Starbucks Math – How much do the rewards reward you?

SBUX_starsAre you a Starbucks drinker? Do you have a family? Do you buy your coffee alone or for others? These habits will drastically effect your view of Starbucks new rewards policy. For most people interested in saving money, the rewards program has a lot to do with where you buy your coffee. And a lot of people choose Starbucks. With 4.5B in gross income last year, Starbucks a huge player in the coffee business. And the coffee chain just announced that it’s changing its game and it doesn’t look good for the singles and spendthrifts of the world.

Starbucks announced a new rewards program update that measures dollar amount spent versus trips into the store. It’s not hard to see that the solo coffee buying, pennywise folks are getting the short end of rewards updates. “Pennypinchers beware” write eater.com. If you’re normally spending less than”$5 a visit for a Gold member, this new system won’t benefit you,” says the consumerist.com. Let me explain.

I’ve been a single coffee, spendthrift-y member of Starbucks since 2010. And each “new system” did not benefit me.

Historically, the Starbucks reward system changes consistently shrunk my rewards. When I first joined, the big reason was for free soy milk.  This saved me $0.50/cup.  I bought about 1 latte/week at that time, so this was $26/year. More than enough money to sway a poor graduate student into Starbucks’s doors. By being a rewards member, I paid $133.40/year for my coffee. Without the rewards it would have been $169/year. I was saving about $35.60/year. Thus I was getting a 21% discount by being a member. Way better than any rewards program out there.

But, in 2012, Starbucks removed free soy from their membership rewards. At the same time, they lowered the number of drinks purchased before you get a free drink from 15 to 12. With the 2012 change, I only saved $11.9/year and each coffee now cost $3.25. Thus I was only getting 7-8% rewards. But that was still a couple coffees, Starbucks was close to my office, and it was still better than other rewards programs… so it still seemed like a good idea.

Let’s consider the newest change:Starbucks_rewards_update_2015

So, now it’s a question of money. I need to spend $62.50 before I get a free drink instead of the $39 I was spending previously.  Effectively, Starbucks has changed my star policy to 19 drinks for a free reward. This is only a 5% rewards. My discount over the years is getting worse and worse:

SBUX_rewards_savings_by_yr

Is it worth it to keep going to Starbucks? If I was still a graduate student, then I would struggle to find a reason to continue to be loyal to Starbucks. There are other rewards systems at my local coffee shops which are better than 5%.

However, I’m no longer a graduate student. And I’m noticing that my cost/trip is increasing. Especially if I’m with my family. Then the trip definitely costs more than $5/trip.  And under the previous rewards systems I would only get 1 star for that trip.  Let’s pretend that I spend $15 each Saturday morning for 1 star. So, I spend $180 to get 12 stars and a free item. So on my 13th trip I only spend $10.  Thus, I’ve spent $190 for $195 worth of product: a 2.5% discount. But starting in April, I will get stars for every 50 cents. So, for each $195 I spend, I will get 3 free drinks. My new discount is 8-10%! A huge discount boost to the fancy family spender.

Thus, it is my opinion, that Starbucks, like the American economy, is giving financial credit to families over singles. If you are wealthy and can afford Starbucks coffee for you and your entourage, then the new Starbucks system is going to work out well for you. Your percent rewards savings will increase: potentially moving from 2-3% discount to a 8-10% discount.  But if you are single, or deign to purchase inexpensive coffee at Starbucks, then you will receive a cut in your benefits from a 7-8% discount to a 4-5% discount. Should you stay loyal to Starbucks? If you are still primarily motivated by money, you’ve got some math to do.

 

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About Samantha from SocialMath

Applied Mathematician and writer of socialmathematics.net.
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