How Starbucks is Leveraging AI to Increase Customer Loyalty

Starbucks Rewards is using AI to show strong growth

Photo by Arnold Choppala on Unsplash

Happy Thursday, y’all! Hope everyone is having a good week. Today I wanted to take a closer look at Starbucks Rewards, one of the most successful and popular loyalty programs. I think Rewards merits a closer look because the program has recently made some changes that were a bit controversial, but group has continued unabated. Let’s take a closer look at why.

First, the numbers:

Starbucks Rewards has roughly 33 million members as of Q2 numbers according to the company. That represents a 6% year to year growth among members with 90 days of activity. Now it is worth noting that growth has slowed, it was 15% for the same period in 2023. Still, growth is growth.

Speaking on 2023 numbers, Starbucks’ CEO Laxman Narasimhan noted: “Rewards members accounted for 57% of U.S. company operating revenue in Q2 which marks the highest contribution on record and represents growth 3% on a year-over0year basis.”

So what’s the controversy with Starbucks Rewards?

Early last year, Starbucks Rewards adjusted the rewards structure to basically call for more reward points to get the same discounts and items. It seems inflation has even come to loyalty programs.

This growth suggests that, even as consumers chafe against reduced discounts, they will still take their rewards where they can. Starbucks Reward’s changes, implemented in February, included doubling the number of points, or Stars, it takes to earn brewed hot coffee, bakery items and hot tea while decreasing by a third the number of stars required to earn iced coffee and iced tea. Overall, consumers have generally understood these changes (per their complaints on public platforms) to be a devaluation.

Still, the loyalty program continues to grow. I think that growth and be attributed to at least two minor tweaks that Starbucks made in its loyalty strategy. Let’s look at those now: