Photo: Starbucks
Starbucks shifts happy hour to invite-only
Starbucks has brought back its popular afternoon happy hour with deals on Frappuccinos and extended the program to more items. The catch: it’s now invite only.
Launched in 2010, the happy hour program offering half-off Frappuccinos from 3 p.m. to 6 p.m. typically ran during the first two weeks of May. But baristas had complained about the program since making Frappuccinos is time-intensive and customers regularly complained about the long waits.
Starbucks also told analysts last July that the promotion it ran last May had “a lower-than-expected lift in non-discounted Frappuccino beverages following happy hour” and an overhaul of the program was signaled to stores in January.
Among the changes:
- More beverages: The program now includes special offers on select beverages, including espresso, iced tea and Frappuccino. The first deal was offered last Thursday for half-price off expresso;
- Year-round: Instead of taking place during the first two weeks of May, the offers extend through the year. Last Thursday’s lasted only one day. Future offers and timings may vary;
- Extends into night: The program now runs from 3:00 p.m. to close instead of 3:00 p.m. until 6:00 p.m.
- Invite only: While the former happy hour was open to anyone, the updated program requires an invite code. Starbucks Reward members automatically receive the invites. Non-members can go to Starbucks.com/HappyHour to get an invite with a code.
Starbucks said the invite-only change “is part of the company’s ongoing strategy to strengthen digitally enabled customer relationships beyond its Starbucks Rewards loyalty program,” which has nearly 15 million active users. Non-members must provide an e-mail address or load Starbucks’ mobile app and join up to receive offers.
“With nearly 100 million customers in our stores every week, we’re looking for more opportunities to engage directly and personally, providing them with special benefits and offers that are meaningful,” said Matt Ryan, EVP and chief strategy officer for Starbucks.
Earlier last week, Starbucks enabled all customers to use mobile pay after previously limiting it to Rewards members.
- Happy Hour Returns to Starbucks – Starbucks
- Happy Hour Starbucks – Starbucks
- Starbucks is bringing back a promotion that baristas hate — but there’s a catch – Business Insider
- Starbucks’ Frappuccino Happy Hours Are Going To Change In A Big Way – Delish
- Starbucks Happy Hour Is Coming Back with More Than Just Frappuccinos – Food And Wine
- Starbucks to skip ‘Frappuccino Happy Hour’ in U.S. this summer – Reuters
Discussion Questions
DISCUSSION QUESTIONS: How do you assess the changes Starbucks has made to its happy hour program? Is incentivizing digital interactions just as or more important at this point as incentivizing spend frequency?
Poll
BrainTrust
David Weinand
Chief Customer Officer, Incisiv
Jasmine Glasheen
Content Marketing Manager, Surefront
While the pretense of exclusivity has been a marketing ploy since the beginning of time, I just don’t get it. Don’t these people have jobs? Families? A gym to go to? Why is saving a couple of bucks on over-priced iced tea an “incentive?”
And while I’m raising questions … what the heck is “incentivizing digital interaction?” Really?
It’s not just about saving the money, it’s about the consumer getting a deal. It works for airlines, supermarkets, credit cards and restaurants — it will work for Starbucks too. The more email addresses, app downloads and app opens they have, the more chances they have to communicate with their customer to drive brand building and sales from outside their four walls. The move to make a general promotion one that will both drive deeper engagements and support workability with employees is a good one.
On the one hand, if they market this correctly the “club” or “community” aspect of the invite-only model can work. People’s desire to be a part of the in-crowd, especially for a premium brand like Starbucks, can make this model.
On the other hand, if not marketed properly this will fail, as it requires extra steps for redemption.
Getting more people into the store in the afternoon is indeed a difficult challenge, and it’s clear that Starbucks is trying to be as creative as possible with their outreach efforts. I like the idea of requiring a digital commitment from non-members in order to access the offer codes, but I am not sure that deep discounting is the best long-term play. How many premium coffee drinks will a person consume that late in the day, first of all, and second, what are the add-on food items most likely to sell at that time? Scones? Doughnuts? Perhaps a varied assortment — maybe even exclusive to the afternoon — might be more effective than simply deep discounts … just a thought.
