I'm sorry, gang. I didn't realize how long it's been since my last post! How time flies when you're having fun, right?
I've had a pretty full end of Summer between family and work. I spent eight days in Chicago for the 2013 International Manufacturing Technology Show. It was AMAZING. Held every other year, I've consulted for them now for something like 20 years. This year's event was OFF THE CHARTS successful! It was HUGE. It was packed with attendees and exhibitors. It had an abundance of awesome, value-add experiences for everybody.
The big thing was attendance was up over 20% from the previous show. This is a big deal because it's all about manufacturing. Ultimately, manufacturing drives the economy, so this was great news. I think we're picking up steam.
After returning from Chicago I received an email from one of my way cool BFFs, Rikka. What a cool name, too. If I had a name like Rikka, I would just go by that one name, like Madonna, Liberace, and Jell-O! I don't even know if Rikka is a guy or a gal, but it doesn't matter. Great name.
Anyway, Rikka sent along a story about last week's announced changes to the Starbucks Rewards program. Apparently, they've pulled a bit of a Netflix on their most valuable customers. Rikka sent along the link to the announcement page, so I could read it and the reactions from customers.
In a nutshell, Starbucks has "added" two benefits:
- Gold Level members now earn a free reward (food or drink) after 12 transactions, instead of 15. To reach Gold you must collect 30 Stars, i.e. make 30 purchases within a 12-month period. The rest of us must settle for our once-a-year reward on our birthday.
- Rewards will now be digitally loaded to your Rewards Card and can be used via the Starbucks Card mobile app.
- There is no #3.
How to take advantage of these amazing new benefits? Here's what the website explains:
1. Visit any participating company-operated store
2. Tell the barista you have a free reward that you want to use (that way you get to choose when you redeem your reward)
3. Present your registered Starbucks Card (or scan your registered Card on the Starbucks Card mobile app).
And voila, your drink or food item on your ticket will be free.
I especially like the Voila touch.
As I'm sure you can imagine, something else must go to make room for these incredible new benefits:
To add these benefits, as well as to continue to invest in future innovations, we are saying goodbye to a few benefits. Beginning on Oct. 16, we will no longer offer free syrups and soy, or a free tall beverage with a whole bean purchase.
But Starbucks will still keep other amazing benefits:
We are keeping many of the benefits our customers have appreciated – including a free birthday beverage (or a free food item), free refills for coffee and tea and a personalized Gold card for our Gold members.
You can have my personalized Gold Card when you pry it from my cold, dead hand.
Unfortunately, an awful lot of ungrateful Starbucks customers don't appreciate these changes. Specifically, there are 714 Comments on that page. I looked very quickly through them and counted just the negative ones. I came up with 714. Here is a sampling:
Interestingly, Matthew G hasn't responded to anybody.
I googled the topic and found a story on Wired.com. I particularly liked the photo caption: "Membership has its privileges, but not as many as before." Damn, wish I'd thought of that one.
All seriousness aside, I guess I'm getting used to this type of attitude about customers (and voters). I don't get pillows on American Airlines anymore, even though I have five million miles. We're paying for our baggage to fly on almost all airlines. Facebook doesn't quite share everything in their IPO. Netflix…well, it's still Netflix. And don't even get me started on Comcast and AT&T.
Is it fair that Starbucks pulls the plug on immediate rewards, like flavors, soy, and a free drink with bean purchase? Actually, it just doesn't matter if we think it's unfair. It's an irrelevant question. Starbucks has the right to do whatever it wants to do as long as it's not illegal. They have the right to give us rewards and they have the right to take them away. When I wrote about Netflix's dumb decisions, that's all they were…dumb. And I would say, in this instance, Starbucks is dumb, too.
However, I think there's something much more fundamental here and it makes for a great business lesson for all of us. We think Starbucks has made a dumb move, but in reality, Starbucks has simply shown us its true colors. This was clearly a financial decision. The cost of giving Gold Rewards members a slightly shorter path to a free reward is more than offset by the savings in free flavor, free soy, and the free cup of coffee with bean purchase. It doesn't take a rocket scientist to figure that out.
Companies, like Starbucks, Netflix, American Airlines, and too many more to count, make decisions based on bottom line results, not how we feel about them. Starbucks and gang are not our friends. They show that through decisions, like the new Rewards program and the condescending message sent out by Matthew G, their Director of Global Brand Loyalty. He doesn't even give us his full name, unless maybe he's Kenny's brother.
The basic premise for Two Hat Marketing is this: the dumbest thing we can do in business is think like a marketer. Marketers are people, like Matthew G, who put on the marketer's hat, then discombobulate the English language and spin their message to make it sound like they're doing great things for the customer. I'll bet MG and his other last-name-challenged cohorts laughed and giggled all the way through that copywriting session.
Are you treating your customers the same as Starbucks? Are you putting on your Marketer's Hat in the office, making similar decisions, sending out similar insulting circumlocution, and feeling smug about it? Or do you take off that hat and put on your customer's, because you truly want to do right by them. You want to make as much profit as possible, to be sure, but not at the cost of insulting the very people who make that profit possible.
