Starbucks Has One of the Most Effective Prepaid Card Programs

by Ben Jackson 0

For all the noise made aboutopen-loop prepaid card programs, one of the most successful cardprograms out there is actually the closed-loop Starbucks card. Inan analyst call on Nov. 4th, 2010, Starbucks Coffee Company’s CEO,Howard Schultz said that the company’s customers loaded more than$1.5 billion onto Starbucks cards in fiscal year 2010. This was up20 percent over fiscal year 2009 and the card is not used to payfor almost 20 percent of the company’s transactions.

The company’s total revenues forthe year were $10.7 billion, meaning that roughly 10 percent flowedthrough the prepaid channel. The secret of Starbucks’ success isnot too hard to figure out. The company offers a variety offeatures that encourage customer loyalty, including thefollowing:

  • Reloads through PayPal,online, and automatic reloads,
  • Registration to protect lostor stolen cards,
  • No fees or expirationdates,
  • Refunds for unusedcards,
  • Loyalty programs offeringfree beverages and exclusive offers,
  • Mobile phone account management,
  • Instant bar codes displayedon a mobile phone for payment at the register,
  • Card management on Facebook,
  • A suggestion box for new ideas,

And other perks.

Yet even with such a high valueproposition, looking at the numbers, it is clear to see thatStarbucks’ card program has plenty of room for growth. Now the taskfor Starbucks is to find out who among its regular customers arenot prepaid cardholders and figure out what package of featureswill appeal to them. Given their record of innovation, it is likelyStarbucks will see its card base grow. The question remains, whatwill that card look like. One possibility is to look at its mobileofferings and see whether some customers move off of plastic to anentirely virtual card.