Starbucks Reinvention Plan Marries Digital and Physical Experiences With Web3 Loyalty
Starbucks Reinvention Plan, announced last fall, detailed a five-phase approach seeking to "touch and elevate" the end-to-end Starbucks experience, and its latest earnings shows signs the overhaul is already paying off.
While performing just slightly under analysts' predictions, Q1 of 2023 still proved to be a strong quarter for the company, which reported record quarterly sales of $8.7 billion — up 8% over last year.
Much of this, the company said, has to do with Starbucks’ strategic investments, which are helping to make the brand more relevant globally, “and positioning us to successfully execute our ambitious growth agenda,” said Howard Schultz, Starbucks’ outgoing CEO, during an investors call this week.
Experiential Benefits Via Loyalty
In focus is loyalty. Starbucks’ loyalty program has continued to grow, presenting the question: Where does the company go from here? The company remains optimistic about continued opportunities in the loyalty space, particularly those related to experiential benefits.
The Starbucks Rewards membership program currently has over 30 million active members — an increase of 4 million members, or 15%, since last year. Members have also been driving the majority of traffic, resulting in a record 56% of transactions (up 3% over last year).
Recent changes that have proven successful include updates to the Starbucks Rewards redemption tiers, as well as the launch of Starbucks Rewards Odyssey in beta to select members on December 8, 2022.
“Odyssey members have been invited to partake in multiple Odyssey journeys, driving increased engagement and loyalty from our members and now ownership in their loyalty experience,” said Brady Brewer, Starbucks’ executive vice president, chief marketing officer, during the call.
Odyssey integrates NFTs with Starbucks’ loyalty program to create an accessible Web3 community that brings the brand to life in a new way, according to the company. It allows members to earn and buy digital collectible stamps (NFTs) that unlock access to new, immersive coffee experiences.
This investment, along with other loyalty-related approaches — including special events and immersive Starbucks Reserve stores — merge digital and traditional experiences to “make people feel genuinely valued for being their Starbucks customer,” said Brewer.
Brewer said she sees a lot of opportunity left within Starbucks Rewards, with an incredible roadmap ahead.
Workforce Investments
Also, the company has seen success across partner retention. Schultz pointed to more stable store environments with improved turnover rates, which has lowered costs related to hiring and training, while also showing accelerated productivity growth, speed of service, and partner customer experience scores.
“Cross-functional teams continue to successfully execute against our reinvention initiatives and our reinvention investments are having a measurable positive impact on our business,” added Schultz, “evidenced by an 8% improvement in U.S. hourly retail partner turnover.”
What specific investments have prompted this labor transformation? Fourth-quarter initiatives in 2022 have paved the way, and they include a new incentivized savings program in partnership with Fidelity, an increase in sick time accrual ratios for partners; an updated family expansion reimbursement program, as well as the pilot of a new partner app that will ultimately integrate across 270,000 U.S. and Canada company-owned operated store partners.
The app gathers all employee benefits and scheduling capabilities under a single, mobile platform.
“Our Q1 performance demonstrates that our reinvention plan investments are the right investments that we are making and are delivering results and creating shareholder value,” said Schultz.
- More About Reinvention
- Creating a unified global company
- Radically improving the in-store partner experience
- Reimagining the store operating model
- Reinvention around what customer connection means
- Redesigning the construct of what it means to be a partner at Starbucks
Incoming CEO Laxman Narasimhan, who most recently served as chief executive officer of Reckitt, plans to continue on with Starbucks Reinvention strategy. He takes over for Schultz on April 1.
“Only weeks from now, Lax will take full control of the company and together with our leadership team, bring reinvention to life, guide Starbucks into a new era of growth, and begin writing the next chapters of our storied history. I cannot be more confident that Lax is the right CEO at the right time for Starbucks.” — Howard Schultz
