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Will a co-branded credit card boost Starbucks’ sales?

Written by Tom Ryan

Photo: Starbucks

Known as one of the pioneers in developing rewards cards, Starbucks has partnered with Chase to launch its first co-branded credit card. New card members earn:
  • 2,500 Stars once they spend $500 in the first three months;
  • 250 Stars upon linking the card to their Starbucks app;
  • One Star for every $4 spent outside of Starbucks stores; one star for every $1 loaded onto the Starbucks mobile app; two stars for every $1 spent as part of its Rewards programs;
  • Automatic Gold Status in the Starbucks Rewards program that adds perks such as birthday rewards and double-star days;
  • Eight free foods or beverages per year.
“It’s important to us to make earning Rewards as easy for our customers as possible, and the Starbucks Rewards Visa Card is a powerful tool for us to do that because of how easily it fits into their daily lives,” said Matt Ryan, EVP and chief strategy officer for Starbucks, in a statement. Jennifer Roberts, head of digital products at Chase, told USA Today that, depending on spending levels, cardholders could get free food or drink almost every week the first year. For Starbucks, the co-branded card serves as a branding tool and is designed to encourage greater spending by loyal customers and to attract new ones. Starbucks just reported disappointing first-quarter sales as holiday offerings failed to click with customers. Attracting new customers is also seen as a challenge for the chain. Rewards would have to cover the $49 annual fee and one drawback for consumers is that Stars can only be redeemed for Starbucks merchandise. Matching Starbucks’ Rewards programs, points also expire six months after they are earned. “This card isn’t worthwhile for those who visit Starbucks just once in a while, or those who prefer to redeem rewards for cash back or travel,” wrote Claire Tsosie for NerdWallet. “But for Starbucks fans who prefer earning rewards in food-and-drink form and want VIP treatment at their favorite store, this card is a solid deal.” Starbucks is likely to receive lower interchange fees and commission on sign-ups from the partnership, but faces brand risks with the high annual interest rates that come with co-branded cards and any delinquency situations.

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