Why Starbucks Wins at CRM

By: Emily Koba

Customer Relationship Management (CRM) has become a crucial part of the modern marketing strategy. Most commonly, CRM is performed through the use of customer loyalty programs. Ultimately these programs exist so that businesses can see their profits increase by focusing on personal relationships with customers. Countless loyalty programs exist, however according to an article published by Marketing Magazine, Starbucks seems to be a leader when to comes to creating an effective loyalty program that satisfies customers, as well as increases profits.

In our textbook, CRM is defined by its three major objectives. The first is customer acquisition. This means that the “right” customers will be attracted to the business or product, based on known or learned characteristics. In this year’s Q3 results, Starbucks revealed a 28% increase to 10.4 million users of its loyalty program, My Starbucks Rewards. This number included a total of 6.2 million gold members, the highest status level the program has to offer. This is a strong indication of the second major objective of CRM, customer retention. CEO Howard Schultz was quoted saying that the growth of Starbuck’s loyalty program, “continues to be our most important business driver as new members contribute not only short-term increases in revenue and profit, but also long-term loyalty for years to come”. The program creates an incentive for customer retention through its three levels – welcome, green and gold. Users can work their way to gold status through increasing their purchase frequency, which earns them “stars”. These stars can be redeemed for free food and drinks. This increase in purchasing obviously gives way to the third and final objective of CRM, customer profitability. Howard Schultz cited My Starbucks Rewards as major reason for the Q3 18% increase in net revenues, making a new quarterly record of $4.9 billion.

The Starbucks Loyalty Program has seen great success in its mobile payment option at a time when many other mobile payment apps have been struggling. In U.S. Starbucks stores, 20% of transactions are done via the mobile app, resulting in nearly 9 million mobile transactions weekly. The article mentions that the popularity of mobile payments at Starbucks comes as a certain “Network Effect”. Starbucks as already created a sense of intimacy at the counter, and witnessing someone ahead of you in line utilizing mobile payments with ease will ultimately influence you to try it out as well. This is achieved by the high frequency of consumers’ Starbucks visits and their close proximity to other customers.

Even with the proven massive success of the program’s current model, Starbucks still has plans for enhancing it. Over the summer it announced plans for partnerships with outside companies to increase ways that customers can utilize their program membership. The first was with the ride-sharing company Lyft. This deal would allow riders to collect loyalty program stars, while all Lyft drivers would automatically earn gold status. A second plan for partnership was with The New York Times. This would allow loyalty members to view a selection of stories for free via their Starbucks app, as well as earn stars through paid subscriptions to the newspapers.

In conclusion, The Starbucks Loyalty program exemplifies all the components of modern successful CRM. While it has been able to achieve the three objectives of CRM, it has also been able to go above and beyond by paying attention to all the components of customer loyalty. Its plans for partnerships with outside companies successfully integrate Starbucks into other common tasks for consumers besides just getting a cup of coffee. Being able to earn stars through riding in a Lyft or reading the New York Times proves that Starbucks is attentive to their consumers’ lives beyond their Starbucks visits and is therefore customer centric. Considering optimizing ease of purchases through the successful implantation of the mobile payment option shows that Starbucks has a customer mind-set, but is also focused on increasing purchases and profits. Starbucks has clearly considered all aspects of a successful customer relationship management model and will continue to experience record breaking profits and customer growth because of it.

Source: http://www.marketingmag.ca/brands/why-starbucks-is-winning-at-loyalty-152974