This reeks of desperation, an attempt to save a failing program. While membership (and scarcity) are values, I can’t see this doing much for Starbucks’ bottom line. The brand of Starbucks isn’t about exclusivity. In fact, it’s probably the exact opposite.
I could not agree more on your “desperation” and “exclusivity” comments, Tom. To me this would be like having a wine bar with Happy Hour specials from 8:00 a.m. to 11:00 a.m.
Exclusivity breeds desire. By Starbucks making Frappuccino Happy Hour an invite-only event, they’re creating excitement (and headlines) for their Happy Hour program. Starbucks also is taking measures to monitor the herds of pre-teens who come in solely for the Frappuccino deals and nothing else. Additionally, extending the Happy Hour menu deals to include coffee beverages will encourage parents and those of us who can’t afford to down beverages with 490 calories and 77 mg of sugar to tag along.
You’ve got a good point but I see it differently Jasmine. Only in marketing theory does exclusivity breed desire. The last time “exclusivity” really worked was in 1966 when Amex came out with the Gold Card and we all took delight in flashing it around to the awe and admiration of our friends. Ego caused me to pick up way too many lunch tabs.
And honestly, have you ever seen “excitement” in a Starbucks? Ask anyone in line if they are excited. Frankly, I see Starbucks as one of the saddest places imaginable.
Thanks for your perspective, Ian! While I personally patronize indie coffee shops whenever possible, I enjoy a chai latte or green tea from Starbucks now and again and know plenty of folks who enjoy working remotely from various ‘Bucks locations. With that said, I’m curious about your strong reaction to the franchise. What makes Starbucks “one of the saddest places imaginable” and how can other chains avoid being slapped with such an unflattering epithet?
Thanks for asking Jasmine. Since I’m a guy who drinks coffee as God intended — dark roast black — it will be easy to disqualify my observations. But … compare the energy in a Panera Bread location to that in Starbucks. First the coffee is just as good and a heck of lot cheaper with free refills. But I digress.
I have many meetings in both places though try to avoid Bucks. PB seems to be mostly 2-4, and sometimes more, people having meetings, often breaking bread together. I swear there are more Bible study groups in PB locations than in churches! Rarely do you see a person sitting alone for hours on end as though they have no other place to go. It’s the opposite at Starbucks IMHO.
It’s always about the energy … and paying unconscionable prices after waiting in line and then sitting alone against the wall conveys a very sad and negative energy. I admit, perhaps that lone person is composing a love letter or closing the deal of a lifetime, but it sure doesn’t look like that.
And, of course, if there were no internet all these places would be gone. If that’s what really drives their existence perhaps we should design them around that feature.
This move seems less about incentivizing digital transaction and more about not driving their employees nuts for a promotion that didn’t make the company any money. But opening up mobile pay to all customers is a great move.
It would seem that Starbucks would want to recruit new customers who might not like Frappuccino to be loyalty members. It would also seem that Starbucks would want to recruit customers that would continue to order things like Frappuccinos, especially in later hours of the day. There should be some strategic potential on how to use and leverage the invitation process.
Starbucks has been a master of the “Secret Menu” to market exclusivity. A segment of customers value being “in the know” and part of something exclusive so maybe invite-only will work for that segment. The best part of this is that it is all highly measurable and adjustable. It can be iterated week-to-week based on results and cumulative learnings (an Amazon-like strategy).
This is Starbucks trying to expand their third-place concept into the evening hours. Lacking a food offer to attract a dinner customer they are trying to do so by offering discounts on their normal fare. For those that are Starbucks advocates this may have an appeal but, as Ian stated, they have other things to do.
Great point! More food offerings would make this initiative more compelling.
Starbucks is building a club mentality. I agree with Jasmine: Exclusivity breeds desire. It also can have a negative result a la retailers who have a coupon event where shoppers without one lose. Starbucks is smart to offer the deal to non-members as well. Baristas who keep the code handy so non-members don’t have to click around while waiting in line will become customer favorites.
And that’s exactly the problem Georganne. To remain truly exclusive there has to be a hard cap on membership. With the exception of a few old white men golf clubs, most “exclusive” clubs are trying to bring in more members or, as you note, even non-members. So “poof” goes the exclusivity!
There is nothing wrong with exclusivity, especially if it reduces costs for Starbucks. However, if this is a mechanism to drive afternoon trade I question whether it is the best area to focus on.
