Q1 Active U.S. Starbucks® Rewards Membership Reaches 34.3 Million, Up 13% Over Prior Year. Q1 U.S. Card Loads Reaches a Record $3.6 Billion; Ranking as #2 U.S. Brand in Holiday Gift Card Activations.
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StarbucksStarbucks is leveraging its artificial intelligence (AI) and data-driven initiatives to bolster the effectiveness of its rewards program, aiming to incentivize customers to increase spending and frequency of visits. In a conference call accompanying the release of Starbucks’ first-quarter fiscal 2024 earnings report, CEO Laxman Narasimhan provided insights into the successful strategies employed to extract greater value from Starbucks Rewards members.
Narasimhan highlighted the implementation of targeted offers in the United States, specifically designed to attract occasional customers into the Starbucks loyalty program. Over time, Starbucks Rewards members tend to develop a routine and long-term relationship with the brand, leading to increased ticket sizes and transaction frequency. The company also activated new capabilities within its proprietary Deep Brew data analytics and AI tool, allowing for the identification and incentivization of specific cohorts within the rewards program.
During 1Q 2024 Starbucks financial results call, Narasimhan commented: “In the US, we implemented targeted offers aimed at bringing our occasional customers into our loyalty program. As we’ve seen over time, Starbucks Rewards members develop a routinized long-term relationship with our brand that increases both ticket and transactions. Additionally, we activated new capabilities within our proprietary deep Deep Brew data analytics and AI tool to identify and incentivize specific Rewards members cohorts. Finally, we are leaning further into our brand marketing and factual narrative and social media to engage these audiences where they are. We’ve already seen the positive impact of these new initiatives with our more occasional customers beginning to rebound in December.”
Consumer preferences for personalized deals and discounts have played a pivotal role in Starbucks’ approach. Starbucks actively utilizes data analytics and AI to tailor offers to individual customer preferences. A recent PYMNTS Intelligence report revealed that 71% of surveyed U.S. consumers have received personalized offers and are interested in them, emphasizing the importance of personalized incentives.
During the quarter, Starbucks observed a significant surge in its rewards program’s 90-day active member base in the U.S., reaching 34.3 million, marking a notable 13% year-over-year increase and welcoming around 4 million new members. To further enhance engagement, Starbucks is strategically entering into rewards partnerships, tapping into the established audiences of partner companies in various industries. Recently, the company announced a collaboration with Bank of America, adding another layer to its rewards ecosystem.
The Bank of America partnership is part of Starbucks’ broader strategy to expand and diversify its rewards program, offering more value to its loyal customer base. Narasimhan expressed enthusiasm about this collaboration, highlighting it as one of two new Starbucks Rewards partnerships planned for rollout in the current year. Starbucks has previously found success in similar partnerships, such as its existing rewards collaboration with Delta Air Line’s SkyMiles program.
The move towards digitalization and increased engagement through loyalty programs is not unique to Starbucks. Many consumers actively participate in restaurant loyalty programs, with 51% of respondents in a recent study by PYMNTS Intelligence indicating their use of such programs. Additionally, consumers are increasingly interacting with restaurants through digital channels, as seen in the growing trend of ordering food exclusively using internet-connected devices.
Starbucks has capitalized on this trend, reporting increased engagement across digital channels. Mobile order and pay transactions surpassed a record-high 30% of all transactions during the quarter, demonstrating the growing preference for digital interactions. Furthermore, Starbucks reduced downtime associated with mobile order and pay by half, enhancing the overall customer experience.
The company also reported remarkable results in its U.S. delivery business, achieving nearly 80% year-over-year growth. This growth was attributed to an expanded partnership with DoorDash, emphasizing the potential for further incremental growth, as delivery currently represents only 2% of Starbucks’ total transactions.
In summary, Starbucks’ strategic use of AI, data analytics, and targeted loyalty programs has proven successful in not only retaining its customer base but also driving increased spending and frequency of visits. The company’s focus on personalized incentives, digital engagement, and strategic partnerships reflects a broader industry trend toward leveraging technology to enhance the overall customer experience and loyalty.
Source: Starbucks
