The Power of Loyalty: Analyzing My Starbucks Rewards Programs in China and Thailand
Akira Kondo
March 15, 2014
My Starbucks Rewards program is probably one of well-known reward programs in the United States while Starbucks Coffee Company successfully has integrated into the mobile technology that we now live with. This reward program is now available outside the United States, but it is available in limited countries. Starbucks China started the program in 2012 while Starbucks Thailand just kicked off the program on February 4, 2014. In this article, I would like to show the differences between My Starbucks Rewards programs in China and Thailand. Since both countries are located in Asia and their income levels on average are pretty much similar today, it probably is good to compare between them. (I originally wanted to work on China and Japan; however, no My Starbucks Rewards program is unfortunately available in Japan, where I also live.)
What is My Starbucks Rewards program? Put it simply, you will collect Stars to get rewarded. In order to earn one Star, you need to spend certain amount of money. For instance, 50RMB for one Star in China and 100Bahts for one Star in Thailand. While earnings Stars, you will receive some benefits, such as birthday drinks, and discounts on some certain products. By the way, earning Stars in the U.S. is far easier because you need to purchase one cup of coffee/drink to get one Star regardless of a price. This article will focus on how to reach Gold level, where greater rewards come along with more purchases on Starbucks’ products. The Gold level loyalists, for instance, will receive a personalized Gold card, enjoy one free drink every 10 purchases (China), and receive a little recognitions (benefits vary among countries but getting one free drink after 10-12 purchases of drink is one of the best benefits of the rewards program). While I do not discuss many details on the rewards programs, please visit to check more details about My Starbucks Rewards programs in each county at: China: www.rewards.starbucks.com.cn Thailand: www.starbuckscard.in.th USA: www.starbucks.com/card/rewards One important note: you need to register your card on one of the above websites to start earning the Stars. In Thailand, My Starbucks Rewards program just started on February 4, 2014. Until then, Thai local customers were used to pay with cash, credit cards, or a U.S.-issued Starbucks card. Now, Starbucks Thailand offers its own Starbucks cards that are exclusively available and used within the country. That said, the reward program is relatively new in Thailand. It has been less than a few months since it kicked off the program. On the other hand, Starbucks China started My Starbucks Rewards program earlier in 2012. According to William Blair Growth Stock Conference in 2012, China will be the second largest market outside the U.S. in 2014. There are currently slightly above 1,000 stores (as of September 29, 2013) across China, and though it is an old stat, there were 600, 000 active reward program members (as of first half of 2012). The latest number of reward program members is unknown; however, it is highly likely that it has already hit more than one million by today. How do these My Starbucks Rewards programs work in these countries? (See more details in the figure) <China> Each 50RMB purchase -> 1 Star There are three tiers: Welcome Level, Green Level, Gold Level To reach the Welcome Level, get your card at nearest Starbucks store and register it. To reach the Green Level, five Stars to be collected within a calendar year. As a Green level status holder, benefits are one Birthday Beverage and Buy Three Beverages, Get One Free. To reach Gold level, 25 Stars to be collected within a calendar year. Or spend 1,250RMB (US$203) annually to attain Gold As a Gold status holder, benefits are your own personalized Gold card and one complimentary drink for every 10 purchase. <Thailand> Each 100Baht purchase -> 1 Star There are three levels: Welcome Level, Green Level, Gold Level To reach the Welcome Level, get your card at nearest Starbucks store and register it. As a Welcome Level holder, your great benefit of “one free drink for every 12 drink purchase” is already built in. To reach the Green Level, 100 Stars to be collected within a calendar year. As a Green Level holder, some benefits are free birthday drink and food, free New Year calendar, and some discounts on special occasions. To reach the Gold level, 250 Stars to be collected within an annual calendar year. Or spend 25,000Bahts (US$774) annually to attain Gold As a Gold Level holder, some benefits are your own personalized Gold card, free New Year gift, and special event invitation. |
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Sources: Starbucks, Starbucks China, Starbucks Thailand
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As I said earlier, collecting Stars is much easier in the states compared to China and Thailand. It seems like newly launched My Starbucks Rewards in Thailand requires more actual money spent with the card to reach the Gold level compared to China. Since each Star is collected based on the money spent, it requires about $774 spent to reach the Gold status in Thailand while about $203 spent to reach the Gold status in China.
The main difference is clearly the cost of Stars between China and Thailand. Collecting Stars to reach the Gold level in Thailand is much harder than doing so in the second largest economy in the world, China. Is it contradicting? Probably. However, Starbucks Thailand generously gives “a free drink for every 12 drink purchase” from an introductory Welcome level while Chins is not. Again, the main difference is that collecting Stars to reach the Gold level in Thailand is challenging for Thai local customers, who tend to be trapped in the middle-income level. Last year, there was an article that Starbucks’ products were more expensive than the U.S. It is nothing wrong. One cup of Tall Americano in China costs 22RMB, which is about $3.58. The same product costs only about $2.00 in the U.S. (depending on the cities). In Thailand, it costs 90Bahts or $2.79. The price of Tall Americano in China is relatively expensive. Without calculating operating costs in China, it is impossible to know how it leads to that $3.58 per cup of Tall Americano; however, one thing we know that the Chinese have to pay higher price to grab coffee in the country. 
