Starbucks Gives Its Rewards Program a Friendly Makevoer

For the past decade, Starbucks (NASDAQ: SBUX) has been pouring a little something extra for its most loyal customers, in the form of free food and drink earned via its Rewards program. For every dollar members spend, they get two "stars" -- points they can eventually redeem for lattes, cookies, and the like.

It's a deal that has already drawn in more than 16 million members, but there was a bit of a catch. Before you could start accruing points for giveaways (125 stars gets you one free item), you had to earn 300 stars -- i.e., spend $150 -- to qualify for "Gold Status."

No more -- as of April 16, the company will began letting new members collect stars toward free rewards from the moment they sign up. That's a big change, but Starbucks regulars might see others going into effect at the same time as even bigger.

"Since introducing Starbucks Rewards ten years ago, we've experienced tremendous growth and continued to evolve the program to meet the changing needs and purchase patterns of our customers," said Starbucks Chief Marketing Officer Matthew Ryan in a press release. "These new updates put choice in the hands of our customers and a personal touch they can only get from Starbucks."

What is being changed?

Under the previous system, there was only the single choice for redeeming rewards -- earn 125 stars and get any size drink or a single pastry. But the revamped rewards program will give members a lot more choices:

  • 25 stars: Extra espresso shot, dairy substitute (soy or coconut milk), or an additional flavor;
  • 50 stars: Brewed hot coffee, hot tea, or select bakery items;
  • 150 stars: Handcrafted drink, hot breakfast, or yogurt parfaits;
  • 200 stars: Lunch sandwich, protein box, or salad;
  • 400 stars: Select merchandise or packaged coffee.

The biggest changes here involve drinks, and they correct a quirk in the old system. Because the same 125 stars could be redeemed for a tall (small) coffee or a venti (large) Frappuccino, it made sense for members to use them only to buy the priciest beverages or food items on the menu.

Under the new system, a user who prefers a simpler brew will be able to use 150 stars for three basic coffee or tea drinks, rather than feeling they are wasting the value if they don't order a higher-priced concoction. This right-sizes the plan to members' individual needs, -- though it slightly raises the reward bar for specialty beverages.

In addition, any member who uses a Starbucks Rewards credit card or a prepaid card will no longer have to worry about their stars expiring, as long as their accounts remain open. Currently, Gold members' stars expire after six months. (Starbucks always applies the oldest stars to a redemption.)

Everyone love free stuff -- but not everyone loves the same free stuff

These tweaks will make the Rewards program pay off sooner for new members. And if customers can earn lower-tier reward after two or three visits, that positive experience of getting a freebie faster could motivate more of them to drop in more often -- a win for the company.

In addition, these changes make the Starbucks program a little more fair for customers who prefer basic coffee or tea. Previously, they got much less value from a redemption compared to customers who worked the system and picked the priciest choices.

The coffee chain may not have done anything major here, but it has made a popular program a little more friendly to new customers and veteran users alike.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.