What Starbucks Gets About Loyalty

The coffee chain has been a model of using games to build brand loyalty.

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Starbucks has long-honored local laws that allow residents to openly carry firearms, though an open letter by CEO Howard Schultz published Wednesday asks customers to leave their guns at home before entering its stores.
Starbucks has long-honored local laws that allow residents to openly carry firearms, though an open letter by CEO Howard Schultz published Wednesday asks customers to leave their guns at home before entering its stores.

Consumers today are more demanding than ever and they are armed with limitless information about products, pricing and current activities. Mounting evidence has convinced many organizations that they must find a way to emotionally connect with their customers in order to drive growth and increase sales with some degree of sustainability. Without such a connection, customers have no basis for making purchase decisions other than price. Thus, given the abundance of pricing information available today on the internet, the risk of becoming a commodity supplier with low margins is extremely high.

In order to create a lasting emotional connection, companies must start by fostering a corporate culture where their employees deliver on the brand promise, sustain the business strategy and create exceptional customer experiences. Current research indicates that 70 percent of U.S. workers are not engaged, costing the U.S. economy approximately $370 billion in lost productivity and sales.

To engage both customers and employees, companies must commit to an ongoing effort to educate, inspire and secure commitment to the brand and the company, including recognizing and rewarding loyalty. This is not about developing a program, but rather making a long-term commitment in focusing on both employees and customers as a way to drive growth.

Every single touch point with a customer is an opportunity for the brand to either gain or lose equity and loyalty, including interactions with customer service, billing, sales, after sales support and administration. In order for employees to deliver exceptional customer experiences, the team must know and understand the company vision, values, strategy, and brand promise. Their behavior and beliefs must genuinely alight with the delivery of the coporate promise.

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Starbucks represents a true success story when it comes to engaging both customers and employees to drive growth. As Lisa wrote in an earlier article, customers are not paying $3 to $5 for cup of coffee. They are paying for brand experience. The coffee chain's brand experience is manifested in every interaction with a Starbucks employee, whether it's the person taking the orders or the barista making the drinks.

There is a culture at Starbucks that drives its success, and one of the tools it uses very effectively is gamification. The company's loyalty program is designed to make tracking rewards fun and exciting.

Gamification made the short-list in Oxford Dictionary's 2011 "Word of the Year," defined as "the application of typical elements of game playing (e.g., point scoring, competition with others, rules of play) to other areas of activity, typically as an online marketing technique to encourage engagement with a product or service." Current projections by research firms including M2 and Gartner indicate that by 2015, U.S. companies will spend approximately $1.6 billion on gamification and over 50 percent of the largest international businesses will integrate gamification into their innovation processes.

Gamification is being adopted large scale because it works, catering to intrinsic and extrinsic motivators. In addition to being motivated by rewards and incentives, employees and customers are motivated by intrinsic motivators including the urge to direct their own lives, the yearning to do what we do in the service of something larger than ourselves, the desire to see progress and results, as well as the need to belong and connect with others. Dr. B. Lynn Ware, president & CEO of Integral Talent Systems, reported in "Corporate Universities: Lessons in Building a World-class Work Force" that retention and absorption levels through gamification are ten times higher than through traditional learning techniques or computer based learning.

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CEO and Founder of BRIC Language Systems Ryan McMunn says:

An example of how gamification can enhance a learning experience is in learning Chinese characters. My associate, Mike Morris challenged himself with a game of learning the radicals – 10 per day, and wound up pushing himself into learning the written language. He can't speak, but he reads a newspaper! Make learning a game!

The gamification technique has been used effectively for years by organizations like the Boy and Girl Scouts of America and Mary Kay. Children are thrilled to add merit badges to their uniforms as symbols of achievement and status. The goal of obtaining every additional badge is a strong motivator in the process of learning and changing behavior. Similar uses of gamification in the business world has emerged as a powerful tool in the employee and customer engagement tool bag.

To develop a powerful gamification program, it is critical that the gamification program is tied to a comprehensive employee and customer engagement strategy. Research indicates that 80 percent of gamification programs will fail because they are poorly designed or not tied to an overall engagement strategy

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In designing the program, you must know:

  • Who is your audience and what motivates them?
  • What kind of rewards appeal to your customers?
  • How will the game mechanics work in your overall strategy?
  • How you will measure the success of your program?
  • In addition to incorporating the right motivators and tying the program into a comprehensive engagement strategy, it is also important to get senior level alignment and endorsement. Management must educate the organization on the difference between "gaming," which is a form of entertainment, and "gamification," which is integrating game dynamics to engage users, drive participation and influence behavior.

    Next, it's time to educate consumers with comprehensive communication through rollout programs so people understand the objectives and how to play. Social media is an important element of gamification programs because it provides a vehicle to publicly share achievement and status. Be careful to keep the program fresh and current so users do not become bored. The experience should avoid becoming predictable and monotonous.

    As part of an overall engagement strategy, a well-designed gamification program will drive emotional connection to a company's brand and foster sustained growth and loyalty from employees and customers

    Rick DeMarco is the managing director of the West Coast office of Inward Strategic Consulting, an employee brand engagement consulting firm.

    Lisa Chau is the founder of Alpha Vert, a private consultancy focused on social media and cross–platform marketing. Previously, she spent five years working for her alma mater Dartmouth College, as assistant director of alumni affairs and assistant director of PR for the Tuck School of Business. She has also taught at MIT, and guest lectured MBA and undergraduate courses in e-business strategy at Baruch College and The New School.

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