Starbucks Consumers Are in for a Rewarding Experience

by on Mar 07, 2018

With the average American spending $1,100 annually on coffee and more Americans than ever gravitating toward gourmet coffee (up more than 350% since 1999), the growing prominence of specialty brews is no secret. Consumers are prioritizing getting their caffeine fix over even important budget items like investing, with one-third of Americans spending more on coffee than investing each week.

In an attempt to ensure that consumers turn to Starbucks for their coffee each morning, the company partnered with Chase to launch a credit card, effectively creating a reward program unlike any other that largely targets Millennials, who frequently open multiple cards simply to capitalize on the unique rewards they present.

With a $49 annual fee, the card is designed for everyday coffee drinkers. Utilizing the company’s existing rewards structure, card holders are automatically enrolled in the Starbucks Rewards program and given Gold Status, meaning they receive a free food or drink after earning 125 stars. Bumping up the existing program’s accrual rate of two stars per one dollar spent, card holders now receive three stars for every one dollar spent, if the credit card is used to digitally load money onto the Starbucks app. They also receive one star for every four dollars spent elsewhere. Additional perks include an easily attainable 2,500-point reward (equivalent to more than 20 free food or drink items) after card holders spend $500 or more in the first three months as well as eight annual free Barista Picks food and drink items. The card charges a variable APR of 17.24% to 24.24%.

Starbucks Card Rewards

The firm does an excellent job of marketing the card, promoting it on the mobile app and site homepage. A dedicated product page details all rewards and offers a link to apply. Commendably, the product page lists sample expenditures and their total reward value to illustrate the card’s benefits before the application. Chase also promotes the card on the Credit Cards section of its public site, offering an Apply Now link as well as all card details.

Starbucks Credit Card Page (Truncated)

Chase’s Starbucks Card Promotion

The card will likely be a hit with those loyal customers who drink Starbucks coffee every day, although the $49 annual fee might deter the standard coffee drinker. After cashing in the initial spending bonus, consumers will have to spend about $24 a week (about $1,250 a year) at Starbucks to make the card worth it, as they would earn about 10 free items (assuming they use the rewards on an item valued at $5). Additionally, some coffee consumers may turn away from this card due to the comparatively limited scope of the rewards—all stars must be redeemed for food or drink—as well as the fact that for optimal star earning, all transactions must be performed through the app or a registered gift card. Starbucks and Chase should consider linking the credit card directly to Starbucks Rewards, so customers do not have to reload to app with the credit card prior to making a purchase.