Which hat are you wearing today?
While I appreciated the wit that I’ve come to like about your marketing approach and your blog, I appreciated the message you closed with twice as much. Thank you for writing on this topic.
Also, it’s wonderful to hear about your time at IMTS. I was involved in that gargantuan trade show back in 2008 and loved every minute of it. It was the pre-show exhibitor function in 2010 that introduced me to you and all your marketing knowledge.
By the way, Rikka is a girl. 🙂
Starbucks not my friend?!! OMG!
Well, Steve, I guess that validates my decision many months ago to only go to Starbucks when I’m out of town and don’t know of a better place.
Recently, I used my Starbucks app to guide me via taxi to a non-existent Starbucks store across Bucharest. Was my informing the company of that fact worth a free cup of coffee? Nooooo…
Thanks for the post! Got me thinking about my own business. Where have we done similar things?
Excellent bit – thank you for your clarity. Treat customers like KINGS (or QUEENS).
They pay your salary – don’t ever forget that.
director, Global Brand Loyalty
Thanks for the great write up. I just reached “gold” and was kind of excited (i cannt drink milk. Free soy is great). Now I just feel that was a waste of time. Back to local coffee!
Well, if marketing is everything you do to to make your product the obvious and only choice when your customer is ready to buy, I think the folks at Starbucks left their marketing hats in the closet. IMHO, just because accountants can type copy, it doesn’t make them marketers.
As always, thank you for your article. I did not know that refills were free at Starbucks. I have a gold card and have always been charged! In our business, we help to promote our customers’ businesses (for free) because by promoting them, we are also promoting ourselves. Their success is ours as well. But we’re a small business, we love what we do, and we appreciate our customers. Large businesses appreciate money. PS – thanks for the orange shoelaces!
Very similar to the changes Air Canada is making with their “Elite” program. Since I can remember (and I have been a member since 1992) there has been only 1 level of Elite (or Gold status when travelling on Star Alliance partner airlines) Now there are 3 levels of Elite.
– Elite 35 (the old standard) is now really a silver membership with several perks removed)
– Elite 50 is close to the old benefit package but with a couple of nice options removed (like free access to preferred seating in economy) and it is now the basic Gold membership.
-Elite 75 is now the one with the full benefits of the original Elite status……what does this mean? Instead of 35 flights or 35,000 status miles you only have to do 75 flights or 75,000 status miles to keep all of the same benefits.
Let’s see if my math is correct. 75 is over double the amount of 35. That means its a bit more than twice the travel to “qualify” for the same frequent flyer perks. Enough to make this frequent flyer and 10 year Elite member go to FiveBucks for a Tall Americano.
I live in small town America and I don’t have the luxury of having a Starbucks close by to go often enough to even justify any membership. But sometimes decisions are handed down from corporate management and the marketing of that decision is left to the marketer to inform the general public. The marketing team has to somehow create a way to tell the public that this is a good decision so they don’t lose customers to the competition. The problem is that corporate management (for the most part) is stuck in the old way of thinking how business is done. You used to be able to sugar coat these types of decisions and not hear much feedback. In today’s digital and connected world, corporations need to be transparent because people are smart enough to see right through the marketing speak.
I don’t know if Matthew G was part of the decision process or not, but I’m sure the marketing team was directed to make this sound wonderful despite taking something away. It happens at a lot of companies and a scenario can go something like this:
Corp. Manager: “We are going to sell a brand new widget. Come up with a way to make a splash about it.”
Marketer: “How is it different from our competition?”
Corp. Manager: “It’s the same as our competition. It’s just new to us.”
How do you market against your competition in a situation like that? Yes, there are ways, but more and more companies are copying the competition because something is “hot” right now, and it gets to be a marketing director’s nightmare coming up with the jargon to tell people it’s different because it has OUR name on it.
I got a little sidetracked, but my point is that companies need to understand that bean counters should be there to count beans, and taking away something customers come to expect WILL result in the bean counters having less beans to count.
Thanks for sharing this post with the BizSugar community. Certainly companies like Starbucks need to sometimes make business decisions to minimize costs and maximize profits, but customers can spot value and see through smoke screens. Long term these decisions may still have an effect, especially if eventually more palatable alternatives present themselves.
Many great comments about the Starbucks story. Thanks to all for participating in this discussion. It also struck me yesterday that the NFL story of using replacement referees for the first three weeks of the season showed a similar attitude towards customers. Considering the fact the NFL and its players garner billions of dollars annually, the argument of giving a few dozen referees a raise from $160,000/yr to $186,000/yr, plus some other similar low cost demands seems petty. More important it shows the NFL has low opinion of its true customers.
All I have to say is….if you don’t like it, stop going there. If enough people stop going, they may change their ways 🙂 Starbucks is too expensive anyway, but they do make amazing coffee!