Starbucks NFT Web3-based Loyalty Program: How and Why it Matters (暫時只提供英文版本)

Author: LazyKar (Repost)

NFT, a key web 3 element, is going mainstream as some big brands are moving into the space by incorporating NFT elements as a part of their loyalty program. Starbucks announced its plans to introduce NFT in its loyalty program in May 2022. In September, Starbucks unveiled Starbucks odyssey, a new experience powered by NFT technology, for its members to earn and buy digital collectible stamps (NFTs) to unlock new benefits and immersive coffee experiences.

Why are people excited about this launch? How does Starbucks add value to the Loyalty Program by integrating NFTs? What can we learn from Starbucks' NFT-centric loyalty program?

How it works

In Starbucks Odyssey, once members log in. they can embark the ‘journeys,’ a series of activities, such as playing interactive games or taking on fun challenges to deepen their knowledge of coffee and Starbucks. Upon completion, members will be rewarded with a digital collectable journey stamp (NFT).

Starbucks didn’t reveal much details about the activities, we can expect NFTs should provide flexibility to loyalty programs. For example, Starbucks can reward members by completing tasks or missions. Like Pokémon Go, members can claim NFTs after completing the mission in the physical store. Or educate customers by rewarding NFT, such as watching new flavor behind the scene videos, ways to brew coffee, daily check-in, etc. Members can even burn NFTs to get premium NFTs to unlock premium benefits.

1. User experience

Starbucks adopts NFT and other Web 3 technology in its rewards loyalty program with user experience in mind. According to Starbucks, “Our vision is to create a place where our digital community can come together over coffee, and engage in immersive experiences, and celebrate the heritage and future of Starbucks.”

As a web3 enabler, Starbucks Odyssey provides a seamless experience for its customers who may not even know they are interacting with blockchain technology. “It happens to be built on blockchain and web3 technologies, but the customer — to be honest — may very well not even know what they’re doing and is interacting with blockchain technology. It’s just the enabler,” Starbucks CMO Brady Brewer told TechCrunch.

To lower the entry barrier to Starbucks Odyssey, a crypto wallet is not required as Starbucks understands crypto wallets and blockchain are too professional for the general public. Customers can use their existing login credentials and buy NFTs using a credit or debit card, making the Starbucks Odyssey experience fun and easy for members to access this new technology and claim an ownership stake in their loyalty to Starbucks.

By using blockchain technology, every transaction is required a gas fee. To eliminate the high gas fee for each NFTs transaction, Starbucks coordinates with Polygon (MATIC) blockchain to avoid high costs and low transaction speeds caused by congestion on Ethereum’s main network. (Note: Ethereum just completed the merge, from proof-of-work to proof-of-stake, on September 15, 2022)

2. Digital Ownership

NFTs provide a digital certificate of ownership for a specific asset. All transactions and transfers are tracked and recorded on the blockchain and available to the public. Implementing NFTs into the loyalty program can provide digital ownership to members. In the release, Starbucks mentioned members can purchase ‘limited-edition stamps’ (NFTs) through a built-in marketplace within the Starbucks Odyssey web app experience. Each digital collectable stamp will include a point value based on its rarity, and the stamps can be bought or sold among members within the marketplace, with ownership secured on a blockchain.

According to Brady Brewer, Starbucks executive vice president and chief marketing officer, “Leveraging Web3 technology will allow our members to access experiences and ownership that was not possible before.”

3. Gamification

Gamification not only allows brands to deepen relationships with customers and increase customer engagement but also can use for new product launches. Yet Starbucks' current loyalty program is using gamification for customers to earn stars. The stars are not transferable, and can only redeem rewards, like free food and drinks. The NFT platform allows customers to earn and purchase NFTs by providing a new gamification experience.

4. Brand Building

• Sustainability

To align with its sustainability aspirations, Starbucks Odyssey is utilizing a “proof-of-stake” blockchain technology built by Polygon, which uses less energy than first-generation “proof-of-work” blockchains.  (Note: Ethereum just completed the merge, from proof-of-work to proof-of-stake, on September 15, 2022)

According to Ryan Butz, VP of loyalty, strategy and marketing for Starbucks “Building Starbucks Odyssey using technology that aligns with our sustainability aspirations and commitments is a top priority. We took a very thoughtful and thorough approach when evaluating which blockchain to utilize and Polygon’s fast, low-cost, and carbon-neutral network is the perfect foundation for our first digital community.”

Final Thoughts

NFT is a good match for a loyalty program extension. It allows brands to have a more dynamic relationship with different segments of customers. Starbucks acts as an early adopter for web3 technology, providing a use case for marketers on how to implement NFT into loyalty programs. Instead of making web3 technology a gimmick, Starbucks is using the technology to add value and focus on functionality to its loyalty program.

Next Steps

As aforementioned, Starbucks provides us with a good case study on applying NFTs to loyalty programs. It is not just applying the technology but also having a holistic view, domain experts, long-term strategy, and executive plan. The following are basic questions we should take into consideration before applying NFT and web3 technology to the loyalty program.

1. How many members do you have? Are they engaged with the brands?  

Though NFTs can add value to loyalty programs, we should have a broad customer base who cares about the brand before implementing NFT. If we do not have a certain amount of active customer base, even if we issue branded NFT, it may not be worth allocating the budget to it.

According to Starbucks Q3 2022 report, Starbucks has 27.4 million 90-day active members in the U.S. With the large member base, despite Starbucks Odyssey being launched this year, Starbucks opened a waitlist to let members be the first to experience the new digital community. It can help to create noise before it is launched.

2. Are you focusing on user experience? Do you understand your customers?

Adopting NFTS to loyalty programs is to retain customer loyalty and gain new generation customers. Therefore, user experience is still a focus area for the loyalty program. Web3 technology is just a solution to make it happen. And NFT is one of the use cases in Blockchain technology.

3. Do you respect what Web3 stands for? Did you do the web 3 entry research?

The core value of Web3 is to power back to the customer's hand. They own the data, products, and digital assets. Hence, decentralized ownership is key in web3.