The US coffee market is experiencing a wild surge driven by insanely busy schedules and long working hours, which boost the business of coffee chains catering to the increasingly demanding tastes of coffee enthusiasts. These consumers seek certified coffee products wrapped up with excellent coffee shop experiences, and the numbers strongly suggest the game is worth taking.

The overall coffee market size in the US is estimated to reach $132.13 billion in 2024. While the substantial market value is attributed to the growth of major coffee chains like Starbucks and Dunkin', there is still room for local players if they can effectively build customer experiences that are convertible to client loyalty.

Thus, loyalty programs are crucial for their success, aiding in maintaining existing customer bases, attracting new ones, increasing sales, and boosting profits. Most importantly, rewards programs are proving to be an almost surefire way of delivering high value to customers and solidifying behaviors that benefit the brand.

Below, we examine some of the most successful examples of coffee loyalty programs and draw comparisons between them.

Costa Coffee Club

When it comes to coffee loyalty schemes, Costa has paved the way for many developments in the coffee industry and set an example for other coffee shops to follow. Having launched its very first iteration in 2010, Costa was the first points-based loyalty program in the coffee industry, and since then, the chain has gained six million loyal customers. What’s more, one third of Costa’s sales comes from its loyal customers.

However, despite hitting the ground running back in 2010, Costa was not immune to the soaring competition in the coffee industry, as well as the increasing number of attractive loyalty programs that gradually made Costa Coffee Club feel somewhat stale. And when its sales further plummeted as a result of the pandemic, Costa knew it was time to reexamine its loyalty strategy and give its program an overdue glow-up.

In 2021, Costa rolled out a brand new iteration of its loyalty scheme. Based on extensive qualitative research, the chain decided to give customers exactly what they wanted. While the new program remained simple in its value proposition, it ticked many boxes that appealed to today’s consumers, i.e. an attractive UX, emphasis on sustainability and the chance to earn freebies faster.

Costa Coffee Club: The loyalty program’s mechanics

Under the new loyalty offering, customers collect “beans” instead of points, and 10 beans are needed to earn a free drink. This makes earning a complimentary beverage more than half as expensive as it was under the points scheme (£26.40 vs. £66). What’s more, customers using reusable cups only need five beans to claim their free drink, further adding to the savings and saving the planet, of course.

The new loyalty program also employs a Surprise and Delight tactic in the form of birthday rewards, i.e. free cake on a loyalty member’s birthday. What’s not to love?!

Starbucks Rewards

Perhaps even better known than its major competitor, Costa Coffee, is Starbucks. Founded in 1971, the coffee chain has become something of a cultural icon. The brand and its double-tailed mermaid feature in films, TV and everyday jokes about hipsters and college students.

Starbucks currently boasts over 35,000 stores worldwide. Their annual revenue for the 2023 fiscal year was $35.976 billion.

Starbucks’ success is almost unparalleled in the coffee industry, and the chain accounts for over 75% of all coffee shop sales. However, these numbers aren’t merely due to Starbucks simply existing. Their loyalty efforts in recent years have a lot to do with their success.

Starbucks’ loyalty program, Starbucks Rewards, is one of the most successful programs of its kind and the coffee chain attributes over 40% of its total sales to the rewards program, which boasts a loyalty base of 31 million members in the US alone.

Starbucks Rewards: The loyalty program’s mechanics

Starbucks Rewards is slightly more complex than Costa’s loyalty program. For starters, it is tier-based, and the currency used to reward members is “stars.” Customers are given one star per $1 spent when paying by cash/credit, and two stars per $1 when preloading funds onto the Starbucks app or card.

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Starbucks Rewards is a relatively straightforward 2-tier points-based program where customers earn one star per 2 PLN spent. Eighty stars can be redeemed for a free drink, with the Gold tier at 200 stars providing additional perks like free modifiers and a birthday treat. Registration creates an account to track progress. 

