Starbucks Loyalty Program Adds Negative Consequences

blogs.starbucks.com

I recently blogged about the subtle changes that Starbucks had made to its Gold Card reward program, noting how the company had quietly eliminated many of the program's perks.

Things just keep getting worse for the Starbucks marketing team. The company has decided to incorporate negative consequences into its loyalty program. That's right, the Seattle coffee giant has now found a way to thump customers who, for whatever reason, have reduced the frequency of their treks for java.

I just received an email from Starbucks notifying me that my card status was sent "back to Green for now" and that the company had reset my accumulated points "to zero." It is punitive enough to take away somebody's privileges but it is excessively harsh to negate all the points someone had accrued in order to earn rewards.

This is an eye-opening experience that doesn't require an ounce of caffeine!

The best loyalty programs reward loyalty, making people feel a sense of accomplish when they reach a certain level. Negative reinforcement is an ill-advised direction to take with a loyalty program. I was always taught that negativity breeds more negativity ... or in this case animosity.

Given an abundance of options, and even the healthy choice of avoiding fatty specialty beverages, people already have an incentive to ditch Starbucks. The company seems intent on giving people yet another reason to seek a coffee alternative.

Teaching Entrepreneurship to Kids

A Star is Born

It is never too early to encourage and foster entrepreneurship.

A few months ago, it was a rainy day and the girls were bored. They had just finished another game of Monopoly and they were desperate to find something else to do. That's when my significant other's 7-year-old daughter remembered that she had a collection of Perler Beads in a craft box, and she suggested that we try our hand at that.

To the uninformed, the craft involved carefully placing small cylinder-shaped plastic beads on a pattern, then using an iron to fuse them together. It is quite fascinating to see just how creative kids can be with something so simple.

After a while, we had several stars, peace sign circles and hearts to show for our efforts. That's when my 10-year-old daughter, who is always eager to cook up money making schemes, asked if they could go door to door selling the bead creations. Both girls, who are participating in the Bank of Dad concept, were ecstatic about the idea of making some extra spending money.

The parents agreed, feeling quite impressed with their initiative. My significant other, who also has an MBA, had the bright idea to use this endeavor to teach the girls about being entrepreneurs. This is one of the rewards of being in a relationship with another business school graduate (she was also the catalyst for our highly successful Bank of Dad initiative).

Let's begin with a basic understanding of what it takes to be an entrepreneur. The Merriam-Webster Dictionary defines an entrepreneuras "one who organizes, manages, and assumes the risks of a business or enterprise."

We decided to involve the girls in all the aspects associated with starting up a business. The girls were allowed to use the initial beads to make their first items for sale. After that, however, we made it clear that any additional beads or patterns would have to come out of their revenue. Thus, the girls would be assuming any future risk for the enterprise.

What about organization and management? We asked the girls how much they wanted to charge for the hand-made crafts. They collectively shrugged their shoulders. "Maybe a dollar or two?" one of the girls responded with some hesitancy. So we got out a notepad and began making calculations, getting both the girls involved in the math.

A starter kit costs about $5 and includes 2,000 beads. A standard star-shaped pattern, as seen above, requires roughly 150 beads. So our aspiring entrepreneurs would be equipped to make about 13 crafts with that kit, more or less. Based on those numbers, it was going to cost about 39 cents in materials to make one item. They girls decided to charge $1 for each craft, netting 61 cents profit for each sale. Even if they got bored and only sold half of the crafts, they realized that they would come out slightly ahead.

To quickly placate finance and econ students, we realized that our daughters were also devoting time and labor to the business. We opted against getting into the concept of opportunity costs, given their limited options to raise money elsewhere (and playing Monopoly unfortunately deals in fake cash). So we'll save the discussion on opportunity costs for their next venture.

Let It Snow!

Finally, we encouraged the girls to brainstorm about any practical uses for their bead creations. Sure, they're cute home-made crafts, but we thought the girls might have better luck with sales if people found use for them.

The girls experimented with making "sets," or a collection of similar themed items to sell as a group. My significant other glued magnets on the back of their crafts to display on the refrigerator, but she was quick to note that magnets are expensive and would have put a major dent in profits.

Another idea that eventually proved useful: tying strings to the top of the star-shaped crafts to make Christmas ornaments, which were sold at a premium during the holidays.

To recap; it is easy to teach kids how to be thoughtful entrepreneurs. Using the definition of an entrepreneur and our own personal experience, there are three key takeaways.

