in the midst of a monumental traffic slump, in part because it has been paying so much attention to loyal- ty members and generally ignoring everyone else. One of the first pri- orities for new CEO Brian Niccol is to broaden the chain’s marketing strategy. “We’ve been focusing on Star- bucks Rewards customers rather than talking to all our customers,” Niccol said in a video published last month. “And we’re changing that quickly, as you likely have already seen. We’re prioritizing our brand, highlighting the handcrafted prod- ucts customers expect, and show- casing the coffee innovation that sets Starbucks apart.” You may have noticed, for in- stance, that Starbucks has been run- ning TV commericals that focus on the quality of the chain’s coffee and the experience of its cafes. Mobile phones are conspicuously absent, and there’s no parting nudge to sign up or download anything. Starbucks is not the only brand making this shift. At McDonald’s, where customers typically have to download the app to get discounts, the chain has taken a more popu-
list approach with a $5 meal deal available to everyone. That deal, of course, helped spark a flurry of low- priced bundles across the indus- try—no loyalty account necessary. “It’s not that loyalty programs are wrong. It’s just that they’re nec- essary but not sufficient,” said Noah Glass, CEO of online ordering pro- vider Olo, in a recent interview. “You can’t just do loyalty. It needs to be couched in a guest engagement strategy that can be a net that cap- tures all the guests.” That could mean broad, brand-focused messaging like we’ve seen from Starbucks. It could also mean the opposite: One-to-one marketing that uses technology to tailor messages for specific custom- ers, whether they are loyalty mem- bers or not. Breakfast-and-lunch chain First Watch is one of the companies taking the latter approach. First Watch does not have a traditional loyalty program. Instead, it’s using data gathered from digital orders to appeal to individual customers in hopes of boosting traffic. Execu- tives said they saw a small increase in average check last quarter as a re-
We’ve been focusing on Starbucks Rewards
customers rather than talking to all our customers."
—BRIAN NICCOL, CEO, STARBUCKS
sult of their tests, though traffic was still down more than 4% compared to last year. This isn’t to say that loyalty pro- grams aren’t necessary or even that they aren’t effective. Red Robin, for instance, has celebrated the ear- ly returns from its revamped Red Robin Royalty club, and tests of a program at The Cheesecake Facto- ry are exceeding the company's ex- pectations. But the programs, aimed as they are at such a small, hyper-engaged slice of a restaurant's audience, can be distracting at a time when opera- tions should be working to attract as many people as possible. Whether those people come back will depend on the food, the service, the experience. If those things aren’t on point, a loyalty pro- gram won’t matter, as Starbucks has learned. “That rewards program is a valu- able tool,” Niccol told analysts on an earnings call last month. “It's not the only tool, but it's a valuable tool that I think we could make work harder for us if we put it in concert with marketing that has more broad reach.”
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JANUARY 2025 RESTAURANT BUSINESS
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