering is emblematic of a larger trend that is likely to have its most significant impact in rural areas and, specifically, for orders placed by motorists. Through voice commands tied to predicted arrival times calculated by location pings, people may soon be able to submit advance drink or food orders to restaurants or gas station convenience stores, such as Sheetz , and have them waiting on arrival.

“You experience hunger and the store is coming toward you. But that is not the point at which I want to be navigating a mobile app,” he said. “So I think there are huge opportunities in that space.”

3. Create Timed Ordering Options

Timed ordering options — where you place an order to be picked up at a specified time in the future —  are another aspect of the mobile experience Starbucks and its competitors aren’t capitalizing on as well as they could, Zimmerman said. Mobile apps that allow users to reserve restaurant tables for specific times are also surprisingly rare, he said.

One exception to the rule is the restaurant reservation app Nowait, a Pittsburgh-based start-up recently acquired by Yelp for $40 million — all cash — that folds Nowait’s timed waitlist system into the Yelp app.

For customers, the benefit is obvious: not having to wait in line. But the app is useful for restaurant proprietors and managers too, Zimmerman said, particularly given the space and occupancy challenges many restaurants are facing due to COVID-19 restrictions. The app can help them gauge visitation and avoid “no-show” reservations.

 “You have this limited resource of tables,” Zimmerman said. “You’re trying to spread your customers out to have most of your tables full, most of the time.”

The Stickiness of Self-Reward

At home, I played with the app some more. On the Home screen was a button to “Add to Siri.” Once I tapped it to create the shortcut, I was able to say, “Order Starbucks,” and Siri asked, rather politely, “Would that be your grande blonde roast at Armitage & Hoyne - Bucktown?” In the span of seconds, Siri had magically become a knowledgeable barista.

“The Starbucks experience is built on the personal connection between our barista and customer,” said Gerri Martin-Flickinger, chief technology officer for Starbucks, in a prepared statement announcing the debut of voice ordering back in 2017. “So everything we do in our digital ecosystem must reflect that sensibility.”

I was beginning to understand what she meant. Whatever culture Starbucks had created in the physical world — a carefully curated and monetizable blend of convenience, comfort, caffeine and familiarity   — its trademark je ne sais quoi, that culture   was slowly, if imperfectly, shifting to the virtual realm. Soon it would be time for me to talk to Siri, or the friendly new barista I’d met at the counter, and reward myself with a free drink.

More on Rewards and Gamification Gamification Is Over. Long Live Game Thinking.

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Starbucks Loyalty Rewards Program Case Study: What Makes It Work?

Coffee helps us to kick start our day or helps us take the best breaks when we need one!  Coffee gives us the much-needed boost of energy. The coffee market is growing at a CAGR of 5.5% during the forecast period (2019 – 2024).  The number of Americans who drink a cup of coffee daily has been the highest in six years.   This highlights the massive potential of this market segment. One of the key players in the coffee market is Starbucks, a common name to the coffee cravings! Starbucks has 30,184 stores worldwide, making a consistent coffee experience available in different countries throughout the world.

About Starbucks Loyalty Program:

Starbucks offers one of the most sought-after loyalty programs ‘Starbucks Rewards’ program that offers freebies and discounts to members giving them plenty of reasons to choose Starbucks over other players. ‘Starbucks Rewards’ program represents a significant portion of the coffee chain’s recent fiscal growth. Starbucks has reported an increased revenue of $2.65 billion, attributing their rewards program for most of the increase. Over the last two years, membership has grown more than 25%, loyal customers use Starbucks’ membership program (16 million members) for about 40% of sales at the company’s US stores.   Revenue rose 4.6% to $6.31 billion  during the quarter from the previous year.

How Does the Starbucks Rewards Program Work?

Starbucks has enabled customers to check their gift card balance, points, and mobile orders via phone, website, in-store, or on their user-friendly app. Real time correspondence of different channels eliminates the possibility of a lapse in communication. This omnichannel capability is attractive to customers, encouraging engagement at many levels. Customers earn birthday rewards, free in-store refills and double-star days- these are limited-time promotions during which members earn twice the points for purchases made.

Experience the Zinrelo Loyalty Rewards Platform to Believe it!

Mobile app makes online ordering and payment easy. The mobile ordering system acts as a digital marketing tool, allowing customers to see new items much in advance of launch. The Starbucks app provides users with an inviting and innovative personalized experience, just like the coffee chain itself. The convenience of using an app acts as a powerful driver of loyalty. The simple layout of the app makes it appealing to users.

Starbucks gathers information on customers habits, interests etc. thus empowering them to offer more relevant perks & communication to customers. According to a survey by Manifest, a technology survey data company in 2018, Starbucks has the most regularly used loyalty rewards app (48%). Launched in 2015, the mobile order and pay feature helped customers to order via the app & skip the line. The app offers customers convenience while clearly communicating how customers can earn rewards points (stars) and what they will get with them. A strong gamification strategy fueled by exclusive customized offers, has helped the brand stay top of mind for customers.

Changes & enhancements to the ‘Starbucks Rewards’ programs are on the leading edge of customer loyalty. They have recently revamped their rewards program in North America to offer occasional customers greater access to freebies. With the aim to provide more flexibility in the program to bring in greater value to more people.

Highlights of New Starbucks Loyalty Program-

• Customers have multiple benchmarks to cash in their stars for rewards. They can get rewards faster, option to make minor customizations for free in exchange for 25 stars. Some of the most popular rewards like Macchiatos, Starbucks lattes and other drinks will now require 150 stars, an increase from the previous program.
• Members can redeem smaller amounts of stars for lower-value buys
• Starbucks rewards will form a single-level program, where all members can begin to earn stars toward free rewards from the day they join.
• Points will not expire for customers, who attach the loyalty program membership to their Starbucks rewards Visa credit card or a prepaid card. In the previous program, any gold-level points would expire six months after the calendar month they are earned in.
• When a customer walks in a Starbucks store, any purchase they make can be used towards rewards.

Starbucks used to give a free drink of customers choice after $62.50 in spend; now, customer must spend $75. Customers were upset with this change, as there were initial hiccups in the communication of the new program benefits. However, Starbucks was fast to address customer concerns on social media.

What has Not Changed in the Starbucks Program?

• Free Starbucks birthday drink, this could be a complimentary handcrafted beverage, or one complimentary ready-to-drink bottled beverage or one complimentary food item.
• Opportunity to earn bonus stars on monthly double stars days.

How do the Rewards Work in the New Program?

New redemption options:.

• 25 stars: an espresso shot, dairy substitute, or additional flavor
• 50 stars: brewed hot coffee, hot tea, or bakery item
• 150 stars: handcrafted drink, hot breakfast, or parfait
• 200 stars: lunch sandwich, protein box, or salad
• 400 stars: select merchandise or at-home coffee

The move to revamp the program is to offer customers more flexibility and options.

Starbucks is continuously revamping its loyalty program to offer more value to customers. Further enhancements will help make the program more enjoyable to customers.

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About author.

Samir Palnitkar ,  is the VP of Customer Success at Zinrelo, An expert on building and growing “retention-first” businesses, he frequently writes on customer retention and rewards programs. Samir holds five technology patents, and is the author of two technical books.

More blog posts by Samir Palnitkar

Digital Innovation and Transformation

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• Assignment: Competing with Data

The Perfect Blend: Starbucks and Data Analytics

Every day, Starbucks grinds through mounds of coffee beans to serve its customers. In doing so, the company has also been collecting mounds of data that could be used to improve customer experience and business performance. In this article, we will investigate how this 26 Billion USD company captures value through data analytics.

