Despite revenue fluctuations caused by the pandemic, the global coffee industry continues to go from strength to strength. In the U.S. alone, there are 24,000 coffee shops, bringing in $12 billion annually. While it’s been shown that the industry is highly concentrated at the top, with top 50 companies such as Starbucks and Dunkin Donuts raking in 70 per cent of the sales, the industry is defined by its strong competition. It’s predicted that in the next few years tens of thousands of new coffee shops will enter the market as demand soars across all demographics and barriers to entry remain low for aspiring coffee shop owners.
Both established coffee chains and new entrants are finding loyalty programs to be crucial in their success. Helping maintain existing customer bases and attract new ones, increasing sales, and boosting profits are just some of its benefits. Most importantly, however, 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 take a look at 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 loyalty 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.
Under the new loyalty offering, customers collect “beans” instead of points and 8 beans are needed in order 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 4 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?!
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 meremaid feature in films, TV and everyday jokes about hipsters and college students.
Starbucks currently boasts over 30,000 stores in 80 countries, half of which are in the US. Last year, their revenue topped a whopping $29 billion USD.
Starbucks’ success is almost unparalleled in the coffee industry, and the chain accounts for 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 40% of its total sales to the rewards program, which boasts a loyalty base of 24.2 million members in the US alone.
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”. Every dollar spent is equivalent to 2 stars, and 125 stars are needed to receive a free drink or food item.
There are three tiers and those are:
Welcome level (0-59 stars): This level is reserved for customers who have just registered, and it includes a free birthday drink.
Green level (60-299 stars): This is where the fun begins. Customers who have reached this level can receive a free drink with just 60 stars, get size upgrades on certain drinks, a free slice of cake alongside their drink when purchasing during their birthday month, and free drink customization.
Gold level (300+ stars): Gold level customers get all of the above perks in addition to a personalized gold card, tailored offers and coupons in addition to a free drink every 15 stars. And for those who earn an additional 30 stars on top of the 300, Starbucks guarantees the extension of gold level for an extra 12 months.
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 as well as other retailers. In return, they can earn stars a lot faster than members paying via other means.
Founded in 1997 in London, the Italian-influenced chain, 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 sizabla monopoly on the coffee market. With over 1000 coffee houses in over 10 countries, it’s reported to have generated £135.7 million in the first half of 2022 in the UK alone, a 200% increase on the same period the previous year.
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.
In 2017, Cafe Nero launched an app, allowing users to collect their points without the need for physical stamps 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 ran 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.
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.
The success of the chain’s loyalty program is made up of three key parts, namely:
- 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.
- Apart from earning the standard number of points (5 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 known how to stay relevant among its customers and foster lasting loyalty.
- 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.
With 887 million USD worth of annual sales, 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 program’s official name, has a relatively unique and complex benefits structure. It’s made up of four reward “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 there being 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.
Although not as internationally recognized as some of the brands mentioned above, Greggs remains a UK favorite. 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 profits while overtaking Starbucks in the number of beverages served to the nation.
These great results come following 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.
However, its overall loyalty proposition is very similar to Krispy Kreme’s. Functioning as a digital stamp card, credits are also divided into a number of different categories, i.e. breakfast, savouries 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. And given that Greggs is typically seen as the more affordable option, it’s clear to see 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.
The brand that hardly needs an introduction, McDonalds, 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 algorith regularly features lots of coffee-related rewards for its devoted coffee drinkers. The app itself is wildly successful, surpassing 20 million users in 2021.
McDonald’s keep it fairly simple with their app, 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 can redeem more valuable prizes.
The program is split into four points-based tiers: 1500, 3000, 4500, and 6000 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 get 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.
Founded in sunny Berkeley, California in the 1960s, Peet’s Coffee is undoubtedly a much smaller coffee chain. Its 200+ 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 over 14,000 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.
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 (looking at you, Krispy).
Customers signed up to 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.
The New York-based Gregory’s 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 been 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.
At Gregory’s, customers fall into one of four tiers, each offering a different amount of rewards -- but, unlike at Starbucks, you can start working toward free drinks even at the lowest tier. As a Tier 1 Gregular, you get a $5 credit for every $50 you spend. You’ll also receive special offers (fairly often), a free birthday drink, and a $5 credit any time you convince a friend to register.
Once you’ve spent a total of $200 with your rewards account, you’ll reach Tier 2, where you get everything previously mentioned, plus free in-store refills for drip coffee. Then, once you’ve spent $500, you get bumped to Tier 3, where you will also start getting a free $2.50 credit each month, just for existing.
Finally, once you’ve spent $1,000, you arrive at your final destination: Tier 4. As a Tier 4 Gregular, you start getting a $3.50 credit each month ($1 more than the measly Tier 3s), plus a free Gregorys hat.