Amid the post-pandemic economic disruptions that persisted through 2022—like record-high inflation—Starbucks’ foot traffic prevailed. While consumers were largely choosing the most affordable options in dining, Starbucks, the priciest specialty coffee chain, continued attracting visitors. It may have been due to the lipstick effect, wherein consumers hold on to affordable luxury purchases during economic uncertainty. It may have also been because of the beloved Starbucks rewards program, boosting loyalty and adding value for frequent visitors. The Starbucks rewards program has become one of the most-subscribed rewards programs in the quick-service restaurant industry since its introduction in 2008. So, is this program the key to Starbucks’ resilience?
In February of this year, the Starbucks loyalty program underwent major changes that sparked criticism and negative predictions for the company. As the popular program shifted, did consumer foot traffic to Starbucks locations shift as well? If so, how might Starbucks’ business be affected?
Starbucks Rewards Program & Foot Traffic
To better understand the potential impact of Starbucks’ updated rewards program on consumer foot traffic, we analyzed foot traffic to Starbucks and competitors Panera Bread, Peet’s Coffee & Tea, and Dunkin’ Donuts. We looked at weekly foot traffic data for all four companies between January 1, 2023, and March 19, 2023. Starbucks’ rewards program was officially updated with new terms on February 13.
Although foot traffic to Starbucks dipped slightly during the week of the new rewards program launch, foot traffic dipped across the board that week. This suggests that outside factors like Valentine’s Day traditions may have affected foot traffic to the companies we analyzed. Consumers often opt to visit upscale restaurants or dine at home during the week of Valentine’s Day, visiting quick-service chains less than usual.
As of the week of March 19, foot traffic to Starbucks locations increased by 24% from the beginning of the year. It seems that the newly updated rewards program didn’t have any major negative effects on the company’s foot traffic, despite the initial criticism the brand received from some customers.
The other three companies saw growth for this time period as well. Dunkin’ Donuts experienced a 36% increase in foot traffic and Panera Bread experienced a 24% increase. Peet’s saw a 7% rise, the lowest for the time period we analyzed. Since the start of 2023, all four coffee destinations have been attracting more visitors, but perhaps Dunkin’ Donuts’ more affordable pricing has led to greater growth than its competitors. With that said, one thing is for sure this year: specialty coffee isn’t going anywhere, and Starbucks knows it.
Starbucks Rewards Today
Earlier this year, foot traffic to Starbucks and other specialty coffee chains decreased mid-January but quickly rebounded by early February and continued to trend upward through mid-March. Despite Starbucks’ updated rewards program facing widespread criticism for potentially offering less value to customers, the company is projected to continue its growth after record sales in Q1 2023. Given this success, it begs the question: what exactly sparked the criticism for the new rewards program updates in the first place?
The new rewards program terms require double the amount of points to earn a free hot beverage, which was the principal pain point for many critics. However, Starbucks has now made it easier to earn a free iced beverage, decreasing the number of points needed. This was likely a strategic decision as 60% of the company’s sales are iced coffees and other cold drinks. This means that for a large portion of its customer base, Starbucks is actually adding more value than before. With the other changes to the Starbucks rewards membership program, and with some deeper analysis, these changes could bode well for Starbucks.
The last few years have been filled with significant shifts in consumer behavior post-pandemic. Perhaps it was time for Starbucks to make some shifts in order to stay ahead of the curve, and maybe we’ll see other companies follow. Starbucks likely did the necessary, thorough research required to enact its significant changes, and the company must understand its market better than its critics do.
Research Makes Perfect
Starbucks’ new rewards program updates may have seemed like a bad decision at first, but after digging deeper, it’s obvious that the global coffee giant knows what it’s doing.
To establish such significant changes in such a popular loyalty program, thorough market research and planning is needed. To do this, the company may have analyzed consumer data like demographic or purchase data, along with consumer foot traffic analytics and location data, to understand their market on a deep level. Without the understanding of what brings customers to Starbucks locations, this rewards program change may not have been successful. It will be interesting to see how Starbucks’ foot traffic continues to evolve this year, and if this rewards program change will be just one of many 2023 restaurant loyalty initiatives that could emerge.
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