An opportunity brewing

Through its network of over 30,000 stores worldwide, Starbucks has been gathering over 100 million transactions a week. To make use of these data, the company set up a dedicated team of data scientists, led by Jon Francis, Starbucks’ Senior Vice President of enterprise analytics, data science, research data, and analytics. Since then, the team and the company have been able to tap into the power of data analytics to enhance its business performance. 

Using data collected at the store and through its mobile apps with over 17M members, the company has been able to drive business improvements in 3 significant ways. 

(1) Personalized experiences and promotions

Pathways to a Just Digital Future

When Starbucks launched its rewards program and mobile app, they dramatically increased the data they collected and could use to get to know their customers and extract info about purchasing habits. Through its mobile app, Starbucks has been collecting data about what, where, and when members buy coffee. To do so, Starbucks leverages the Digital flywheel program, a cloud-based artificial intelligence engine that’s able to recommend food and drink items in a precise manner. As such, even when people visit a new Starbucks location, the store’s point-of-sale system can identify the customer through their phone and give the barista their preferred order.

Based on customers’ purchase history, Starbucks could also suggest new products a consumer might enjoy and provides unique discounts and rewards on certain items based on customers’ unique preferences. Taking it a step further, Starbucks has also been collecting data on weather patterns and their relationship with customer order patterns. Doing so allows the company to provide even more personalized experiences and promotions such as targeting a customer with cold drinks on hot days.

(2) New product introduction

When launching new products, Starbucks also turned to the data collected to determine what products they should offer. Specifically, when expanding its product lines into grocery stores, the company relies heavily on the data collected. For example,  data collected has shown that 43 percent of tea-drinking customers tend to skip the sugar. To cater to this segment, Starbucks created its lines of unsweetened ice tea. When data has shown that 25 percent of consumers don’t add milk to their coffee, the company launched a new line of black iced coffee without milk.

(3) Location selection

Selecting the right location is critical to winning in retail. Using location-based analytics powered by Atlas, a mapping and business intelligence tool developed by Esri, the company can select the most strategic location to open up its new stores. The tool enables Starbucks to evaluate massive amounts of data including variables such as population, income levels, traffic, competitor presence, and proximity to other Starbucks locations before recommending a new store location. Using these data, the company can also predict revenues, profits, and other aspects of economic performance associated with that location.

While Starbucks was not born in the digital era, it has successfully integrated new technologies into its core business like a digitally native company. Over the years, data analytics has undeniably become the backbone of Starbucks’s continuous improvement. Looking ahead, I have no doubt that Starbucks will continue to gather more data and make even more innovative use of those data to create an even more personalized customer experience and achieve business excellence.  

“Starbucks Isn’t a Coffee Business – It’s a Data Tech Company,” Marker, Jan 16, 2020

“Big Data: The Secret to Starbucks’ Supply Chain Success,” Sisense, Jun 25, 2020

“Starbucks: Using Big Data, Analytics And Artificial Intelligence To Boost Performance,” Forbes, May 28, 2018

“6 Ways in Which Starbucks Uses Big Data,” Analyticsteps, Nov 17, 2020

“How data empowers human connection at Starbucks,” Tableau, Jan 15, 2021

“Starbucks knows how you like your coffee,” CNBC, Apr 6, 2016

Student comments on The Perfect Blend: Starbucks and Data Analytics

Thanks, Max, for the very interesting article! I am just wondering how successfully Starbucks was able to attract new customers with their initiatives with big data. It definitely added a lot of value to existing customers but was it enough to pull customers who like other coffee shops? Also, I wonder what would happen (or maybe is already happening) if competitors start to do the same things with big data. In a such setting, what would be the real competitive advantage? Would it go back to the basic things such as the quality of the coffee?

Great post Max! Very informative. I did not know that Starbucks is actively monitoring the weather information to make product decisions. I would like to know if you think that data is giving Starbucks any sustained competitive advantage?

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Publication date: 9 February 2016

Teaching notes

By July 2015, 20% of Starbucks’s payments in the United States came through its mobile app. The company had created a tool to both drive loyalty and grow its customer base. No stranger to innovation, Starbucks was partnering with iTunes as early as 2007, earned its first mobile marketer of the year award by 2010, introduced its mobile app in 2011, and by 2015, 94% of Facebook users were either fans of Starbucks or friends with someone who was. This case explores the company’s commitment to mobile and its social media prowess, and considers just what it takes to drive loyalty in a customer base.

Murray, M. (2016), "Starbucks’s Loyalty Reigns", . https://doi.org/10.1108/case.darden.2021.000023

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Copyright © 2016 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

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Starbucks’ Customer Management Case Study

Starbucks, once a single storefront in Seattle, has burgeoned into a global coffee powerhouse, renowned for its quality brews and exceptional customer service. This transformation wasn’t just about expanding its footprint; it centered on mastering customer management —a critical factor in the retail and service sectors.

In industries where experiences and relationships outweigh transactions, Starbucks’ narrative from facing customer management challenges to setting industry benchmarks for customer centricity offers invaluable insights.

This case study delves into the strategies, innovations, and steadfast commitment to customer satisfaction that underscore Starbucks’ evolution into a model of customer management excellence .

Historical Context and Challenges

As Starbucks evolved into a global brand, it faced significant customer management challenges that threatened its customer-centric ethos. Initially, Starbucks enjoyed a reputation for intimate customer experiences and high-quality coffee.

However, rapid global expansion and the commodification of the coffee experience began to erode this perception. Specific incidents and trends highlighted the growing pains Starbucks faced in maintaining its customer service standards.

One of the primary challenges was the dilution of the Starbucks experience. As the number of stores increased, Starbucks struggled to maintain the personalized service that had defined its early success. Customers began to report inconsistent service quality, with some locations failing to live up to the company’s high standards.

This inconsistency was a symptom of broader operational challenges, including employee training and retention issues, which directly impacted customer satisfaction.

Customer feedback mechanisms at the time were not as developed, leading to a disconnect between Starbucks and its customer base. The company’s rapid expansion meant it was harder to track customer satisfaction trends effectively and respond to feedback swiftly.

This issue was compounded by the 2008 financial crisis, which saw Starbucks closing several underperforming stores and reevaluating its business strategy amidst declining sales and customer visits.

The broader impact of these challenges on Starbucks’ brand image and financial performance was significant. The perception of Starbucks shifted from a premium coffee experience to a more commoditized one, where the unique selling proposition of Starbucks was less about the customer experience and more about convenience. This shift threatened the core of Starbucks’ brand identity, which was built on customer connections and community.

Financially, the company saw a downturn in its profitability during this period. The financial crisis exacerbated existing problems, leading to a significant restructuring of the company’s operations.

Starbucks’ response to these challenges marked a turning point in its approach to customer management, initiating a series of strategic initiatives aimed at reclaiming its reputation for customer-centricity and operational excellence.

In the next sections, we’ll explore the turning point for Starbucks, the strategic overhaul undertaken to address these challenges, and the innovative approaches that helped Starbucks not only recover but also thrive by refocusing on customer management.

Turning Point

The turning point for Starbucks in prioritizing customer management came during the late 2000s, marked by a series of key events and realizations that led to a fundamental shift in the company’s approach to customer service and overall strategy.

One pivotal moment was the return of Howard Schultz as CEO in 2008 . Schultz, who had stepped down as CEO in 2000, returned to lead the company amid declining sales, store closures, and growing dissatisfaction among customers and employees alike.