Earning Stars

• Customers earn one Star for every 2 PLN spent at Starbucks 
• Stars can be earned by paying via the Starbucks app, card, or other payment methods 

Reward Levels

• Green Level (Entry Level): Free birthday drink or cake when reaching this level
• Gold Level (200 Stars): Free extras like extra espresso shots, syrups, whipped cream on drinks

Redeeming Stars

• 80 Stars = Free drink 

Registration & Account

• All loyalty program members are in for occasional treats such as “double star days” and access to exclusive games and offers.

As part of their loyalty program, Starbucks also offers prepaid Visa cards that customers can use when shopping at Starbucks and other retailers. In return, they can earn stars a lot faster than members paying via other means.

Cafe Nero/Caffè Nero

Founded in 1997 in London, the Italian-influenced chain Caffè Nero (also spelled Cafe Nero), is yet another successful coffee shop. While perhaps not as culturally iconic as Starbucks nor as popular as Costa, Cafe Nero still enjoys a fairly sizable monopoly on the coffee market. For the first half of fiscal year 2023, Caffè Nero reported UK sales of £150 million, a 17% increase compared to the same period in 2021. 

Though a lot of its success can be attributed to engaging with new sales channels such as Uber Eats and its Coffee At Home business, to name just a few, similar to its competitors, Cafe Nero has also been working on revamping its loyalty scheme.

Initially starting with a simple proposition, i.e. “buy-nine-get-one-free” stamp cards, the coffee chain is now taking a leaf out of its competitors’ book and experimenting with things such as gamification, as well as placing a greater emphasis on sustainability.

Cafe Nero: The loyalty program’s mechanics

In 2017, Cafe Nero launched an app allowing users to collect their points without the need for physical stamp cards. This has clearly been a success with its customer base, and the app was downloaded a million times in its first year. 

Since then, Cafe Nero has also run a number of loyalty-focused, gamification-based campaigns to increase engagement, for example:

• Unlimited coffees over a certain period of time for customers who purchase their coffee with the Cafe Nero loyalty payment app
• Customers using the app receive a surprise reward
• The chance to win one of 10,000 free coffees when purchasing during its Christmas promotional period

The brand continues to engage with gamification tactics to maintain high levels of engagement across all of its markets and differentiate itself from the competition. It’s also responding to consumers’ desire for environmentally conscious products, by rewarding customers using reusable cups with an extra digital stamp.

Dunkin’

Founded over 70 years ago, the American-based coffee and donut company, Dunkin’ Donuts is a key player in the coffee industry. Available in 36 countries and 12,871 locations, it maintains a 26% share of the U.S. coffee shop market. While its famous donuts probably played a part in its success, its loyalty program, Dunkin’, has brewed quite a storm as well.

Within three years of the Dunkin’ launch, 7.5 million people signed up for the app. Thanks to a combination of clever technology investment, its customer-centric app and savvy marketing, Dunkin’ Donuts has built a sizable empire of loyal customers.

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Dunkin’: The loyalty program’s mechanics

The success of the chain’s loyalty program is made up of three key parts, namely:

1. The Dunkin’ app, which is currently rated five stars on the App Store, is more than a barcode users scan to claim or spend their points. It also functions as a digital wallet and an ordering platform, allowing customers to order ahead and pay within the app and skip the queues, making the app irresistibly convenient.
   
   
2. Apart from earning the standard number of points (10 points per dollar spent), Dunkin’ Donuts offers program members lots of opportunities to earn extra points and rewards. For example, crediting members extra points upon hitting important business milestones; offering generous seasonal discounts and special codes; running campaigns that give users the chance to win cash prizes, and lots more. Dunkin’ Donuts knows how to stay relevant among its customers and foster lasting loyalty.
3. The brand has also been particularly good at engaging with its customers on social media. Thanks to its frequent campaigns and promotions, its loyalty members have been happy to refer friends and make their love of the brand known on their social profiles, making their loyalty engine a self-perpetuating cycle.

What makes Dunkin’ Donuts’ rewards program so successful is the fact that the brand is ready to go the extra mile and continue engaging and re-engaging users beyond their standard point offerings or free birthday drinks.

