How Loyalty Programs Choose Metrics So Nothing is Ever a Failure

Of course brands are going to say what they are doing is a success, whether the argument holds or not.
American said basic economy was working exactly the way they wanted until the moment they eliminated the carry on restriction and said they were losing sales to Delta.

Hyatt said World of Hyatt was a huge success because membership signups were up. Only World of Hyatt changed nothing whatsoever for general members, only elite members. And when program members pay a couple percentage points less for rooms, people join the program.

During United’s earnings call they pointed to double digit growth in their credit card business. That doesn’t surprise – acquisitions are up compared to when they didn’t do on board card acquisition, and they’re up during a time they offered record high public acquisition bonuses. Oddly they’re pointing out how successful the program is — right as they’re changing how it works — a strange time to upend the program indeed if everything is great.

In 2016 Starbucks Rewards moved to revenue-based earning which was supposed to better reward big spenders. Now those big spenders are finding their points (stars) are worth less as they’ve just moved closer to revenue-based redemption.

The coffee chain was asked about devaluing their program on their earnings call and they claimed customers don’t mind because:

  • Fewer customers picked up the phone to call and complain than they had anticipated

  • Fewer customers are complaining about this devaluation than their 2016 devaluation

Notice what Starbucks is doing here. First, they’re defining the bar for customer unhappiness. There’s an unstated level of unhappiness that they aren’t hitting therefore it’s a success. Since no matter how bad things are with your customers they can always be worse, everything is a win.

In this case the standard is whether or not customers of an app-based loyalty program picked up the phone to call to voice their displeasure, which is exactly how you wouldn’t expect complaints to show up. If you want to declare victory, note that your customers aren’t complaining using venues they do not use much generally.

Ultimately Starbucks is correct though that this devaluation isn’t nearly as bad as the last one. And since the rewards are already so modest, earning even fewer ducats as a rebate on coffee spend isn’t going to affect my buying choices one way or the other. Which is a strange direction to go for a program that only recently re-launched its co-brand credit card.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I haven’t went into a Starbucks since 2016. I’ve saved a lot of money, redirecting it to wine, women and song.

  2. Personally I LOVE the changes to Starbucks program. Yes in the past I could get a breakfast sandwich (less than $4) for 125 points and now it is 150. However a Venti coffee (which I typically get) was also 125. Now my Venti coffee ($3) is 50 so not only can I get what I want for fewer points but I get more value (125 for $4 vs 50 for $3).

    Gary – PLEASE quit Repeating things solely for clicks and to stir stuff up. This actually DOES work to the benefit of many participants like myself.

  3. Alan,

    What’s your actual beef with Gary’s post? The BusinessInsider link he quoted very clearly said they were monitoring *phone calls* about complaints, and using that as a metric for unhappiness. By that metric, Gary’s blog and every post is a smashing success because *nobody* calls him to complain!

    Gary’s point is valid, and stands on its face — in this day and age, every corporate puff piece always calls things a success, whether it is or not. They even get to invent their own metric by which success is measured. Heck, reference his post the other day about all of the AA folk getting bonuses for missing performance targets!

    I’m fine with this post, even if you’re not. Perhaps you should call him to complain…

  4. @Alan, also, it has been clearly demonstrated in multiple articles that the new program is significantly worse for big spenders, who buy more expensive items, like me. In my case, a star was worth 4.4 cents to me before and is worth 2.7 cents now. That’s quite a negative change.
    I’m mad but it never occurred to me to call Starbucks. Who does that todsy?!

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