One of the things Starbucks could and should do is provide a much better selection of afternoon food treats — things like fresh cakes, scones, etc. At present, the offer is boring and unchanging throughout the day. Indeed, some stores seem to run out of loaf cake slices by early afternoon.
I love the incentives but I am still unsure how it will pay out. At this point in retail though it’s all about digital. Regardless of how good the in-store experience is shoppers want to be able to use their phone as part of that experience.
The Starbucks consumer is a unique breed but no one knows them better than Starbucks themselves. The tricky part will be providing enough of an incentive to get their shopper to break their regular afternoon routine.
Starbucks is using exclusivity as their marketing hook to not only drive some added afternoon traffic but more importantly to drive digital interaction and encourage more downloads of their app. Digital transactions is a growth area for Starbucks and they are looking for more ways to encourage both adoption and usage. While the exclusivity factor is something you used to brag about to friends, today it’s more of a personal win for most people to have that private feeling you’re getting something special that others are not. Whether or not this results in increased afternoon sales is something Starbucks can easily measure with this approach – and that means they can easily tweak the program over time to get the desired results. It’s a good tactic that needs time to measure success.
Very interesting debate here. Considering that the program didn’t see any initial incremental lift, the “invite only” tactic sounds like a strategic choice to simply control the quantity of subsidies they were dishing out (while saving their employees valuable time and frustration).
Based on the copy on their site (“Already a Starbucks Rewards™ member? You’re in. No need to sign up”), I imagine they are also using this as a carrot to give non loyalty members a taste of the good life, in hopes that they eventually make the switch.
While it requires an additional step for the customer, that seems like a far better way to control demand than creating complicated terms with limited hours and availability. By simplifying the promotion period (year around/till close) they are training a new customer behavior, while using the full year to continue to gather rich data on their customers.
I think Starbucks understands that their loyal clientele might see themselves as “above couponing” so their marketing department needed to find a way to rebrand the discount model. *Cue “invite-only”*
The other play is simply getting more people involved in the program and utilizing the app for quick happy-hour access. Behind the scenes, Starbucks begins building your consumer profile, you get more targeted “coupons”, and when Starbucks pulls the plug on the “all night happy-hour” promo in 6 months, you simply shift your behavior on to their next offer instead of the next coffee shop.
Starbucks has become increasingly effective with their digital communications, including their members app and the various promotions available within, particularly for frequent users. My wife has been a member since its inception in the US and in Hong Kong and I can personally tell you that, although she is not usually incentivized by “offers”, has been an avid user.
The recent changes point toward their intelligent mining of the data from millions of users to make changes that will reward their fans and encourage more to download the app and use the features. Two actions stand out as examples of decisions stemming from data analytics: Enabling all customers to use mobile pay and adding beverage choices to the “happy hour” promotion. Clearly, their analysis shows mobile pay is a mass-desired convenience that drives incremental transactions and transaction spend. While extending beverage choices for the happy hour promotion indicates their ability to target a next likely drink choice for loyal users. Using data analytics, they can determine the most likely “next” beverage for the typical grande non-fat, no-whip mocha customer vs. the venti soy latte customer.
In short, the changes are smart and will likely be effective based on the data analytics and, further, can easily be adapted as they continue mining the data from users.
Starbucks’s Invite Only initiative certainly addresses the consumer trend of “personalization” by making the rewards members feel special and they are keeping to one of the valuable characteristics of a great reward program of treating top customers like VIPs. However, Starbucks is missing on the current retail trend of convenience and on a key success trait for reward programs of keeping it simple.
It is too complicated for the end user to use the reward. For example, it varies each time (by day and offer). If the goal is to increase customer visit frequency, simply double the star points from 3-6 p.m. Programs have to be simple and transparent to use. In the last statistics I have seen, a normal reward member visits Starbucks 18 times per month and the highly loyal Starbucks customer (about 10% of the customers) visits twice a day. Perhaps the goal should be to increase shopper frequency to 2x a day to 20%.
Typically, rewards customers are less price sensitive and more profitable so discounting may not be the answer. Giving more rewards points during certain times requires no effort from the customer, allows for customers to choose their own rewards (not limiting to certain products) and redemption is “as earned” which makes the workload less burdensome on the baristas.