Krispy Kreme Rewards

Continuing with the donut theme, we arrive at Krispy Kreme, a globally recognized donut and coffeehouse brand founded in 1937.

The brand remains a strong competitor in the coffee chain industry. As such, it’s no surprise that Krispy Kreme has decided to come out with its own loyalty program to optimize its existing customer engagement offerings.

Krispy Kreme Rewards: The loyalty program’s mechanics

Krispy Kreme Rewards, the program’s official name, has a relatively unique and complex benefits structure. It’s made up of four rewards “tracks,” which are coffees, specialty coffees, singles, and dozens. Any time a customer purchases an item from one of the four tracks, they receive a single credit for that very track. In order to get a freebie from one of the categories, members need 12 credits in total, e.g. buying 12 specialty coffees will get you a free specialty coffee. Essentially, each track functions as a digital stamp card.

Although the loyalty scheme sounds fun, earning rewards may take some time, with credits being split four different ways and no way to merge credits from different tracks. Also, the fact that at least 12 coffee purchases are needed to get a free beverage makes the program not as kind on the wallet as some of the other coffee loyalty programs. The credits also expire after 90 days, so there’s a chance that some will expire if we don’t keep track (pun not intended) of them.

The program’s redeeming feature is the free donut members get upon registering, in addition to exclusive access to deals and offers that can be found within the Krispy Kreme Rewards app.

The revamped Krispy Kreme Rewards aims to be more generous by allowing faster points accumulation across all purchases and more flexible, customizable rewards redemption compared to the previous credit-based model [4][5]. The welcome offer, birthday treat, and other perks further incentivize joining the new program.

Recently, the Krispy Kreme Rewards program was revamped to allow faster points accumulation across all purchases and more flexible, customizable rewards redemption compared to the previous credit-based model. The welcome offer, birthday treat, and other perks further incentivize joining the new program.

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The key elements of the renewed Krispy Kreme Rewards program include:

• Faster points earning

Members now earn 10 points for every $1 spent at Krispy Kreme, replacing the previous system where 12 specific item purchases were required to earn a reward.

• More flexible rewards redemption

Points can be redeemed at varying levels for different rewards, such as a free single doughnut, 3-pack, 6-pack, dozen doughnuts, coffee, and hot chocolate drinks. This allows members to customize their rewards based on their preferences.

• Welcome offer

To kick off the new program, Krispy Kreme is giving all members (new and existing) a free Original Glazed dozen doughnuts from April 30 to May 11, 2024.

• Birthday treat

Members receive a free sweet treat on their birthday under the new program.

• Limited-time product trials

There will be opportunities for members to try new, limited-time products for free.

Greggs

Although not as internationally recognized as some of the brands mentioned above, Greggs remains one of the UK favorites. Founded in 1939 as a bakery, Greggs has been steadily transforming itself from a sausage roll merchant into one of the country’s most popular coffee shop chains. In recent years, the brand has been achieving record results, delivering a bumper pre-tax profit of £188.3m for 2023 – up from £148.3m the previous year, after like-for-like sales in company-managed shops rose by 13.7%

These great results follow Greggs’ efforts to expand their coffee proposition by investing in better coffee machines, providing WiFi, and offering more seating in order to recreate the coffee shop experience customers usually go to Starbucks for.

Similarly to its competitors in the coffeehouse industry, Greggs has also set to work on its loyalty scheme, going beyond physical stamp cards and updating their app with their new loyalty offerings. Greggs fans now get to enjoy a wider variety of rewards, ranging from sweet treats and savory bakes to hot beverages.

Greggs Rewards: The loyalty program’s mechanics

However, its overall loyalty proposition is very similar to Krispy Kreme’s before revamping. Functioning as a digital stamp card, credits are also divided into a number of different categories, i.e. breakfast, savories and bakes, drinks, sandwiches and salads, sweet treats and hot food. 

