[Thoughts #101] Starbucks ☕️
Lets dig beneath the layers of whipped cream and latte foam
Announcement about premium subs
When I introduced tipping subs in my 100th piece last week, I figured it’d be fun to make things a surprise since the whole concept was to subscribe as a tip (with nothing expected in return because you don’t want me to starve).
However, those emojis were too vague and it sorta defeats the purpose of tipping, so let’s call it ‘tippers with benefits’ instead 😉
There’s still a line item for surprises because I think the benefits will evolve as my journey does too. Those that support me the most should benefit the most.
It’s inevitable that this will lead to some sort of tokenized community, I’m writing about Web3 after all. Something for me to noodle on at a later point.
Thank you for everyone that has already subscribed to premium, it means a lot. Seriously.
And don’t be alarmed if you subscribe to premium and you get a charge like this.
That’s me. And I promise, I won’t use these funds for McDonald’s unless you explicitly tell me to. A will be so happy though if you do 😂
As many of us are aware, Starbucks has had rumblings of launching a loyalty program using Web3/NFT tech.
Today a big announcement came from Polygon.
BTW, this is Polygon’s 6th most engaged tweet of all time, and as of this writing it’s 8 hours old.
I’d recommend you sign up for the waitlist, you never know. You only need to provide your e-mail anyway.
There are two parts to this announcement as it’s a partnership.
Polygon is a blockchain built on Ethereum, but more scalable and cost/environmentally friendly (eg: sending an asset to another address on Polygon costs $0.0006 vs. $0.90 on Ethereum right now).
The blockchain and company has been on a tear with its partnerships:
Working with Meta to showcase Polygon NFTs on Facebook and Instagram
Integrating with Robinhood for deposits and withdrawals of MATIC (Polygon’s token)
Working with large brands like Coca-Cola, Adobe, Stripe, and Dolce & Gabbana
So why is the partnership such a big deal for Polygon?
This is not just a one-off NFT collection like the partnership with Coca-Cola. Starbucks is creating an experience. I mean…it’s called Starbucks Odyssey lol.
When you combine the scale that Polygon’s blockchain is able to support with the scale of Starbucks operations, this starts to make more sense.
In the Q3 2022 results, Starbucks shared that there are 27.4 million active Starbucks Rewards members.
So what happens when you start approaching local maxima of your loyalty program? You evolve it.
The other big draw for blockchains like Polygon are the environmentally friendly aspects.
Techcrunch came out with an article that provided a lot more detail about the program, emphasis mine.
Starbucks Odyssey will be a way for its most loyal customers to earn a broader set of rewards while also building community.
Starbucks brought in Adam Brotman, former Starbucks exec who was in charge of the Mobile Order & Pay system and the Starbucks app, as a special advisor. They’re also working together through Adam’s new company, Forum3, a web3 loyalty startup.
CMO Brady Brewer says the company wanted to invest in Web3, but not as a “stunt” side project. Rather, it wanted to find a way to use the technology to enhance its business and expand its existing loyalty program.
To engage with the Starbucks Odyssey experience, Starbucks Rewards members will log in to the web app using their existing loyalty program credentials.
Once there, they’ll be able to engage with various activities, which Starbucks called “journeys” — like playing interactive games or taking on challenges designed to deepen their knowledge of the Starbucks brand or coffee in general. As they complete journeys, members can collect early digital collectibles in the form of “journey stamps”.
NFTs will be bought using a credit or debit card — a crypto wallet is not required
The various “stamps” (NFTs) will include a point value based on their rarity and can be bought or sold among Starbucks Odyessy members in the marketplace, with the ownership secured on the blockchain.
By collecting the stamps, members will gain points that can unlock exclusive benefits. These perks go beyond those you can earn with a traditional Starbucks Rewards account and its “stars.” While today, members can earn things like free coffee, free food or select merchandise, the points earned in Starbucks Odyessy will translate into experiences and other benefits.
Brewer says Starbucks is already imagining how some of the activities that earn NFTs will be connected to real-world Starbucks purchases.
Journey challenges might also include a real-world activity like “try three things on the espresso menu.” This would require the user to show their barcode at checkout — as they would if earning stars — to have their transaction counted toward the Starbuck Odyssey challenge.
“We’re bullish on the future of these technologies enabling experiences that were not possible before,” Brewer claims.
Ok the last point was not important. How often do you hear a CMO get quoted saying ‘bullish’ though?! 😂
Loyalty is evolving
That’s the main takeaway, sure. We get that. But how?
This is basically what loyalty programs look like. Sure, there’s a lot of variations of it, but let’s be real, this is it. Nothing wrong per se, but that’s it.
Spend $100k at Gucci stores this year? They’ll fly you out to Italy for an all expenses paid trip. If you stop, they’ll stop.
Play $1,000 blackjack hands in Vegas? You’ll be treated like royalty. If you stop, they’ll stop.
What is Starbucks betting on?
What gets interesting is versions of this have already been done before, just not at the scale and depth that Starbucks is planning.
As players go through the game, they learn more about the history of Louis Vuitton and can collect NFTs (they’re designed by Beeple, which is cool).
A year later, LV added more levels and NFTs to the game to enrich the story further.
So let’s go back to the framework I created and examine 3 points:
This is Web2 + Web3 - The old loyalty program isn’t going to be replaced. It’s going to be expanded as the CMO mentioned.
The loyalty programs will overlap - Users can log into Odyssey with their existing credentials. There will be journeys that will be transaction-based while others will not rely on purchasing items, but engaging with other experiences around the new Starbucks universe. Maybe over time it’ll turn into one gigantic circle.
Increased surface area - Whether it’s mindshare, time spent in-app, or network effects, the surface area in this evolved loyalty strategy is larger than the previous program.
Last but definitely not least - This is also data play. Brands will not admit this for obvious reasons.
As Starbucks rolls out the program, they have a new set of tools to play around with:
Identify new personas: Users that won’t pay a lot of $, but will take actions to engage with or promote the brand
Eg: Share Starbucks posts 5 times and get this NFT
Build programs around the new personas: Previous loyalty promotions were centered around transactions. New loyalty promotions can be centered around transactions, engagement, promotion, or a combination of them.
Eg: Choose your own adventure - Buy 2 drinks, Watch 3 episodes of Starbucks History, OR Share 10 Starbucks posts.
^This would also strengthen persona definitions on a user-level to identify preferences
Hyper-personalize with new experience-based carrots: Not only would Starbucks be able to provide more value to the user based on their preferences, but they can also have a new set of incentives to provide that value.
Eg: User is a mega-promoter and likes to be rewarded with experiences vs. drinks.
^Influencers may fit into this category?
There will be much for Starbucks to figure out with this new loyalty paradigm. Assuming it’s successful, major consumer brands are going to jump on the bandwagon (and are probably already actively working on this behind the scenes).
The two brands I’d be curious about:
See you tomorrow folks ☕️