Recognizing the urgent need to revitalize the brand and reconnect with customers, Schultz initiated a bold plan to refocus on Starbucks’ core values and customer experience.

Under Schultz’s leadership, Starbucks took several initial steps to address its customer management issues:

• Closing Stores for Barista Training: In a highly symbolic move, Starbucks temporarily closed approximately 7,100 U.S. stores for several hours to conduct a nationwide barista training program. This initiative aimed to reinforce the company’s commitment to coffee quality and customer service excellence.
• Reevaluating Store Expansion Plans: Starbucks reevaluated its aggressive store expansion strategy, recognizing that rapid growth had contributed to the dilution of the customer experience. The company shifted focus towards improving the performance of existing stores and ensuring new locations contributed positively to the brand’s value proposition.
• Enhancing Customer Feedback Mechanisms: Understanding the importance of customer feedback, Starbucks enhanced its mechanisms for gathering and responding to customer insights . This included the launch of “My Starbucks Idea,” a digital platform that allowed customers to submit suggestions for improvements, which the company could then implement.
• Revamping the Starbucks Experience: Schultz emphasized the need to revive the unique Starbucks experience, focusing on the ambiance of the stores, the quality of customer interactions, and the overall environment. This included redesigning stores, improving product offerings, and implementing initiatives aimed at creating a more engaging and personalized customer experience.

These initial steps marked the beginning of Starbucks’ journey toward customer management mastery. By acknowledging its shortcomings and taking decisive action to reconnect with its core values and customers, Starbucks set the stage for a comprehensive strategy overhaul that would ultimately redefine its approach to customer service and set new standards for the industry.

Strategic Overhaul

In response to the challenges it faced, Starbucks embarked on a comprehensive strategic overhaul focused on improving customer management. This strategy was multifaceted, addressing various aspects of the business from customer feedback to employee training, technology, and community initiatives.

Customer Feedback and Engagement

Starbucks recognized the critical role of customer feedback in guiding its improvements and rebuilding trust. The introduction of “My Starbucks Idea” was a significant step in integrating customer feedback mechanisms.

This platform allowed customers to submit, vote on, and discuss ideas directly with Starbucks, covering everything from product suggestions to environmental concerns. It democratized innovation and signaled to customers that their opinions were valued, leading to the implementation of numerous customer-generated ideas.

Employee Training and Empowerment

Employee training and empowerment became a cornerstone of Starbucks’ strategy to enhance the customer experience. Following the nationwide barista training program, Starbucks continued to invest heavily in its workforce.

This included not only technical coffee-making skills but also soft skills essential for customer service excellence. Baristas and store managers were empowered to make decisions that would improve customer satisfaction, such as remaking a drink if a customer was not completely satisfied.

This approach underscored the importance of each employee in contributing to the overall customer experience, resulting in a positive outcome on all major customer success metrics .

Technology and Innovation

Starbucks leveraged technology and innovation to improve customer convenience and personalization. The launch of the Starbucks mobile app, including mobile ordering and payment, was a game-changer, significantly reducing wait times and enhancing the customer experience.

The app’s integration with the Starbucks Rewards loyalty program offered personalized offers and recommendations, increasing customer engagement and retention . Through technology, Starbucks was able to offer a more seamless and customized experience to its customers, reinforcing its brand promise of convenience and personalization.

Community and Environmental Initiatives

Understanding the growing consumer demand for responsible and sustainable business practices, Starbucks intensified its community and environmental initiatives. Efforts such as ethically sourcing coffee, reducing waste through the promotion of reusable cups, and investing in local communities helped rebuild trust and loyalty among customers.

These initiatives demonstrated Starbucks’ commitment to corporate social responsibility and its alignment with customers’ values, further enhancing its brand image and customer relationships.

Through this strategic overhaul, Starbucks addressed the root causes of its customer management challenges.

By actively engaging with customers, empowering employees, leveraging technology, and committing to social responsibility, Starbucks not only improved its customer management but also set new standards for excellence in the retail industry.

This comprehensive approach to revitalization has solidified Starbucks’ position as a leader in customer experience, innovation, and community engagement.

Lessons Learned

Starbucks’ transformation in customer management offers several key insights and lessons for other companies aiming to enhance their customer engagement and brand reputation. Here are the primary takeaways:

1.  Embrace Customer Feedback

Starbucks demonstrated the value of actively listening to and engaging with customers. By implementing platforms like “My Starbucks Idea,” the company not only gathered invaluable insights but also fostered a sense of community and belonging among its customer base.

Lesson: Incorporating customer feedback—this could be through USSD Mobile Surveys offered by a platform like SeVO Poll —into business decisions can lead to innovative solutions and stronger customer loyalty.

2.  Invest in Employee Empowerment

The role of baristas and store managers was pivotal in Starbucks’ turnaround. By investing in comprehensive training and empowering employees to make decisions that benefit the customer experience, Starbucks enhanced service quality and consistency.

Lesson: Empowered employees are more engaged and better equipped to deliver exceptional customer service, directly impacting customer satisfaction and loyalty.

3.  Leverage Technology for Personalization

Starbucks’ use of mobile apps and loyalty programs to offer personalized experiences and conveniences to customers set a new standard in the retail industry.

Lesson: Technology can be a powerful tool in understanding and catering to individual customer preferences, driving both satisfaction and engagement.

4.  Commit to Corporate Social Responsibility

Starbucks’ focus on community and environmental initiatives resonated with customers’ values, rebuilding trust and enhancing loyalty.

Lesson: A genuine commitment to social responsibility can strengthen a brand’s reputation and appeal to consumers’ desire to support ethical and sustainable businesses.

Importance of a Customer-Centric Approach

The overarching lesson from Starbucks’ journey is the importance of maintaining a customer-centric approach. This involves continuously seeking ways to understand and meet customer needs, preferences, and values. A customer-centric strategy not only helps in navigating challenges but also in identifying opportunities for growth and innovation.

By prioritizing customer management and adopting a holistic approach to business operations, Starbucks not only navigated through its challenges but also emerged stronger, with a reinforced brand reputation and a loyal customer base.

These lessons underscore the value of integrating customer feedback, empowering employees, leveraging technology, and upholding social responsibility as core elements of a successful customer management strategy.

Key Takeaways

Starbucks’ journey from facing significant customer management challenges to achieving mastery in the field underscores the transformative power of a customer-centric approach.

Through strategic overhauls in feedback mechanisms, employee training and empowerment, technology integration, and commitment to corporate social responsibility, Starbucks not only addressed its immediate challenges but also laid the foundation for sustained success.

This evolution highlights the critical role that effective customer management plays in maintaining a strong brand reputation and fostering deep connections with consumers.

The key to Starbucks’ ongoing success lies in its acknowledgment that customer management is a continuous journey, not a destination. The retail landscape and customer expectations are ever-evolving, demanding constant innovation and adaptation.

Starbucks’ commitment to listening to its customers, empowering its employees, leveraging new technologies for personalization, and upholding its social responsibilities demonstrates a model for other companies to follow.

Reflecting on Starbucks’ experience, it becomes clear that effective customer management is integral to building and maintaining a successful brand. It requires a holistic approach that permeates every aspect of the business, from the frontline employees who interact with customers daily to the strategic decisions made at the corporate level. By placing the customer at the heart of their operations, companies can navigate the complexities of the modern retail environment and achieve enduring success.

Starbucks’ story is a testament to the fact that with the right strategies, challenges in customer management can be transformed into opportunities for growth, innovation, and stronger customer relationships. It serves as a reminder that in the competitive landscape of the retail and service industries, the companies that thrive are those that remain unwaveringly committed to enhancing their customer management practices.

