Photo: Starbucks
Will a co-branded credit card boost Starbucks’ sales?
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.
- Starbucks and Chase Launch Starbucks Rewards Visa Card – Starbucks
- Starbucks launches co-branded Visa credit card – USA Today
- Is the new Starbucks credit card worth it? – MarketWatch
- Chase Launches Starbucks Card: Is It Worth the $49 Annual Fee? – Nerd Wallet
- Starbucks launches new credit card for coffee addicts – CNN Money
- Starbucks Reports Record Q1 Fiscal 2018 Results – Starbucks
Discussion Questions
DISCUSSION QUESTIONS: Do you see the Starbucks Rewards Visa Card helping revive sales for Starbucks? Do you like how the program is structured? Do you see more pros or cons when it comes to co-branded credit cards for retailers?
Poll
BrainTrust
Brandon Rael
Strategy & Operations Transformation Leader
Lyle Bunn (Ph.D. Hon)
Strategy Architect – Digital Place-based Media
How many credit cards can one person own? I get offers three times a week online, and in the mail, and it never stops. The groupies who love Starbucks will love it but, for me many others, it is something I do not need. The four cards I have are enough.
I don’t see the new Starbucks/Chase credit card having much impact or being a huge success for several reasons. People today are getting away from having too many credit cards, and only the deals that have significant benefits will appeal to customers. The benefits of this card are too limited and only benefit the passionate Starbucks customer. So I don’t see it as a big win. As with everything, there will be some customers signing up but not nearly the amount that Starbucks would want to make an impact. Starbucks would have more success if they developed cross-platform opportunities so when customers spend “X” dollars at Starbucks, they get an offer for a discount or coupon from a different brand. And when they spent “X” dollars with any of those brands, they would get offers useable at Starbucks. Give the customers a few different brands/retailers to choose from, and that would be more successful.
While the card may be valuable for heavy Starbucks users, it offers little for the rest of us. With all of the current payment options, many offering rewards that are better than this, there is little incentive for most consumers to sign up.
I am a heavy Starbucks user and I can assure the folks at Starbucks that I don’t want to bother with another credit card, no matter what the reward.
I’m with you, Gene! In fact, I’d even say that part of what makes the existing program attractive to me is that it isn’t attached to another credit card that I don’t need.
I can’t see this making much of a difference to revenue. The card will be most appealing to those who already make extensive use of Starbucks, and getting them to buy more frequently will be challenging. For everyone else, it’s not worth having – especially as most Americans already own multiple branded credit cards.
I’m a fan of Starbucks, but not a fan of this rewards program. Just what the world needs, ANOTHER branded credit card and convoluted rewards program. I understand that Starbucks had a lacklustre quarter and needs to discover new ways to drive revenue, but this type of incrementalism will hardly deliver the results. I expect that this program will sputter and ultimately fade away.
Ho hum, another brand puts their name on a card — is this really the best use of their time at Starbucks headquarters? But then again, it was probably a 30-minute meeting to hear the Visa pitch, four more hours to hear from some Visa competitors, an hour to decide on a card partner and then some legal work. It is a sidebar to the core business that pulls the brand off its straight and narrow.
Starbucks has already cultivated a digital community that loves their mobile app experience. The app already enables you to choose your payment method, without an annual fee, and empowers you to use the app both for ordering and accumulated loyalty stars.
While some credit card and retailer alliances work quite well, I don’t foresee the Starbucks Rewards Visa card driving incremental sales at Starbucks. Starbucks would be wise to continue their innovation, new product offerings, enhancing the mobile and in-store experiences and throughout keeping their very engaged and loyal followers happy.
My fellow panelists seem to feel as I do (who needs it?). But to answer the actual question, this may resonate better with a younger generation (or two) than with us. And on the third hand, even the younger generation of “‘Buckies” (like Trekkies?) may opt to use mobile payment systems already in the marketplace. I’d love to know how Starbucks decided to launch this card.
Less than a third of Millennials say they have a credit card, while more than half of people age 30-49 own one and nearly 70% of people over 65 do, according to 2016 Bankrate survey. A fee-based credit card loyalty program isn’t going to appeal to a younger audience IMHO.
A co-branded credit card will not solve sales issues for Starbucks because there are too many co-branded cards out there that allow much more flexibility of the rewards program. Additionally, the card may benefit the loyal, heavy user of Starbucks, who is already coming frequently without rewards. They key is to get new consumers or to increase usage of existing consumers which this card will not do.
I think there is a lot of consumer inertia around loyalty and branded credit cards. I get asked if I want to sign up almost every time I make a purchase in-store these days. From what is outlined above I can’t see much of what makes these ones different. As Tony pointed out brand loyalists will love it, but I don’t think it will make much of a difference to sales.
Please don’t bother me with another credit card.
How do you REALLY feel about it?
I don’t think this is going to make a big difference in sales. You’d have to really love Starbucks, or visit a lot, to want a credit card with those benefits. While Starbucks has shown it can be very savvy about what customers want — its mobile order and pay app is a prime example — this seems like a bit of a pointless exercise.
This feels more like a “me too” strategy — yet another co-branded credit card. How many of these do people need, or even want? I can see die-hard Starbucks users enticed by the added rewards, but something tells me those customers already have a preferred rewards card they already get benefit from by using it at Starbucks. Why would they want to switch? I don’t see this making much of an impact for Starbucks, more of just checking the box in yet another rewards strategy.
Meh is my first reaction; just another been there, done that, co-branded credit card loyalty marketing play. But then again, any retailer with as large a footprint as Starbucks might as try it and no doubt Chase is happy to help exploit the Starbuck customer base. The seemingly expensive and complicated program will appeal to a predictably small customer segment of avid coffee drinking credit card using customers. Only time will tell if the applicant cohort is credit-worthy and sizable enough to make it worthwhile for bank and retailer.
The die-hard Starbucks customers will absolutely love this card and jump at the opportunity to use it. Many of the younger patrons haven’t acquired tons of credit cards yet which makes this is an easy entry point. Loyalty builds revenue and the more they spend, the more rewards they receive. I don’t see a downside for either party.