In the world of brand loyalty and customer incentives, reward programs have always played a significant role. From birthday freebies to discounts, these programs have been successful in building loyalty and promoting spending. However, recently, some companies have started to tighten their belts, and customers are starting to take notice.
For example, Dunkin’ caused quite a stir last fall when they decided to discontinue offering a free drink on customers’ birthdays and instead provided them with triple loyalty points on their purchase. Similarly, Sephora recently implemented a minimum purchase requirement of $25 for online customers who want to claim a free gift and 250 loyalty points during their birthday month. Red Robin also joined the fray by making their free birthday burger promotion available only for dine-in customers who make a minimum purchase of $4.99.
Changes to birthday rewards and redemption requirements are not new. Starbucks, for instance, has gradually shortened the timeframe for redeeming their birthday rewards over the years, eventually limiting it to the birthday date only in 2018. Experts attribute these changes to the cost of maintaining loyalty programs, as well as inflation and changes in consumer behavior prompted by the COVID-19 pandemic.
Marshal Cohen, chief industry advisor of Circana and a retail expert, points out that businesses are evaluating their expenses just like individuals. They need to assess whether these programs are effective and if there are more cost-efficient alternatives. Leora Lanz, assistant dean of academic affairs and assistant professor of practice at Boston University’s School of Hospitality Administration, adds that companies like Sephora incur additional costs when shipping products sold online, which might explain their decision to implement a minimum purchase requirement for online customers.
Some chains have argued that adjustments to rewards programs are simply a response to customer behavior. Starbucks, for example, stated that the majority of their members were using their birthday reward on their actual birthday. Dunkin’ defended its new rewards program by emphasizing the flexibility and increased variety of food and drink options it offers, along with a three-day window for customers to triple their loyalty points on birthday purchases.
Despite these arguments, Dunkin’ faced backlash from disappointed customers on social media platforms. Some even jokingly declared that they would no longer “run on Dunkin’,” twisting the brand’s iconic slogan. Experts stress the importance of effective communication when making changes to rewards programs, advising brands to think carefully before making frequent changes that might alienate their audience. They also suggest providing clear alternatives to make customers feel rewarded even in the face of program modifications.
Red Robin, for instance, made its dine-in-only and minimum purchase requirements for the free birthday burger promotion to enhance the promotion’s integrity and ensure the best possible experience for guests celebrating at their restaurants. In addition, they introduced a half-birthday treat in 2023 as a gesture of appreciation.
According to retail experts, customers can expect further changes to birthday rewards and customer loyalty programs in the future. Rising costs of living and intense competition among businesses are driving companies to reassess their programs in order to find more profitable ways to attract customers. This might result in scaling back certain rewards programs, but it could also lead to an opposite effect, where retailers offer even better birthday rewards to entice customers to spend on indulgent items.
In summary, brands are reevaluating their reward programs, making adjustments that reflect changing circumstances and customer behavior. Effective communication and providing viable alternatives are crucial aspects of successfully implementing changes. Customers can look forward to evolving rewards programs in the future, as businesses strive to find the right balance between profitability and customer satisfaction.
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