Back in November 2008, Starbucks launched a new “membership rewards” program called Starbucks Gold. Basically, it’s a card that costs $25 a year and gives you 10% off most everyday purchases as well as a free drink for registering and one on your birthday. Oh, and you get this nifty little black card with a gold cup in the middle (see image to the left).
Given that I do marketing for a living, I thought I would dive into the idea of the Starbucks card and see what impact it is having on Starbucks. Here’s what I found.
The idea is brilliant for Starbucks
Starbucks gets $25 a year for people to carry around a card that gives them 10% off. If you do the math, that means you need to spend $250/year to breakeven; which equates to 1.2 purchases a week at an average of $4, for an entire year. Unless you’re a die-hard fan, that is not likely. However, after doing some research for this post, apparently, I under estimate the number of people that really love Starbucks.
According to a recent article in the Seattle Times, Starbucks has sold over 750,000 Gold cards since November 2008. Wow. That’s $1,875,000 in new and immediate revenue with an almost guarantee that those people will spend $250 this year, a total of $187,500,000, to justify the annual expense. Of course, it’s debatable whether all of these card holders will meet this threshold; time will tell. But it does beg the question, why don’t more companies follow this model?
One that does. One that doesn’t.
Amazon.com offers Prime, the $79 annual membership that gives you free two-day shipping all warehoused products. I personally have bought into this program for the past two years and plan on renewing it. As a result, I do a lot of my online shopping here, by default, and have saved hundreds of dollars in shipping costs.
Consider this. Borders Books currently offers a very confusing “Borders Reward” card. According to a 2008 article, they have over 20M people registered. If they converted 10% of those members to a $25 reward program that gives a 10% discount on every purchase, they could see an immediate influx of $50,000,000 and a yearly almost-guarantee of $500,000,000. Quick, someone call Borders and tell them they don’t have to file bankruptcy.
So what’s the point?
- Create a good product or service.
- Spend years building customer loyalty and brand awareness.
- Then offer a reward program, just because you can, and you’ll get even more money from your already loyal fan/client base.
So the practical question is, how do you reward your clients and customers? For me (Motiveight), I offer a $250 credit towards a promotional product order for every $5000 spent in products or services. Is it good enough? What do you think?
What do you do for your fan/followers/client base?
PS. I did buy a Starbucks Gold card recently. I’ve already earned back $10 in savings.