No more free coffee on your birthday? Companies Control Customer Rewards Programs: Here’s Why

WASHINGTON-

Rewards programs, including birthday gifts and discounts, have long been a way for brands to build loyalty and incentivize spending. But now some companies are getting a little tighter, and customers are taking notice.

Last fall, for example, many objected to Dunkin’s decision to stop offering a free drink on their birthday and instead give them triple loyalty points on their purchase. On June 1, Sephora began requiring a minimum purchase of US$25 for online customers looking to claim a free gift and 250 loyalty points during the month of her birthday. And Red Robin added a $4.99 dine-in-only minimum purchase requirement for customers to get their free birthday burger.

Changes to birthday rewards or redemption requirements are not new. Starbucks, which gives its rewards members a free drink or meal for their birthdays, progressively limited the time frame to redeem that gift over the years, from 30 days, to one week, to four days, and finally to just the date of your birthday in 2018.

Some experts say the cost of maintaining loyalty programs, as well as the recent impacts of inflation and changes in consumer behavior since the start of the COVID-19 pandemic, are among the reasons why companies may be going backwards.

“As we assess our own personal spending, so do businesses,” Marshal Cohen, Circana’s senior industry advisor and retail sales expert, told The Associated Press. “Businesses have to look and say, ‘Are these programs working? Are they running at full capacity? … (And) is there another way to do it that doesn’t cost us as much money?'”

For Sephora customers enrolled in their Beauty Insider birthday rewards, for example, they can still claim their gift in person with no minimum purchase. But it costs the company money to ship products sold online, said Leora Lanz, assistant dean for academic affairs and assistant professor of practice at Boston University’s School of Hospitality Management.

Sephora did not immediately respond to The Associated Press’s request for comment.

Despite consumer pushback, some chains have argued that adjustments to rewards programs simply reflect how customers behave. In a statement to The Associated Press, Starbucks said it “found that the vast majority of members were using their birthday reward on their actual birthday.”

Dunkin’ argued that its new rewards program would give its customers more flexibility and a greater variety of food and drink options, and in a statement to The Associated Press last week, the company said the new program allows “members celebrate your birthday longer.” ”, pointing to the three-day window within which customers can triple their loyalty points on birthday purchases.

Still, the announcement felt off-putting to many Dunkin’ customers, who shared their frustrations online. In the months after Dunkin’s announcement, dozens of Twitter users expressed disappointment to learn that the free birthday drink was gone. Some joked that they “don’t work with Dunkin anymore,” a hint at the chain’s tagline, and others suggested they could take their future business elsewhere.

Experts say how companies communicate changes to rewards programs is key.

“What (brands) need to do is not make too many changes so often, because you’ll start to annoy your audience and it could backfire, and you have to be very careful about that,” Lanz said. “They need to communicate it so it’s not a complete surprise.”

Others say that calling attention to what’s “missing” can also cause backlash, and it’s better to provide clear alternatives so consumers feel rewarded.

Red Robin, which said it started with minimum purchase requirements of $4.99 and dine-in only on its free birthday burger “to maintain the integrity of the promotion” and to give guests “the best experience possible” when celebrating in restaurants, it also introduced a half-birthday treat in 2023 “as an added gesture of thanks.”

Consumers are likely to continue to see changes to birthday rewards and customer loyalty programs in the future, Cohen noted.

“The pie is getting smaller for a lot of these discretionary items,” he said, pointing to the persistently high costs of living facing consumers and increased competition among businesses vying for those limited dollars. “You’re going to see a lot of (companies) evaluate their programs to try to figure out how to drive business in a more profitable way.”

This may mean a reduction in more rewards programs. But there could also be the opposite effect, said Julie Ramhold, a consumer analyst for DealNews.com, noting that some retailers could offer “potentially better birthday rewards to encourage a return to spending on frivolous items.”

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