• Assuming Risk: Get your kid involved in the actual funding of the project. Make it clear that he or she will use revenue from the endeavor to buy new materials, advertise, etc.
• Organization: Have them build a business model. Help them gain an understanding of fixed and variable costs, and use those projections to develop a reasonable pricing structure.
• Management: Teach your kid to always look to innovate. Find new uses for old products. Sometimes it can expand the customer base. It can also help the entrepreneur justify a slight higher price, and thus higher revenue/profit.

Managing Changes to Customer Loyalty Programs

Photo: Starbucks.com

The prolonged economic slump has businesses of all shapes and sizes rethinking, and retooling, customer loyalty programs.

I recently stopped into a nearby Starbucks for coffee. Admittedly, it had been a while since my last visit but, in my prime, I was feeding a pretty heavy caffeine habit. I asked the barrista for a seasonal syrup and soy milk, whipped out my gold card and got ready to pay.

It was only then that I found out that Starbucks had dropped free soy milk and syrups from its reward program. I stood there open mouthed (figuratively), let out a sigh and walked to the other side of the counter to pick up my considerably higher priced beverage. It was a small hit in the grand scheme of things, but it got me thinking about how to effectively manage customer loyalty.

Starbucks did officially announce the change, though it did so in a rather ill-advised way. In a September blog post, the company touted how it was "revamping" the rewards program. But the emphasis was clearly on what the coffee giant was adding ... the subtractions seemed a mere afterthought.

In fact, I went home and went online to double check the change. One of the first hits on Google was another blog post, but this one clearly singled out the company's deletions. There was even talk about the retracted benefit equating to a "tax on vegans." Yikes!

This isn't the first time I have found out (too late) that a business has ended a customer benefit. There is a winery that I enjoy visiting from time to time. It has a great view, decent wines and a now-defunct enticement to keep coming back - a free tasting if you brought your branded wine glass with you.

I showed up at the winery a couple of weekends ago, glass in hand, and walked up to the counter, only to be told that the promotion was longer in effect. I never asked why, but I would surmise that the increasing need to lathe expenses had to factor into the decision.

So here are a few suggestions to companies that are considering starting, or changing, their loyalty programs.

• When you are developing a program, try to come up with incentives that you can offer regardless of where the country is in the economic cycle. Forecast the cost of the program over years of promotion.  Picking your reward wisely could keep you from taking them away if times get tough.
• Make sure you clearly communicate changes well in advance of the effective date. Starbucks made its announcement one month before it ended free syrups and soy (the company also axed a reward where customers got a free coffee if they bought beans). Make sure people sign up for email notices and make sure both additions and subtractions are clearly outlined.
• If you issued rewards cards, punch cards, etc., consider a grandfather provision that lets people complete the card they are working on but stop handing out new cards. This allows for a phase out approach that lets you eliminate an incentive over time.
• Get feedback in advance. Planning to take away a reward? Ask people well in advance to choose from a list of potential replacements. Getting consumer participation could help you in the psychological battle of keeping them happy!

I am certainly interested to hear what other people have to say on this issue. Businesses rely on loyal customers, and word of mouth, to grow, so managing these programs is a very critical component for success!

Greensboro Group Planning TEDx Conference

Following in the footsteps of Wake Forest University, Greensboro is preparing to host an upcoming TEDx conference.

TED is an acronym that stands for Technology, Entertainment and Design

Skip Moore, the president of the Weaver Foundation and a member of Action Greensboro, is reportedly behind the event, according to an online report from the Triad Business Journal. Moore's group is still exploring topics, which will help them sort through presentations. 

The article said that the event will likely take place in late March or early April, and will likely be held in downtown Greensboro.

Wake Forest hosted a TEDx event in February, called TEDxWakeForestU, after chemistry student Lucy Lan organized the forum. Attendees heard presentations from Anthony Attala, the director of the Wake Forest University Institute for Regenerative Medicine, and Don deBethizy, the former CEO of Targacept.

Indoor Trout Fishing Could Be U.S. First

We recently posted about an event this Friday where Campus Recreation will stock the pool at Reynolds Gym with rainbow trout, allowing people to fish for $15/person.

The posting quickly - and easily - became the most read item we have ever posted on this site.

So we reached out to Jessica Finnerty, the assistant director of campus recreation who oversees aquatics, to find out more about this unique event.

"This is something I thought of a few years ago but have finally been able to pull off," Finnerty wrote in an email sent Thursday. "As far as I can tell, this will be the first trout fishing even the U.S. in an indoor pool."

Finnerty added that she has roughly 90 people registered to fish for about 130 trout that will be added to the pool. How many of our readers are signed up to compete? We'd love to hear from you after the event wraps up by posting in our comment section below this post.