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The Success of Starbucks App: A Case Study

Starbucks has the most regularly used loyalty rewards app among major restaurant chains. But what keeps users coming back for more? This case study will look at the design of the app, its features, and the bold moves that the coffee chain has made to make the app a “must have” for consumers.

Updated May 12, 2023 

A recent study found that Starbucks has the most regularly used loyalty rewards app (48%) among a list of major restaurant chains. Why is the app so popular? What is it that keeps users coming back for more?   The answer is digital engagement .   From ordering and paying ahead of time to creating your own Spotify playlist, the Starbucks app provides a user experience that is both inviting and innovative, much like the coffee chain itself.   That digital engagement has paid tremendous dividends for the company. At a JPMorgan forum in March, Starbucks CFO Scott Maw said almost all of the company’s same-store sales growth has come from customers that have digital relationships with the company and those that are in the Starbucks Rewards program.    This case study will discuss four main reasons why the Starbucks app is a “must have, must use” app for customers:

• Easy Navigation
• Personalization
• Geo-location
• Mobile pay and ordering
• Integration with other platforms and services

1. Easy Navigation

The app's layout is simple, yet elegant, making the app appealing to the user. However, the platform's navigation is what makes it stand out. Navigating through the Starbucks app is quick and easy, making it conventient for users to place an order. 

Five menu options at the bottom of the app page give the user access to the major functions: Home, Scan, Order, Gift, and Offers. Having the menu at the bottom of the screen makes it easier for users to access the most important pages on the screen because it's well within reach of a user's thumb. 

Additionally, the Starbucks app is exceptionally innovative because it provides a similar experience to visiting the store . Many of us have stood in line at Starbucks thinking, “I should get a gift card for (insert person/occasion).” The Gift menu brings up a variety of gift cards for nearly every occasion, and even suggests cards for upcoming holidays.   Starbucks added the convenience functionality despite the risk of placing too many “bells and whistles” in the app. Chief Digital Officer Adam Brotman acknowledged that the company didn’t “ want the app to become too much of a Swiss Army knife .” 

However, the innovative features have been well received and have not overwhelmed users. The Starbucks app provides its users with a personalized experience. 

2. Personalization

Starbucks added personalization elements allowing the app to recall your favorite order, suggest what food items might pair well with that order, and where you’d like to pick it up.  Again, this simplifies the user experience and makes it especially easy to place an order. It keeps track of what you've ordered in the past and your favorite drinks to ensure that it's easy for users to place their order during their morning commute. 

3. Geo-Location

There are Starbucks everywhere, so it's important for users to be able to select which one they wish to visit when they place an order. The app uses geo-location to show where each storefront is located and how close a user is to each one. 

Using the geo-location feature, a user can see where the closest Starbucks locations are, the menu at each location, and even place an order that can be ready upon arrival. 

 If you often order from a specific location, the app will automatically select that location, limiting the number of clicks a user has to make to place an order. 

4. The Starbucks Rewards Loyalty Rewards Program Leads the Competition

The Starbucks Rewards program is a prime example of how to get customers to utilize a mobile app. Simply put, the more you spend at Starbucks, the more rewards points (or “stars”) you earn. Not only is this great for users on the app, but it also helps foster brand loyalty. With the promise of rewards, users are more likely to order from Starbucks in the future. 

The rewards program gives a number of benefits for app users. In addition to earning two stars for every dollar spent, rewards members get other benefits like free in-store refills, special member offers/events, and the ability to pay by phone and order ahead.

The rewards program also offers plenty of customization for users, including a free beverage on the user’s birthday and personalized suggestions based upon past orders.   In return, Starbucks solidifies an instant digital relationship with the 14.2 million active U.S. rewards program members. The loyalty program has seen hefty growth , with an 11% growth in users in Q2 2018. And Starbucks rewards program members in certain places actually spend more, representing 39% of the entire chain’s sales .   However, Starbucks recognizes that not all customers want to join the rewards program. Starbucks is planning to ramp up digital interactions by offering mobile order and pay options to all customers—not just rewards members. The company also will take advantage of Wi-Fi sign-ins at various stores to help drive mobile order and pay options.     The Starbucks rewards program encourages users to utilize the app to track purchases, as well as the stars earned. To facilitate their usage, stars have a limited shelf life—one year for basic (or “Green”) level rewards customers, and six months for upper-tier (or “Gold) members.   The app provides reminders about stars that are expiring, as well as the number of stars needed to maintain Gold status. Gold members also get special double-star days when they earn four stars per $1 spent.

5. Starbucks’ Mobile App Makes Online Ordering and Paying Easy

Since launching the initiatives in 2015, Starbucks has become the standard bearer when it comes to mobile ordering and payments. Mobile Order and Pay is a feature that let customers order via Starbucks’ app and skip the line.   At first, the growth of Mobile Order and Pay caused some congestion issues inside stores for customers while picking up their coffee and/or food. As one customer stated, “Why should I order ahead if I just have to stand in line to retrieve my order?” 

Starbucks responded by adding dedicated stations for mobile order-ahead customers, distinct from existing in-store registers, and giving baristas new tablets.   The mobile ordering system acts as a digital marketing tool, allowing customers to see new items ahead of time. Coupled with notifications from the app or email blasts, Starbucks creates interest in new menu items long before the customer sets foot in the store. Often, these digital tools create a sense of urgency for customers to sample the latest offerings.   Starbucks also enabled orders via Amazon's Alexa, and the feature has also been integrated into Ford vehicles.   The coffee chain also expanded its My Starbucks barista, a feature integrated into the Starbucks app, which allows customers to order via voice command or messaging. The goal was to boost speed and convenience.   In-store payments are also encouraged through the app, which utilizes a Starbucks gift card to process the payments. This creates seamless transactions, as the gift card can be automatically or manually reloaded using a credit card, Apple Pay or Google Pay, or even with the balance from another gift card. The app screen can be scanned at the register to process the payment.   For iOS users, the app integrates with the Apple Watch, producing a bar code that also can be scanned for those on the go.

By offering a wide variety of functionalities, Starbucks’ Mobile Order and Pay allows users to order and pay in the way that is most convenient for them – which encourages greater sales.

Starbucks’ App Exemplifies Loyalty App Success

The Starbucks app is the center of the company’s digital ecosystem, bringing together loyalty, mobile payment, and content partnerships, all seamlessly integrated into one convenient application.    Restaurants can follow Starbucks’ example to create a successful restaurant loyalty rewards app.

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Founder & Lead Growth Engineer at Grow Hack Scale, Balanced Narrative and Balanced Life Academy Group., Grow Hack Scale

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Case Study: Starbucks’ Success Elevating Customer Experience with Customer Journey Mapping

Customers journey mapping to deliver great customers experiences.

Starbucks, the world-renowned coffee company, is known for its exceptional customer experience and innovative offerings. To stay ahead in the competitive coffee industry and maintain its reputation, Starbucks has consistently prioritized understanding its customers and their needs. One key strategy that Starbucks has used to achieve this is customer journey mapping.

Customer Journey Mapping Strategy

Starbucks embarked on a comprehensive customer journey mapping initiative, aiming to identify pain points in its customers’ experiences and develop solutions to address these issues. The company engaged in a cross-functional approach, involving teams from various departments such as marketing, store operations, and product development, to ensure a holistic understanding of the customer journey.

Understanding the Customer Journey

Starbucks conducted extensive research to gain insights into its customers’ interactions with the brand, both online and offline. The company collected data through customer interviews, surveys, and observations, as well as leveraging digital analytics and transactional data. This information was used to create detailed customer journey maps, highlighting key touchpoints, emotional states, and pain points.

