Starbucks' Loyalty Program Goes Mobile MOBILE
Starbucks is leveraging mobile phones to drive sales and improve its much-vaunted loyalty program. In December 2011, the company disclosed that it had successfully handled 26 million transactions via its new mobile payment system, which allows smartphone users to pay for Starbucks' products using their phones. By the end of 2012, Starbucks was processing more than 2 million mobile payments per week, representing between 1 and 2 percent of the company's total sales. The app is also tied directly to Starbucks' loyalty program.
About 3.6 million customers belong to the My Starbucks Rewards program, and 2 million of them have achieved gold status. When My Starbucks customers pay for purchases electronically, their accounts are automatically credited, and any qualifying discounts are applied. Starbucks' loyalty members earn one star for each purchase they make using the company's loyalty card. When they earn 30 stars, they attain gold status. Starbucks believes the success of its mobile loyalty system is due to the convenience it offers its customers. It is simply a faster and easier way for customers to pay. Sources: C. Tode, "Starbucks Caffeinates Mobile Payments With Over 2M Mobile Transactions Per Week," Mobile Commerce Daily, November 5, 2012; E. Morphy, "The Rise of Self-Service Mobile CRM," CRM Buyer, September 4, 2012; C. Tode, "Starbucks Is Worldwide Leader in Mobile Payment Transactions," Mobile Commerce Daily, January 31, 2012; S. Greengard, "Mobile Loyalty Program Scores at Starbucks," Baseline Magazine, December 20, 2011; T. Wasserman, "One in Four Starbucks Transactions Now Done Via Card, Including Mobile," CNN, December 6, 2011; www .starbucks.com, accessed March 19, 2013.
Questions
1. Do you see any disadvantages to Starbucks' mobile loyalty program? Provide specifi c examples to support your answer.
2. Refer to the case regarding the digital wallet in Chapter 8. How does Starbucks' mobile loyalty program fi t in with the concept of the digital wallet?