Starbucks Explores Blockchain-Based Cross-Brand Rewards to Improve its Loyalty Program
Kevin Johnson, the president and CEO of Starbucks, discussed an upcoming change to the company’s loyalty program that has the potential to transform how rewards work across the restaurant industry during a conference call with analysts on Thursday (October 28). The change involves linking the coffeehouse’s loyalty program with the rewards programs of other companies.
To be sure, the classic rewards approach — rewarding customers who buy menu items with additional free or reduced menu items from the same restaurant — has proven to be successful for the world’s biggest coffeehouse chain. In the United States, the digital sales mix reached 51 percent in the fourth quarter, beating the majority of rivals by a wide margin.
As a result, according to conclusions by the July/August edition of PYMNTS’ Delivering on Restaurant Rewards report, which was created in collaboration with Paytronix, 78 percent of restaurant customers want the chance to acquire free food, and two-thirds wish access to personalized coupons or discounts. This paradigm, on the other hand, restricts the amount of value that a restaurant may supply.
We’re looking at ways to tokenize Stars and make it possible for other merchants to link their rewards programs to Starbucks Rewards using blockchain or other new technologies, Johnson told investors. The ability to trade value between brands, participate in more tailored experiences, improve digital services, and swap other loyalty points for Starbucks Stars will be enabled as a result of this.
In accordance with the findings of PYMNTS’ research, brands that stand out from the crowd are those that can meet consumers’ daily needs across pillars of the connected economy — including how consumers work, pay and are compensated, shop and eat while traveling, bank while traveling, connect with others while traveling, stay healthy while traveling, and live.
The classic loyalty model is based on just two pillars: the way customers eat (or drink) and the way they pay for their purchases. Starbucks is exploring new ways to utilize its rewards program to promote purchases by giving value across a variety of different pillars as part of its new project.
Citing an existing rewards exchange, Johnson underscored the coffeehouse’s collaboration with Air Canada, which began in March and allows members of the airline’s loyalty program to “double-dip” on rewards by making purchases at participating Starbucks locations, garnering loyalty points for both the airline and the coffeehouse.
In this case, the benefits are extended to the factor of how customers travel, which is a plus. The CEO went on to say that over the next 12 months, the business would operate its first loyalty exchange with another consumer-facing company.
In addition, Johnson stated that this method will serve as the basis for a more aspirational notion for new, contemporary payment rails that would match payment expenditures with the value gained by consumers and merchants in the future.
“It is our intention to be at the vanguard of this disruptive innovation, which we expect to take place over the next several years.” Johnson also mentioned the company’s partnership with Bakkt, which enables rewards members to pay with cryptocurrencies by loading their Starbucks cards with bitcoin, Ethereum, and other digital currencies. This is another example of how blockchain technology is being used to improve the company’s loyalty program.
During the previous year, the chain’s 90-day active member count increased by 28 percent, reaching 24.8 million members. Starbucks is ranked third in PYMNTS’ Provider Ranking of Mobile Order-Ahead Apps, which takes into consideration factors such as loyalty and rewards program integrations, the number of active users each month, the average length of time people spend on the app, and the range of various ordering options. The company is right behind Domino’s and Dunkin’ Donuts, which are locked for first place.