Identifying Pain Points and Opportunities

The customer journey maps revealed several areas where Starbucks could improve its customer experience. Some notable pain points included long wait times, inconsistent product quality, and challenges in navigating the rewards program. The company also identified opportunities to enhance the in-store experience, such as incorporating digital technologies and personalizing customer interactions.

Developing a Customer Experience Roadmap

Armed with these insights, Starbucks developed a customer experience roadmap that outlined the strategic initiatives and improvements needed to address the identified pain points and capitalize on opportunities. Some of the successful implementations based on the roadmap include:

• Mobile Order & Pay: To reduce wait times and streamline the ordering process, Starbucks introduced the Mobile Order & Pay feature in its app. This allowed customers to place orders in advance and pick up their drinks without waiting in line, significantly enhancing the overall customer experience.
• Personalized Rewards: Starbucks revamped its rewards program to make it more accessible and user-friendly, tailoring offers and promotions based on customers’ preferences and purchasing habits. This personalized approach encouraged customer loyalty and increased engagement with the brand.
• Consistent Quality Standards: Starbucks invested in employee training and quality control measures to ensure consistent product quality across all locations. This focus on excellence helped reinforce the brand’s reputation for offering high-quality coffee and beverages.
• Digital Integration: Starbucks introduced digital touchpoints in its stores, such as interactive menu boards and mobile payment options, to create a seamless and engaging customer experience. These innovations helped bridge the gap between the online and offline customer journey.

The company’s attention to the entire journey has been a key factor in the development of the premium coffee category.

According to PeopleMetrics, Starbucks has been able to simplify and operationalize Customer Journey Mapping which has helped them unlock the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store.

Initiatives that have been uncovered through journey mapping exercises:

Starbucks is investing in its partners, creating personalized experiences for customers, and innovating its digital and retail strategy.

Investing in Partner Success

Starbucks is placing its partners at the core of its Reinvention plan. The company believes that investing in its partner base is key to delivering high-quality customer experiences, uplifting brand affinity and customer loyalty, and increasing value back to partners through wages, benefits, programming, and tools for continued personal growth. In fiscal 2023, Starbucks has identified a number of near-term solutions that will be implemented to ensure a thriving partner experience:

How to Improve Customer Experience

Wage and Recognition Innovation:

Starbucks is helping partners by giving them the hours they need, expanding digital tipping, and incorporating other opportunities to increase overall pay. The company is committed to paying partners competitively and has raised its starting wage in the U.S. to $15 per hour.

New Well-being Benefits:

Starbucks is offering enhanced sick pay, new savings and student loan management benefits, and additional mental health support to its partners.

Personalized Career Mobility:

Starbucks is introducing a new partner app and the development of personalized career paths to enable its partners to achieve their career goals.

Investments in Store Managers:

Starbucks is providing new leadership trainings, reinventing scheduling and decision-making tools, and creating career journey mapping to improve store manager retention and empower them to focus on core functions of the job that increase satisfaction and overall performance of their store partners.

These investments are aimed at empowering Starbucks partners to thrive at work, thrive as individuals, and thrive together. Stores managed by partners with over three years of tenure have 13% greater weekly sales and higher customer satisfaction, making it clear that investing in partner success is a win-win for both partners and the company.

Creating Personalized Experiences for Customers

Starbucks is committed to unlocking the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store. The company is investing in purpose-built store concepts, delivering beverage innovation, and expanding effortless digital convenience to create personalized experiences for its customers.

Investing in Purpose-built Store Concepts:

Starbucks is reimagining the store environment by introducing purpose-built store concepts that meet customers wherever and whenever they want and improve the partner experience. The company is investing an incremental $450M in the existing U.S. store base in fiscal year 2023 with continued investment in fiscal 2024 and 2025. Starbucks expects these investments will create efficiencies, unlock capacity for partners, and enable increased throughput to support increasing customer demand.

Digital and Physical Customer Journey Optimization

Delivering Beverage Innovation:

To improve partner and customer experiences, Starbucks has developed the Siren System, a proprietary new equipment innovation designed to meet the growing demand for customization of hot and cold beverages and warm foods. As part of the Siren System, Starbucks has redesigned its cold beverage station, which significantly reduces the time and number of steps to make cold beverages, unlocking productivity gains and ultimately freeing up time for partners to connect with customers.

In addition, Starbucks is developing a new way of extracting cold coffee and espresso with the Cold Pressed Cold Brew system. This new, proprietary technology delivers cold press coffee in a matter of seconds and in fewer than four steps, a step-change improvement when compared to today’s cold brew which is steeped for 20 hours and takes more than 20 steps to make. The Cold Pressed Cold Brew will begin testing in stores in fiscal 2023.

Expanding effortless digital convenience

Starbucks’ Reinvention Plan aims to create a seamless and personalized experience for customers, making it easier for them to get their favorite Starbucks beverage when and where they want. The company has recognized the increasing importance of digital convenience in providing a better customer experience. The COVID-19 pandemic has also highlighted the need for contactless ordering and payment options. Starbucks has responded by investing in and expanding its digital offerings, such as its mobile ordering platform, Starbucks Rewards program, and Starbucks Delivers.

Growing Starbucks Delivers program with DoorDash and UberEats

One of Starbucks’ major initiatives for expanding digital convenience is growing its Starbucks Delivers program. The company has partnered with DoorDash to expand the program to a national scale alongside UberEats in fiscal 2023. This partnership aims to improve delivery efficiency, expand delivery areas, and offer more delivery options to customers. Starbucks Delivers is expected to be available in over 10,000 stores across the United States by the end of 2022.

Increase Customer Satisfaction with a Digital Customer Experience Platform

Starbucks Rewards program with Starbucks Odyssey

Starbucks is also evolving its Starbucks Rewards program with Starbucks Odyssey, a Web3-enabled experience that will bridge the physical and digital customer experience. Starbucks Odyssey aims to unlock a new generation of experiential benefits for customers. Through Starbucks Odyssey, customers will be able to earn and redeem rewards, access exclusive content, and become part of a digital community built on human connection. Starbucks plans to roll out Starbucks Odyssey to all customers in the United States and Canada by the end of 2022.

The CDO TIMES Bottom Line

Starbucks’ successful application of customer journey mapping demonstrates the value of understanding customers’ experiences for customers, partners and employees and using these insights to drive improvements and innovation. By identifying pain points and opportunities in the customer journey, Starbucks was able to develop a customer experience roadmap that addressed these issues and reinforced its position as a leader in the coffee industry.

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In this context, the expertise of CDO TIMES becomes indispensable for organizations striving to stay ahead in the digital transformation journey. Here are some compelling reasons to engage their experts:

• Deep Expertise : CDO TIMES has a team of experts with deep expertise in the field of Digital, Data and AI and its integration into business processes. This knowledge ensures that your organization can leverage digital and AI in the most optimal and innovative ways.
• Strategic Insight : Not only can the CDO TIMES team help develop a Digital & AI strategy, but they can also provide insights into how this strategy fits into your overall business model and objectives. They understand that every business is unique, and so should be its Digital & AI strategy.
• Future-Proofing : With CDO TIMES, organizations can ensure they are future-proofed against rapid technological changes. Their experts stay abreast of the latest AI advancements and can guide your organization to adapt and evolve as the technology does.
• Risk Management : Implementing a Digital & AI strategy is not without its risks. The CDO TIMES can help identify potential pitfalls and develop mitigation strategies, helping you avoid costly mistakes and ensuring a smooth transition.
• Competitive Advantage : Finally, by hiring CDO TIMES experts, you are investing in a competitive advantage. Their expertise can help you speed up your innovation processes, bring products to market faster, and stay ahead of your competitors.

By employing the expertise of CDO TIMES, organizations can navigate the complexities of digital innovation with greater confidence and foresight, setting themselves up for success in the rapidly evolving digital economy. The future is digital, and with CDO TIMES, you’ll be well-equipped to lead in this new frontier.

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As the CDO of The CDO TIMES I am dedicated delivering actionable insights to our readers, explore current and future trends that are relevant to leaders and organizations undertaking digital transformation efforts. Besides writing about these topics we also help organizations make sense of all of the puzzle pieces and deliver actionable roadmaps and capabilities to stay future proof leveraging technology. Contact us at: [email protected] to get in touch.

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Starbucks Lowers Guidance, Promises New Drinks and Deals After Customer Traffic Fell in Weak Q2

Starbucks lowered expectations for its full-year sales and profit after a disastrous quarter that saw a slowdown in store visits across the world

David Zalubowski

FILE - Starbucks sign hangs outside a casino along Main Street Wednesday, Sept. 20, 2023, in Deadwood, S.D. Starbucks will reports earnings on Tuesday, April 30, 2024. (AP Photo/David Zalubowski)

Starbucks lowered expectations for its full-year sales and profit Tuesday after a disastrous quarter that saw a slowdown in store visits across the world.

The Seattle coffee giant said revenue for the January-March period dropped 2% to $8.56 billion. That was far short of Wall Street's forecast of $9.12 billion, according to analysts polled by FactSet. It was the first time since the end of 2020 that the company saw a drop in quarterly revenue.

“Our performance this quarter was disappointing and did not meet our expectations,” Starbucks CEO Laxman Narasimhan said during a conference call with investors. Shares in Starbucks Corp. tumbled 12% Tuesday in after-hours trading.

Starbucks said a mix of issues impacted sales. In the U.S., the company saw a sharper and faster decline in consumer confidence and spending than it had anticipated. The Conference Board, a business research group, said Tuesday that U.S. consumer confidence fell for the third straight month in April as consumers continue to confront elevated prices and high interest rates.

Bad weather also closed some U.S. stores briefly during the quarter, Starbucks said.

In China, Starbucks said the post-COVID recovery has been choppy, and it's also seeing increasing price pressure from competitors.

Photos You Should See - April 2024

Starbucks is also facing ongoing boycott of its stores for its perceived support of Israel in the war in Gaza. Customers in the Middle East and elsewhere began boycotting the brand in the fall after it sued Workers United , the union organizing its workers, over a pro-Palestinian message posted on a union social media account.

Starbucks has said that the lawsuit was aimed at stopping the union from using the company's name and logo, which it says confuses customers. Starbucks and the union have paused the court case and are now in mediation. But the company has also taken steps to undo the damage. Last month, Starbucks donated $3 million to World Central Kitchen to provide food aid in Gaza.

Starbucks said its same-store sales — or sales at stores open at least a year — dropped 4% in its fiscal second quarter. Wall Street had expected a 1% increase, according to analysts polled by FactSet.

In the U.S., customers spent more per visit, but that wasn’t enough to overcome a 7% decline in transactions. In China, the company’s second-largest market, same-store sales plunged 11%.

Starbucks said it now expects full-year same-store sales to be flat or fall by single-digit percentages, down from growth of 4% to 6%. It also said it expects full-year revenue growth in the low single-digit range, down from 7% to 10%. It's also forecasting flat to low-single digit earnings growth, down from 15% to 20%.

Narasimhan said Starbucks will try to boost U.S. store traffic this summer with new drinks, including the brand's first energy beverage. Later this year Starbucks plans to introduce sugar-free customization options for most of its beverages, another effort to draw in customers.

After a successful pilot, the company plans to start offering overnight service in many markets, Narasimhan said. And it's trying to improve product availability and service speed. Narasimhan said Starbucks lost some customers because of short supplies of its potato, cheddar and chive bakes after introducing them earlier this year.

Narasimhan also said Starbucks plans to open its Starbucks Rewards app to non-Rewards customers in July so they can take advantage of the deals it offers. Narasimhan said that change is aimed at occasional customers whose visits to Starbucks dropped off during the last quarter.

“In this environment, many customers are being more exacting about where and how they spend their money,” Narasimhan said. “We need to be able to reach and communicate with our customers in a way that demonstrates our value.”

Starbucks’ net income dropped 15% to $772.4 million, or 68 cents per share. Wall Street had expected an 80-cent per share profit.

Starbucks' comments were echoed earlier Tuesday by McDonald's , which also reported lower traffic in key markets like the U.S. and the United Kingdom as inflation-weary customers eat out less often. Like Starbucks, McDonald's said it plans to boost deals and messaging about product value.

Copyright 2024 The  Associated Press . All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Tags: Associated Press , business , inflation , Washington

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Four More Gag Order Violations

DEI is getting a new name. Can it dump the political baggage?

Under mounting legal and political pressure, companies’ DEI tactics are evolving.

Last year, Eli Lilly’s annual shareholders letter referenced the acronym for diversity, equity and inclusion 48 times. This year, “DEI” is nowhere to be found.

In March, Starbucks got shareholder approval to replace “representation” goals with “talent” performance for executive bonus incentives. At Molson Coors, “People & Planet” metrics have displaced environmental, social and governance (ESG) goals, and the acronym DEI has disappeared altogether.

Amid growing legal, social and political backlash, American businesses, industry groups and employment professionals are quietly scrubbing DEI from public view — though not necessarily abandoning its practice. As they rebrand programs and hot-button acronyms, they’re reassessing decades-old anti-discrimination strategies and rewriting policies that once emphasized race and gender to prioritize inclusion for all.

It’s a stark contrast to 2020, when the murder of George Floyd unleashed a racial justice movement that prompted companies to double down on policies aiming to increase opportunity for groups that have historically faced discrimination. Less than a year after the Supreme Court struck down affirmative action in colleges and universities — a landmark ruling that found race-conscious admissions violated the right to equal treatment under the Constitution — a growing contingent of critics is arguing that DEI creates inequalities of its own. Some conservatives have blamed DEI for a variety of problems, such as the Baltimore bridge collapse and Boeing’s safety woes, without providing evidence. Dozens of anti-DEI bills are being considered by state legislatures across the country, and DEI looks poised to become a wedge issue in this year’s presidential election.

Johnny C. Taylor Jr., chief executive of the Society for Human Resource Management, said that practitioners of DEI and its antecedents traditionally have focused on improving representation for historically marginalized groups, believing that “the magic bullet was diversity.”

“We underestimated that inclusion was the real challenge,” Taylor said. “Now people are saying, ‘Not only should we probably call it something different, we should probably evolve it.’”

This shifting landscape is forcing companies and consultants to adapt on the fly, with many acting preemptively to guard against the legal threats that have led some firms to recast or discard race-based initiatives. They’re renaming diversity programs, overhauling internal DEI teams and working closely with lawyers. Some are moving away from using racial and gender considerations in hiring and promotion, and toward approaches that focus more on inclusion.

To be sure, some companies have successfully fended off challenges. In April, a discrimination lawsuit against an Amazon grant program for Black, Latino and Native American contractors was dismissed by a federal court in Texas, though the plaintiffs have appealed. Pfizer and Starbucks have prevailed in court against similar legal attacks, though Pfizer modified the DEI program in question to make it race-neutral, according to court filings.

