How America's biggest loyalty scheme is using NFTs to boost revenue from its biggest customers

Randy Ginsburg
February 1, 2023
Starbucks plans to offer a more engaging experience for the 27 million members of its loyalty programme by creating a blockchain alternative.

With 30 millions members, Starbucks' loyalty programme is one of the most successful in the world. Randy Ginsburg explains why the coffee giant is turning to NFTs for a programme that accounts for over 50% of its sales.

Despite the fading NFT hype, the underlying merit of blockchain technology has not wavered. If anything, the business potential for NFTs and web3 technology is more apparent than it was twelve months ago. 

As gimmicks and marketing cash grabs run their course, major brands are taking a more calculated and strategic approach to web3 in 2023: an approach that views digital assets not as a flash in the pan, but as a catalyst for deep connection and engagement with loyal customers. 

Built on the Polygon blockchain, the Starbucks Odyssey loyalty programme is a shining example. First announced in September last year, Odyssey is an extension of the coffee chain’s already massive Starbucks Rewards, which has almost 30 million members and has become a critical spoke in the chain’s revenue machine; 53% of the company’s US revenue came from loyalty members in 2022.

Starbucks plans to offer a more engaging experience for the 27 million members of its loyalty programme by creating a blockchain alternative.

Designed to offer its most loyal customers a more diverse set of rewards in a more engaging way, Odyssey engages customers through interactive activities called Journeys. Each Journey is crafted to educate customers about the history of coffee and of Starbucks, consisting of digital and in-person activities like taking a mobile quiz or going to a store to test out a new drink.

Once a Journey is complete, members will earn collectible Journey Stamps and Odyssey Points that can unlock three levels of further experiences, from virtual espresso martini-making classes to real-world trips to the Starbucks Hacienda Alsacia farm in Costa Rica.

Intentionally dropping the word NFT from most external marketing communications and allowing Stamps to be purchased with a credit card, Starbucks has thoughtfully designed Odyssey so customers never need to know that they are interacting with the blockchain.

Unlike other NFT loyalty programmes which operate siloed from the rest of a company’s marketing efforts, Odyssey is also seamlessly integrated into Starbucks' existing programme, business goals, and internal processes. As well as being recorded on Odyssey, purchases are also recorded on a customer’s existing Starbucks Rewards account, whilst for in-store purchases, customers simply have to scan their Rewards card to track their progress.

This makes for an organic avenue through which customers can be delighted digitally, and acknowledged for being part of Starbucks, strengthening their affinity for the product. In addition to expanding the strength of its membership programme, these initiatives will continue to drive revenue for Starbucks in both the short and long-term, encouraging customers to spend more with the brand than they normally would, and augmenting what loyalty programmes are designed to do: bring customers in for the long-term.

But in Odyssey, Starbucks has also embedded completely new features that their Rewards scheme lacks. Starbucks has since unveiled the Odyssey marketplace, where members can quickly buy more Stamps or sell their own, no crypto required. This leans into the core advantage of building in web3: your applications are interoperable with all the other data on the chain. Through the marketplace, customers can sell Stamps for cash, making coffee a drink-to-earn initiative backed by real value and rewards at the end of it.

Starbucks Odyssey is built to feel like a normal loyalty scheme, but it uses blockchain behind the scenes to create a better experience with extra features.

Starbucks could have built their own marketplace, but with Odyssey data stored publicly on the blockchain, Journey Stamps can be traded anywhere. Customers have already sold over $33,000 worth of Journey Stamps since December. It also means that other applications are able to privilege Starbucks customers based on their Odyssey progress without having to go through a corporate partnership process, which increases the value of joining Odyssey for customers and helps entrepreneurs build their business.

Rebecca Orlov is the CEO of Epic Playdate, a brand studio that helps companies create compelling visual narratives. She says that there is a lot for both web2 and web3 companies to learn from the rollout, particularly in the design and communication tactics of Starbucks’ pre-launch strategy. Although the first Odyssey invites began in December, Starbucks opened a waitlist months earlier, while they were, in Rebecca’s words, “still building the plane”. That helps build excitement for the launch, as well as ensuring that it gets off to a strong start.

Customers can sell Stamps for cash, making coffee a drink-to-earn initiative backed by real value and rewards at the end of it.

By revealing their most interested consumers, the waitlist also gave Starbucks greater insight into Odyssey’s likely users. “The Starbucks community is so massive, and a huge percentage is not even aware of web3, but they now have a defined cohort from these early sign-ups to use as a focus group,” Orlov tells Culture3. “Starbucks can speak clearly to them because they are cognizant of their typical customer behavior. The beta users know that this is a work-in-progress and that they have the rare opportunity to shape the overall user experience.”

While Starbucks has yet to reveal the exact number of those who have already signed up on the waitlist, the Seattle-based company has said that demand “far exceeded expectations.” Early users have also raved about the experience, acknowledging that the gamified nature of the Journeys turned them from “an occasional Starbucks customer into a regular one.”

“Many brands are missing the customer retention aspect.”

— Rebecca Orlov

And whether members have been accepted into the beta or are still on the waiting list, Orlov praises Starbucks for communicating with those initial cohorts, updating them with clear instructions on how to play, collect, and get the most out of their Stamps. By incorporating gamification and personalised communication, Starbucks has created a sense of community and connection with their customers, ensuring that they remain engaged and invested.

Breaking down how the Odyssey Rewards scheme works: Customers complete Journeys to earn Stamps, which they can either sell on the marketplace or redeem for rewards. Users can also buy Stamps on the marketplace, whilst other entrepreneurs can leverage the onchain data for their own apps.

“I received an email two weeks ago that recognised I was still waiting to get in. They offered me something I want as a Starbucks drinker — coffee — and I was invited to play their ‘Starbucks for Life’ game while I waited,” she explains, noting that she has since been accepted into the beta version. “The intersection of customer engagement and gamification did its job. It made me feel acknowledged and feel good. From such a large brand, this felt human.”

As for how blockchain-powered commerce will evolve down the line, Rebecca emphasises the need for brands to be adaptable, employ the best marketing practices, and put the customer experience first.

“The transaction and experience onchain is technically different but the consumer is the same”, she says. “Meet consumers where they are and always continue the customer journey experience no matter what transaction pathway you go down, whether that's in-store, online, or onchain. Many brands are missing the customer retention aspect of web3 experiences, almost as if it doesn’t apply. It really does.”

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Randy Ginsburg
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Randy is the founder of Digital Fashion Daily and Third Wall Creative, a web3 marketing agency. Straddling the worlds of retail and emerging technology, Randy has worked with many companies including nft now, Shopify, and Touchcast to create compelling and educational web3 content. Previously, Randy worked at Bombas, developing the most comfortable socks in the history of feet.

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