The high price of loyalty

We have some terrible, no-good news: rewards programs are getting less rewarding.

Driving the news: Brands are making customers pay up more loyalty points to get free drinks and snacks. At Starbucks, customers now have to earn 100 “stars” to get a free coffee or baked good, up from 50. At Tim Horton’s, a box of Timbits that used to cost 140 points has shot up to 800.

  • Changes to Tim Horton’s rewards program mean that it now costs $40 to get a reward that used to amount to $15 in spending.

Why it matters: From Chipotle to Canada’s favourite coffee chain, being a loyal customer is getting more expensive. And while regulars may grumble, businesses know they still have money to spend, while placing the blame solely on inflation.

  • Starbucks said the hikes are necessary to preserve its rewards program, suggesting it’s no longer feasible to give out free drinks and snacks like the company used to.

  • Chipotle’s rewards membership did grow 20% last year, however, despite two hikes in the number of redemption points needed for a free burrito.

Bottom line: Businesses look to rewards programs to hack consumers’ brains and drive up their spending. Since the 1930s, researchers have observed that the closer we are to getting a reward, the faster we’ll work to achieve it, and that’s why the time between each visit to a shop gets shorter as customers get closer to their free coffee or snack. For most, the basic psychology will still apply even if Starbucks asks them to put in a little more effort.