Starbucks & Dunkin’ Revisit Loyalty Programs

Reigning in Rewards

In response to the economic climate, popular brands from Starbucks (SBUX) to Dunkin’ (DNKN) to Sephora (LVMH) are reevaluating their customer reward programs. These companies, once renowned for enticing offers like birthday freebies and discounts, are now recalibrating their generosity, raising eyebrows among their customer base.

Loyalty programs are designed to incentivize customer spending and forge a long-term relationship between the customer and the brand. This change in strategy, though subtle, marks a significant shift in the customer-brand dynamic, as companies attempt a delicate balancing act between maintaining both customer loyalty and profits.

Bargains to Boundaries

These companies once offered generous birthday gifts to their loyal customers. Nowadays, they’re offering the corporate equivalent of a birthday text.

Starbucks scaled down the time allowance for their birthday perks in 2018, making them only applicable on the customer’s actual birthday, rather than their whole birth month. More recently, Dunkin’ replaced its customary free birthday drink with an offer of triple loyalty points.

It’s not just coffee shops taking rewards off the menu. Sephora imposed a $25 minimum purchase requirement for online customers wishing to claim their free birthday gift and 250 loyalty points. And Red Robin (RRGB) added a dine-in-only rule and a $4.99 minimum purchase requirement for customers to avail their free birthday burger.

Perks to Profits

As companies grapple with the impacts of inflation and changing consumer behaviors, experts predict further changes to customer loyalty programs as profits take the driver seat.

For customers, this may well mean a further reduction in familiar perks. But businesses claim this is just an exploring into finding more financially sustainable ways to drive engagement and reward loyalty. So it could mean innovative new rewards as well.

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