The good news is that coffee drinkers only need to buy nine coffees before they receive a free one. Given that Greggs is typically seen as the more affordable option, it’s clear why the brand is soaring in popularity among coffee drinkers.

Greggs also gives loyalty members a free hot beverage upon registering and a sweet treat on their birthday.

MyMcDonald’s Rewards

The brand that hardly needs an introduction, McDonald's, though best known for its burgers, has actually been brewing a storm among coffee lovers who swear by McCafe coffee. Given that the chain is easily accessible in all corners of the world and has consumer-friendly prices, we can definitely see the appeal.

Although there isn’t a designated app for McDonald’s Cafe, the MyMcDonald’s Rewards algorithm regularly features lots of coffee-related rewards for its devoted coffee drinkers. 

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MyMcDonald's Rewards: The loyalty program’s mechanics

McDonald’s keeps its app fairly simple, which probably accounts for some of its success. For each $1 spent, the customer earns 100 points in the QSR loyalty scheme. The points can be later exchanged for free meals. The more points you have, the higher tier you are in and therefore, you can redeem more valuable prizes.

The program is split into four points-based tiers: 1 500, 3 000, 4 500, and 6 000 points for different rewards from the 16 menu items.

For coffee lovers specifically, the app functions as a digital collection of alternating deals and coupons. Examples of past campaigns include a deal where buying five McCafé beverages gets you one for free; or coupons for 1-cent medium or large beverages when buying a McCafé drink – basically a buy-one-get-one-free. 

Although the app may not have all of the fancy offerings that consumers can find with your average coffee chains, the program works due to its generosity, which doesn’t go unnoticed by coffee consumers.

Peet’s Coffee

Founded in sunny Berkeley, California, in the 1960s, Peet’s Coffee is undoubtedly a much smaller coffee chain. Its 289+ coffee stores can only be found in the US, with 80% of them in California. Even so, the chain is credited with introducing the country to darker roasted Arabica blends, which lend themselves especially well to a good morning espresso.

Apart from serving its blends in its coffee stores, Peet’s also enjoys deals with a number of grocery stores in the US, which offer the brand’s freshly roasted beans, brewed coffee, bottled cold brew and other coffee-based drinks. Peet’s Coffee is also served at airports and Californian universities such as Berkeley and Stanford, making the brand especially popular with younger sections of the population.

Peetnik Rewards: The loyalty program’s mechanics

Its rewards scheme, Peetnik Rewards, keeps it very simple – which is probably not a bad thing considering how easy it makes for program members to redeem their rewards, unlike some of the above-mentioned coffee brands. 

Customers signed up for the loyalty program receive one point per every dollar spent, 125 complimentary points after their first purchase, in addition to an extra 25 birthday points alongside a treat of choice. Peet’s Coffee recently revamped their range of offerings, increasing the number of different rewards for members to enjoy, e.g. lattes, alt-milks, coffee beans and other treats.

Members can also skip the morning queues by ordering and paying contactless within the app.

Gregorys Coffee

The New York-based Gregorys Coffee is a fairly recent addition to the U.S. coffee scene. Though the chain only opened its doors in 2006 and its 24th store in the last few years, that hasn't stopped Gregory’s from delivering the highest quality of coffees and teas to busy New Yorkers. Its pastries and packaged goods are known to be curated by an in-house dietitian, making staying healthy on the go that much easier.

Gregorys Coffee: The loyalty program’s mechanics

It is a multi-tier points-based loyalty program that aims to drive customer engagement and spending by offering increasingly valuable rewards as members climb through the Gregular, Hot Shot, Visionary and VIG status tiers.

