Starbucks’ New Loyalty Program Receives Positive Remarks From CEO Howard Schultz

Despite the influx of customer complaints, Starbucks Corporation said Thursday that its new-and-improved loyalty program was off to a good start and will ultimately help the chain build its expanding digital ecosystem to propel the business forward, reports National Restaurant News.

Approximately 1 million customers joined the loyalty program during the quarter, an increase of eight percent, to more than 12 million users, Starbucks said in a call with Wall Street analysts.

Starbucks reported a seven percent increase in same-store sales for the Americas region during the March 27-ended second quarter. Net earnings in the quarter grew 16 percent, to $575.1 million, or 39 cents per share, compared with $494.9 million, or 33 cents per share, a year ago.

The company launched the new loyalty program on April 12, rewarding customers with stars based on spending rather than transactions. Many worried that the move would alienate lower-spending customers, but according to Starbucks Executive Vice President and Global Chief Strategy Officer, Matthew Ryan, spending per member was up across the board within the first week.

"We are not seeing any of the noise that has been speculated," Ryan said in a statement.

Ryan also acknowledged that the loyalty changes would benefit certain customers. Most will end up "more or less the same," and a small minority of people will earn rewards a bit slower.

But "all three of those cohorts are up in terms of spend so far," he said.

Starbucks President and Chief Operating Officer, Kevin Johnson, said the changes level the playing field by rewarding both transaction frequency and total spending. The move was intended to speed throughput while putting a stop to transaction splitting – customers would ask baristas to ring up purchases separately in order to earn more rewards.

During the first week after the new program went into effect, the coffee giant added 280,000 new rewards members, Johnson told NRN.

Starbucks Chairman and CEO, Howard Schultz, said that the road ahead may not be entirely smooth for the new loyalty program, but it lays the foundation for the chains rollout later this year or a prepaid, re-loadable debit card that will allow loyalty members to earn stars with purchases wherever Visa is accepted.

"We're building something so enduring and so unique that I think it's going to be one of the most significant changes to the equity of the brand, customer experience," Schultz said in a statement.

"The ubiquity of people using that debit card and the only way they can bring back stars and get rewards is at Starbucks, is going to be a significant flywheel effect on our overall business."

According to NRN, the loyalty program and the stars-earning debit card are part of a growing digital ecosystem Starbucks has been working on to build over the past few years as more Starbucks' customers across the U.S. embrace digital ordering and payment.

In addition to improving its digital presence, Starbucks is reaching out and moving on to new horizons. On April 21, Starbucks opened its very first location in South Africa.

Customers lined up at the doors at 6 a.m. for the grand opening in Johannesburg. According to CEO of Taste Holdings, Carlo Gonzaga, the company plans on opening 12 to 15 more stores in South Africa within the next two years.

[Photo by Stephen Brashear/Getty Images]