Blog Review: RUNNERSAPIEN

Wake Forest University has many active bloggers among its students and alumni. From time to time, we like to identify a noteworthy blog. If you have an interesting blog, or know someone else who does, please let us know via the comment section below.

Given the Summer Olympics going on now, our featured blog involves MBA (and competitive runner) Molly Nunn.

*****

RUNNERSAPIEN is a blog by Molly Nunn, who was both an undergrad and an MBA grad from Wake Forest. In the past, she has used her blog to chronicle her passion for running and her pursuit of an MBA in the Working Professionals program.

The best thing about the blog is that it is conversational and well-written, reflecting the author's English major and unique outlook on life. In addition to great posts, Molly has a column highlighting some of her favorite song lyrics!

There is an inspirational element steeped in her business school education. Here is a great example that would make Dean Reinemund proud, given the topic:

Passion never leaves, it pauses; we pause it. Sometimes, I think that this is necessary or just happens due to life's circumstances be it family, jobs, friends, et. al. It is recognizing when I have paused on purpose that I must step back and recognize why I'm walking around feeling discontent - and then make the needed adjustments. The funny part about all of this is that it is usually the smallest changes that are catalysts for big time results!

And another example following May's graduation ceremony:

This night filled me with overwhelming memories of the past several years up until now. There was much that was accomplished in this time period and I've gained the tools needed to move steadily forward. In gaining a new skill set and learning lessons, some fun - others very difficult, there are things and people to be left behind. ... I can only speak for myself because ultimately I am the one responsible for how, when, and whether or not I use the tools and knowledge that I have. It's a simple business decision made from a cost-benefit analysis.

These are just a few examples of the writing style. Molly also has a great eye for photography, so you will also see some terrific photos on her site.

KeyCorp CEO Mooney Discusses Gender and the C-Suite

“I’m going to go to my job this morning, and I’m standing a little taller and I am walking a little prouder because a woman will lead us.”

*****

Photo courtesy of Cleveland.com

Beth Mooney, the first chief executive of a top 20 U.S. bank, read the text above with great pride during her speech last week at an event hosted by Beta Gamma Sigma. Mooney received the email from a female employee at KeyCorp shortly after she became the Cleveland company's chairman and CEO in May 2011. 

The encouraging letter also underscored the historic importance of Mooney's appointment to lead the large regional banking company. 

"It was a comment like that that made me realize that it was a unique opportunity for our company to have a woman CEO, but it was unique for women in general,” she told attendees in a speech built around diversity and inclusion. “And it is important to me that I approach this with a sense of obligation to do this well. There is an extra responsibility in being the first and I want you to know that I actually feel that sense of responsibility every day.”

The speech seemed more timely given the recent news that Yahoo! had hired Marissa Mayer, a former Google executive as its CEO. Mayer then topped the news by announcing on Twitter that she is pregnant.

Mooney made it clear that women are poised to make more breakthroughs in the corporate world as businesses realize their success or failure hinges on the strength of the individual CEO, regardless of whether that leader is a man or a woman. “Gender doesn’t matter when it comes to delivering results,” she said.

“I do feel the leadership should be carried out by people who are the right people for the task at hand,” Mooney said. “As we move forward I have little doubt that more and more of them will be female and that they will be diverse. And that will be better because it will reflect the broader population. For a while, at least, I think a diverse leader will be something of an event. But the day will come, and it will be a great day, when it isn’t.”

Mooney also shared advice to attendees (more than 90 in person and 600 or so via a Webcast) about leadership. She touted the importance of having a “pit crew,” or a group of people with diverse backgrounds to share knowledge. “Always practice continuous learning, particularly with those who can help you see yourself more clearly and will … challenge you to grow,” she said.

“I have become a role model, and I take that obligation very seriously,” Mooney added. “Every day … people are watching what I do and listening to what I say. As leaders, we should never underestimate that how we conduct ourselves, how we extend ourselves and how we reward people matters mightily.”

In conclusion, Mooney gave her philosophy for leadership, boiling it down into five simple principles:

• Always be your best. I believe you’ll be able to look back with pride instead of regret.
• Be of service. Your community needs your gifts just as much as your career does.
• Be grateful. Not being grateful will turn us bitter and old before our time. On the other hand, I believe gratitude gives us dignity and grace.
• Remember to thank those who helped you along the way. Don’t wait to let them know how much they’ve meant to you.
• As a leader, be conscious of your legacy. To do this, start with the end in mind and craft the journey to that end.

Beta Gamma Sigma is planning to post video of Mooney’s presentation. It is well worth allocating the time to watch. She also answered several questions about the banking industry, and a write up of her responses can be found here.