And many companies have held onto their programs since the Supreme Court ruled against Harvard and the University of North Carolina last June. Six months after the ruling, the employment law firm Littler Mendelson reported that 91 percent of the 320 executives surveyed said the ruling had not lessened their prioritization of DEI. In fact, 57 percent said they had expanded their DEI programming in the past year.

But that sentiment is far more subdued than it was in 2020, when corporate America poured more than $50 billion into racial justice causes. Meanwhile, the DEI industry — which was worth an estimated $9 billion in 2023, according to market researcher Fact.MR — is also rethinking its public face, consultants say.

Last fall, a few months after the Harvard-UNC decision, Taylor was already noticing growing antipathy toward the methods that companies, institutions of higher education and other organizations used to diversify in their ranks. So instead of referring to DEI, Taylor switched to calling these efforts “IED,” putting the focus on “inclusion” as DEI accrued cultural and political baggage. SHRM, the human resources association he heads, changed the name of its annual DEI conference to “Inclusion 2023.”

Some practitioners and executives dismissed the rebrand as superficial, Taylor said, a concession to political correctness. But months later, his strategy has proved prescient.

A growing number of companies — including language app Duolingo, JetBlue and Molson Coors — are either listing DEI as a “risk factor” in shareholder reports or removing mentions of diversity goals outright. A Bloomberg Law analysis found that two dozen public companies have incorporated similar risk-factor language into their filings. And several companies, including Kohls, Salesforce and Workday, have dropped references to diversity goals in regulatory filings, the Wall Street Journal reported .

Eric Ellis, CEO of Integrity Development, a DEI consultancy, said he’s seen the “branding merry-go-round” playing out for decades, tracing back to the wake of the civil rights movement. He expects the language to keep changing in response to public attacks, especially those by high-profile figures like Elon Musk, who in January wrote on his social media platform X that “DEI is just another word for racism.”

“If every day you’re getting pummeled and there is no effective strategy to protect the brand of DEI, there’s no doubt it’s going to be hard for it to survive,” Ellis said. “We keep adjusting.”

Starbucks is “a case in point” for how companies are altering terminology around DEI, said Brian Bueno, ESG practice leader at Farient Advisors, an executive compensation consulting firm. After Floyd’s murder by Minneapolis police, the company was among the first wave of firms incentivizing executives to achieve DEI targets, he noted.

In its proxy statement last year, Starbucks said it was “holding our senior leaders collectively accountable” for goals that focused “on improvement in Black, Indigenous, and Latinx representation at the manager level.” It also had goals around executive mentorship for BIPOC (Black, Indigenous, and other people of color) employees, scores on inclusive leadership surveys and other metrics, Bueno said.

But starting this year, Starbucks is weighting its incentive plan more toward financial performance, tethering representation-related rewards to “talent” goals. The company’s 2024 proxy statement references a goal to “ensure that leaders have accountability” for “creating a culture of belonging.”

“Starbucks was an interesting case because they did come out with very specific goals,” Bueno said. Now, “they’re moving them from a more prominent area of the bonus plan to a little more backstage.”

Bueno estimated that 35 to 40 percent of large-cap companies — those with a market capitalization of $10 billion or more — have some DEI targets in their executive bonus criteria. About half of them frame these policies around quantitative targets, while the rest take a more qualitative approach. Still, “companies are treading carefully,” given the legal climate, he said.

Starbucks has already withstood legal scrutiny of its policies: In September, a federal judge in Washington state threw out a lawsuit alleging Starbucks violated its duty to shareholders by endeavoring to diversify its workforce. The suit targeted the company’s goals for hiring people of color and awarding contracts to “diverse” suppliers and advertisers, as well as its tethering of executive pay to diversity goals.

Betsy McManus, a spokeswoman for Starbucks, said the company has a goal of achieving “racial and ethnic diversity of at least 30 percent at all corporate levels and at least 40 percent at all retail and manufacturing roles by 2025” in the United States.

“Real inclusion requires intent, and diversity creates stronger communities and workforce,” McManus said in a statement emailed to The Washington Post. “With that in mind, we continue to make improvements and changes to ensure Starbucks remains a diverse, inclusive, equitable and accessible company.”

Eli Lilly scuttled DEI from its proxy statement this year and dropped mentions of “racial justice” — from eight times in 2023 to one in 2024. It also eliminated a section on progress toward meeting its racial justice commitments, which had been included in 2023.

Yet the pharmaceutical giant still ties executive compensation to general goals of fostering diversity within the company — and it cites fostering a diverse workforce as a core priority. In a statement to The Post, the company said it removed the references to DEI “to avoid redundancies in reporting.” Information about the company’s diversity efforts and racial justice commitments are detailed in its latest “ESG report” as well as in a separate DEI report published last fall.

“Lilly is committed to diversity, equity and inclusion — they are foundational in every part of our organization and essential elements of our success as a company,” Eli Lilly said.

Molson Coors, meanwhile, erased DEI references from its “People & Planet” metrics, a change from 2023. This year, it says, fostering an “inclusive culture” is central to its efforts. The company did not respond to a request for comment.

Many large companies see a correlation between a diverse workforce and financial success, and routinely tout the “business case” for DEI. Companies with the highest racial, ethnic and gender representation are 39 percent more likely to financially outperform, according to a 2023 study by McKinsey & Co. involving more than 1,200 firms worldwide. In June of last year, a study by the ratings agency Moody’s found that companies with higher ratings tended to have a greater racial diversity on their boards and in their executive ranks.

In his annual letter to shareholders this year, JPMorgan Chase CEO Jamie Dimon emphasized that DEI “initiatives make us a more inclusive company and lead to more innovation, smarter decisions and better financial results for us and for the economy overall.”

Still, he said, JPMorgan will “scour” its programs to ensure they comply with the changing legal landscape. Similar assessments are playing out at Meta, Snap, DoorDash and Home Depot, which have culled their internal DEI teams in the past year. Others, such as Zoom, have outsourced their DEI work to consultants.

Marilyn Fish, an Atlanta-based employment attorney who specializes in affirmative action, said she’s seen companies “looking at policies more holistically” since the Harvard-UNC decision. Many of her clients — among them Fortune 500 companies — have renamed their programs to put “inclusion” up front, hoping it will resonate with employees.

Some of her clients recently moved away from employee resource groups that had identified some people as “members” and others as “allies.” Some opened up mentorship programs that were reserved for employees of certain races to people of all backgrounds.

“I do think that some programs were operating with an exclusivity that was potentially problematic,” Fish said. She doesn’t think the new labels matter much from a legal perspective. “What matters most is how their programs are being implemented.”

Joelle Emerson, chief executive of DEI consultancy Paradigm, considers corporate DEI to be “one of the most visible civil rights initiatives of the past decade.” Much like affirmative action before it, DEI has faced resistance from within organizations and outside them — and now it’s being thrust into the political limelight at a moment of acute polarization.

“ DEI has only been the acronym du jour since 2020,” Emerson said. “Regardless of what we call it, we’ve done a really poor job storytelling what this work is actually about.”

The rebranding is clearly being sparked by the “baggage” now associated with DEI, Emerson said. She pointed to conservative activist Christopher Rufo, who led the campaign to oust Harvard’s first Black president, Claudine Gay, framing her exit as “the beginning of the end for DEI in America’s institutions.”

“Companies with leaders that might be particularly supportive of DEI might also be the ones that are uniquely averse to drawing scrutiny,” Emerson said. “A lot of the companies that were vocal in the past have already been sued.”