Here is Gregorys Coffee's loyalty program structure:

1. Earning Points:
   1. Customers earn 10 "G's" (points) for every $1 spent at Gregory's Coffee.
   2. The more points accumulated, the higher rewards can be redeemed.
2. Tier Levels:
   1. Gregular (Base Level)
      1. Order ahead, delivery and in-store mobile pay capabilities
      2. Special offers and an annual "Gregular anniversary" reward
   2. Hot Shot (Spend $250)
      1. Free in-store refills
      2. Special birthday reward
      3. Exclusive "Hot Shot only" perks
   3. Visionary (Spend $500)
      1. All Hot Shot perks
      2. 10% off all bags of coffee
      3. Two  monthly "happy hours"
      4. Access to monthly CEO newsletter
3. VIG – Very Important Gregular (Spend $1000)
   1. All previous tier perks
   2. Free coffee once a month
   3. 20% off all bags of coffee
   4. Three monthly happy hours
   5. Exclusive events and new store access

Caribou Coffee

Caribou Coffee, an American coffeehouse chain and coffee company founded in 199, began as a modest coffee shop in Minnesota and has since evolved into a significant competitor alongside renowned brands like Starbucks and Dunkin'. As of September 2023, Caribou Coffee boasts over 750 locations worldwide, maintaining a robust presence both domestically in the United States and in international markets such as the Middle East.

To rival the loyalty programs of larger coffee chains like Starbucks Rewards, Caribou Coffee introduced "Caribou Perk," a strategic initiative designed to reward and incentivize customers for their repeated visits and purchases through a points-based system.

Caribou Perks: The loyalty program’s mechanics

Here's how Caribou Perk operates: Upon joining, new members are greeted with a welcoming gesture—a complimentary medium beverage on their inaugural visit, crafted to their preferences.

As for earning points, it's simple: Members of Caribou Perks accumulate 2 points for every $1 spent on purchases at participating U.S. Caribou Coffee locations. Whether they're checking in at the store or making eligible online purchases while logged into their account, every transaction contributes to their point tally. Naturally, the more frequently customers visit and make purchases, the faster their points accumulate.

Once points are amassed, members have rewards awaiting them. From the threshold of 25 points to the more substantial milestones of 50, 100, 150, 200, 300, or 400 points, there's a reward to redeem.

Conclusion 

Loyalty programs in the coffee industry can be 'make or break' factors, especially given the fierce competition, substantial investments involved, and coffee's crucial role in urban lifestyles. Coffee shops are constantly striving to differentiate themselves, and while product quality remains paramount, creating an effective coffee shop rewards program is essential for sustained success. 

The coffee shop loyalty programs are not just about offering discounts; they play a significant role in customer engagement, fostering a sense of belonging, and building an emotional connection with the brand. They incentivize customers to return frequently, thus boosting customer retention and encouraging repeat business. By offering rewards such as free drinks, discounts, or exclusive perks, coffee shops can motivate customers to spend more, thereby increasing their average transaction value. Additionally, well-structured loyalty programs can transform occasional visitors into regular patrons, significantly enhancing the overall customer lifetime value.

It would not be an exaggeration to say that coffee shop loyalty programs are indispensable in the urban coffee market, serving as a gateway for building long-term customer engagement. It is a crucial element in the coffee business, where customers – on the one hand – consider coffee as a lifestyle attribute, but – on the other – face multiple coffee shop offerings all the time, which makes their loyalty very fragile. 

A well-designed loyalty program can keep customers engaged and connected to the brand. By providing personalized rewards and recognizing customer preferences, coffee shops can create a more personalized and enjoyable experience for their patrons. This level of customization not only enhances customer satisfaction but also fosters a deeper emotional connection, making customers feel valued and appreciated.

Furthermore, loyalty programs in the coffee industry can help businesses gather valuable data on customer behavior and preferences. This data can be leveraged to refine marketing strategies, tailor promotional campaigns, and introduce new products that resonate with the target audience. For instance, understanding which rewards are most popular can help coffee shops optimize their offerings and create more compelling incentives for their customers.

The emotional connection between a coffee brand and its customers cannot be overstated. Loyalty programs that include elements of gamification, such as earning points for each purchase or unlocking new levels of rewards, can make the customer experience more engaging and enjoyable. This sense of progress and achievement keeps customers coming back, not just for the coffee but for the experience itself. It turns a simple transaction into a memorable interaction, fostering a loyal customer base.