Article 1: The Brewing Backlash Over Reward Programs

The consumer backlash is brewing over Starbucks' changes to its rewards program, which took effect Monday.

Blaming inflation, the Seattle-based chain has moved up the reward tiers for its most popular items. Now, coffee lovers must spend more money to earn enough "stars" for a free latte or pastry.

"Starbucks just torpedoed their reward system, customer L.C. Graf-Juarez tweeted in December after the company announced the changes.

Dan Busler, another customer, tweeted in response, "I easily spend $50 a month at Starbucks...now there's no reason to go there as often as I do."

"Reward programs are one of many things companies are thinking about in terms of their own profitability, so I think it's a tight balance," he said to Wharton Business Daily on SiriusXM. " On the one hand, you want to continue the rewards that you have set up to nudge consumers to buy.

At the same time, the economy has been tough with the interest rates going up. They have to also start thinking about what else can be done

An analysis of 15 months of sales data for 24,000 customers enrolled in a loyalty program with a cosmetics retailer in Asia found that customers spent twice as much per month after joining. It was a boon for sales, yet the company was surprised by how much more it cost to serve those

customers.

Starbucks may have been facing a similar conundrum in the latest revamp of its rewards program, which has been around since 2008. It grew steadily to 19 million customers in late 2020, then skyrocketed during the pandemic. At the end of last quarter, Starbucks counted 28.7 million rewards members.

All the recent changes are just a reminder that businesses continue to walk a fine line between profitability and customer loyalty, lyengar said.

They are always thinking about what customers want - and what keeps them coming back.

1.Discuss the factors Starbucks should have considered in its reward system by using the CAGE Framework.

2. Discuss FOUR (4) different characteristics between services affered by Starbucks versus goods (physical products) like a chocolate bar