Rhonda Moret, founder of Elevated Diversity, a DEI consultancy, said she’s seen “a shift in what we’re being asked to do.” Demand for programs such as unconscious bias training — high a few years ago — has dried up, she said. But there’s been a spike of interest in employee resource groups, particularly those that aren’t race-based, such as groups for caregivers, veterans and first-generation Americans.

Like many consultants, Moret has been tweaking the terminology she uses to describe her work, now framing it as L&I (leadership and inclusion). She prides herself on having always taken an “inclusion-forward” approach, and she’s noticed the movement away from emphasizing “diversity” in her field.

But she’s conflicted about whether to follow the tide and change Elevated Diversity’s name.

“I am what someone thinks of when they think of diversity,” said Moret, who is Black. “Do I want to change who I am to be able to fit into another model? I still haven’t decided.”

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Starbucks lowers guidance, promises new drinks and deals after customer traffic fell in weak Q2

FILE - Starbucks sign hangs outside a casino along Main Street Wednesday, Sept. 20, 2023, in Deadwood, S.D. Starbucks will reports earnings on Tuesday, April 30, 2024. (AP Photo/David Zalubowski)

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Starbucks lowered expectations for its full-year sales and profit Tuesday after a disastrous quarter that saw a slowdown in store visits across the world.

The Seattle coffee giant said revenue for the January-March period dropped 2% to $8.56 billion. That was far short of Wall Street’s forecast of $9.12 billion, according to analysts polled by FactSet. It was the first time since the end of 2020 that the company saw a drop in quarterly revenue.

“Our performance this quarter was disappointing and did not meet our expectations,” Starbucks CEO Laxman Narasimhan said during a conference call with investors. Shares in Starbucks Corp. tumbled 12% Tuesday in after-hours trading.

Starbucks said a mix of issues impacted sales. In the U.S., the company saw a sharper and faster decline in consumer confidence and spending than it had anticipated. The Conference Board, a business research group, said Tuesday that U.S. consumer confidence fell for the third straight month in April as consumers continue to confront elevated prices and high interest rates.

Bad weather also closed some U.S. stores briefly during the quarter, Starbucks said.

In China, Starbucks said the post-COVID recovery has been choppy, and it’s also seeing increasing price pressure from competitors.

Starbucks is also facing ongoing boycott of its stores for its perceived support of Israel in the war in Gaza. Customers in the Middle East and elsewhere began boycotting the brand in the fall after it sued Workers United , the union organizing its workers, over a pro-Palestinian message posted on a union social media account.

Starbucks has said that the lawsuit was aimed at stopping the union from using the company’s name and logo, which it says confuses customers. Starbucks and the union have paused the court case and are now in mediation. But the company has also taken steps to undo the damage. Last month, Starbucks donated $3 million to World Central Kitchen to provide food aid in Gaza.

Starbucks said its same-store sales — or sales at stores open at least a year — dropped 4% in its fiscal second quarter. Wall Street had expected a 1% increase, according to analysts polled by FactSet.

In the U.S., customers spent more per visit, but that wasn’t enough to overcome a 7% decline in transactions. In China, the company’s second-largest market, same-store sales plunged 11%.

Starbucks said it now expects full-year same-store sales to be flat or fall by single-digit percentages, down from growth of 4% to 6%. It also said it expects full-year revenue growth in the low single-digit range, down from 7% to 10%. It’s also forecasting flat to low-single digit earnings growth, down from 15% to 20%.

Narasimhan said Starbucks will try to boost U.S. store traffic this summer with new drinks, including the brand’s first energy beverage. Later this year Starbucks plans to introduce sugar-free customization options for most of its beverages, another effort to draw in customers.

After a successful pilot, the company plans to start offering overnight service in many markets, Narasimhan said. And it’s trying to improve product availability and service speed. Narasimhan said Starbucks lost some customers because of short supplies of its potato, cheddar and chive bakes after introducing them earlier this year.

Narasimhan also said Starbucks plans to open its Starbucks Rewards app to non-Rewards customers in July so they can take advantage of the deals it offers. Narasimhan said that change is aimed at occasional customers whose visits to Starbucks dropped off during the last quarter.

“In this environment, many customers are being more exacting about where and how they spend their money,” Narasimhan said. “We need to be able to reach and communicate with our customers in a way that demonstrates our value.”

Starbucks’ net income dropped 15% to $772.4 million, or 68 cents per share. Wall Street had expected an 80-cent per share profit.

Starbucks’ comments were echoed earlier Tuesday by McDonald’s , which also reported lower traffic in key markets like the U.S. and the United Kingdom as inflation-weary customers eat out less often. Like Starbucks, McDonald’s said it plans to boost deals and messaging about product value.

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Starbucks corp (sbux) q2 2024 earnings call transcript highlights: navigating economic ....

Total Company Revenue: $8.6 billion, down 1% year-over-year.

Global Comparable Store Sales: Declined 4% year-over-year.

North America Comparable Store Sales: Negative 3% comp growth.

China Comparable Store Sales: Negative 11% comp growth.

Global Operating Margins: Contracted by 140 basis points to 12.8%.

Earnings Per Share (EPS): Declined by 7% to $0.68.

Warning! GuruFocus has detected 4 Warning Signs with CLX.

Release Date: April 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

Q & A Highlights

Q : Can you clarify the impact of weather on recent trends, and how does the successful launch of lavender late in the quarter align with unchanged exit rates? A : Laxman Narasimhan, CEO & Director of Starbucks, explained that despite transitory headwinds like weather, the underlying challenge is with the occasional customer due to economic pressures. The strong performance of loyal customers within the Starbucks Rewards and app shows robust business, but the challenge lies in reaching and providing value to more occasional customers. The focus is on meeting existing demand, launching new products, and enhancing value for occasional customers.

Q : Is there a brand resonance issue with younger or more occasional customers? A : Laxman Narasimhan noted that overall brand equity remains strong, but occasional customers are facing economic pressures that affect their spending choices. Starbucks is focusing on connecting with these customers through variety, value, and the Starbucks app to enhance their visibility of the brand's value.

Q : How do you justify the continued rapid store expansion given the current challenges, particularly in China? A : Laxman Narasimhan and Rachel Ruggeri, EVP & CFO, highlighted that despite current challenges, the returns on new stores, especially in lower-tier cities and new counties in China, are very attractive. The deliberate decision to expand in these areas is based on strong cash returns and significant market potential, supporting confidence in continued growth.

Q : Could you elaborate on the competitive environment in China and how it's impacting Starbucks? A : Narasimhan described the competition in China, particularly in the mass market segment, as intense, with many competitors focusing on price. Starbucks is maintaining its premium positioning and focusing on its competitive advantages, including its comprehensive supply chain and store experience. Despite short-term challenges, the long-term potential in China remains significant due to low coffee consumption per capita compared to other markets.

Q : How is Starbucks' beverage innovation pipeline evolving, and what are the plans for R&D? A : Narasimhan outlined that Starbucks is focusing on platforms like textures, handcrafted energy, and plant-based options to drive innovation. These platforms are designed to introduce systematic innovations that cater to customer demands for variety and health-conscious options, reflecting a strategic shift in R&D to more frequent and relevant product launches.

Q : What is the strategy behind the Siren System, and how does it fit into addressing current operational challenges? A : Narasimhan clarified that the Siren System rollout is on track and is complemented by process improvements aimed at reducing wait times and enhancing operational efficiency within stores. This system is part of a broader strategy to improve customer service and operational throughput, particularly during peak times.

This article first appeared on GuruFocus .