Starbucks $2 Receipt Special

As many in the Retail (and hospitality) industry know, Starbucks just recently announced (and executed) their plans to start a loyalty program similar to the ones being deployed by grocery and general merchandise retailers. I'll be interested to learn about how they feel their success with the program is being, but a couple of developments are interesting:

First, every successful loyalty program has some sort of "carrot" that is offered to entice consumers to sign up for the program. Starbucks offered three "carrots" to its' caffeinated consumer base to motivate the sign-up. 1.) A free tall coffee once a consumer signed up. 2.) 2 hours of free wifi through AT&T per day for consumers signed up through the card program, and 3.) A free flavor shot for lattes purchased with the card (It's worth about $0.30 for each peppermint latte I get). I imagine that would entice a certain amount of participation, especially for those of us that like to work from coffee shops that hated going to Starbucks to pay for T-Mobile.

My action item now is to research what their participation rate is... more to come.

I'm curious though if their current "magic receipt" promotion is likely coming out of some of the consumer insights initially gleamed from the card program. For Starbucks and it's peers, there are generally 2 buying and usage occasions... the morning coffee rush which usually results in more sales of drip coffee (like Pike Place Roast) and the afternoon/evening occasion in which more lattes and frappucchinos are sold.

Now, the promotion goes like this... buy a drink in the morning and the barista at the counter will stamp your receipt with a mark that in essence makes your morning receipt into a "coupon" for a $2.00 iced beverage in the afternoon (after 2PM). Notice the synergy with the number "2" in the promotion. After 2PM, this receipt can be redeemed for a grande frap, iced latte, or Vivanno for $2.00 plus tax.

What I imagine the analysts in Seattle observed with this were: The people buying in the morning and the people buying in the afternoon were two different segments of consumers. A lot of people buying <$2.00 coffee in the morning weren't coming back in the "evening occasion" to get the $4.00 lattes, which are probably more profitable for Starbucks. The "afternoon" consumer is likely the "coffee culture" buyer that is pretty loyal to Starbucks anyways and is the "coffee date" type of person (I'm speculating here)... more of the Gen-Y or Millennial crowd. So, I imagine that Starbucks is attempting to entice the "morning consumer" to come and try Starbucks in the "after work" occasion and create a new occasion for them, realizing that many of them do not buy coffee after lunch (perhaps because of price). So, by making the after-work drink the same price as the "work drink" they may get a greater share of wallet and more repeat business from them?

It'll be interesting (for the Starbucks folks) to see if this promotion creates some "sticky" behavior there. What will the drop off from the sales spike be after September 2nd (when the promotion ends)? Will the professionals they enticed with $2.00 iced drinks come back and consider Starbucks the "new non-alcoholic happy hour?" or will they return to their pre-promotion behavior?

It is a good idea, at least from my perspective. Perhaps, however, I'm just enjoying the $2.00 drinks :-).