Sources: World Bank, Starbucks Annual Report (2013)
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Who are the Starbucks customers and Starbucks loyalists in China and Thailand? Starbucks’ products are considered to be premium. Even in the wealthier countries in the U.S. and Japan, they think Starbucks coffee is not inexpensive. There are cheaper coffees outside of Starbucks. McDonald’s offers rich coffee at much reasonable price. They even offer Frappuccino, Café Mocha and Café Latte. However, Starbucks is opening up more stores in China as well as in Thailand while their income levels are much lower than the U.S. and Japan. Per capita GDP of China and Thailand are $6,091 and $5,473, respectively (in 2012), while the U.S. per capita GDP is almost $50,000. Since the cup of coffee is relatively more expensive in China and Thailand than the United States, how come Starbucks’ business so successful in these middle-income countries? It is contradicting that Starbucks offers more expensive prices of their products in those countries, where their per capita incomes are nearly 10 times smaller than that of the U.S. (Asian Starbucks stores tend to be occupied by their local customers for many hours, Starbucks may sell tables occupancy time and of course, cost of business)? In China, the current number of Starbucks stores opened is about 1,000 compared with more than 10,000 in the U.S. The population of China is 1.3 billion while that of the U.S. is about 300 million. Simple math tells that each Starbucks store in the U.S. can serve 27,000 customers, and each store in China can serve 1.3 million customers if all people have to drink Starbucks coffee. Again Starbucks is not inexpensive. If a single Chinese customer drank 10 cups of Tall Americano per month, she would have to contribute about 7 percent of her annual income and about 6 percent for Thai. However, American customers just need to spend about 0.5% of their annual income to get 120 cups of Tall Americano a year. By the way, if every Chinese drank 30 cups of Tall Americano a year, Starbucks’ revenue would become more than $120 billion! Plus, the Chinese prefer more sweeter and expensive Frappuccino, Café Mocha, and Latte, not the cheapest brewed coffee. Starbucks is, for sure, not focusing on 1.3 billion Chinese people but the company is focusing on some of the 1.3 billion. The average annual income in China is $6,091 but it is all about the average. These average people can still consume Starbucks coffee but one is not willing to spend $203 out of her annual income to attain the Gold level status. However, I somewhat often see the Starbucks Rewards Gold holders when I line up to grab my coffee in many of Shanghai Starbucks stores. Shanghai is the wealthiest city in China and according to China Daily, its annual disposable income is 40,188RMB or about $6,500. The disposable income is the income that a person can spend for anytime and it is a closer measurement to the GDP per capita. Higher income should allow more Starbucks consumption in China though it is not necessary. There is no reason why most Starbucks stores are located in urban modern cities, such as Shanghai, Beijing, and Guangzhou. In Shanghai, where I reside sometimes, there are four Starbucks stores near my home, which is located 5 miles away from the downtown (See the article). The average is just an average. Thus, there are many wealthier people above those average people. If 10% of total Chinese population were wealthier, that meant 130 million people, about the same size of the Japanese total population, would be a great target for Starbucks as well as multi-national global companies. Clearly Starbucks is trying to catch wealthier and middle-income customers. The middle-income customers can purchase several cups of coffee per month to enjoy modern culture of Starbucks. On the other hand, upper middle-income customers can purchase more Starbucks’ products, probably a few cups of coffee a week. They are surely today’s and future Gold-level customers. If all the Shanghai population attained the Gold-level status, Starbucks’ revenue would hit $10 billion annually while the U.S. sales in 2013 were $11 billion. That really makes sense why Starbucks wants to expand its business in China. The income level of China is growing rapidly and is moving toward upper middle-income level (See per capita GDP chart). Plus, the young Chinese enjoy the fashionable and modern culture that Starbucks offers. It is probably one of the best success stories among multi-national companies, which have entered into the Chinese market. |
 Source: World Bank
How about Thailand?
Starbucks’ products are surely expensive in Thailand. One cup of Tall Americano costs 90Bahts or $2.79. With 90Bahts on hand, a local person can grab a couple of food stand food, such as a bowl of noodle soup. Green Tea Frappuccino would probably be one of the best selling drinks in any Starbucks stores in Thailand and it costs 155Bahts. That 155Bahts is enough to cover a cost of full meal in an air-conditioned restaurant. Per capita income in Thailand was about $500 lower than that in China in 2012 while it was, in fact, twice higher than China during 2000. Thai people will clearly have to spend more money to grab Starbucks drink out of their annual income compared to the Chinese. Plus, attaining the Gold-level status for Thai is relatively more difficult to China and the U.S. They need to spend 25,000Bahts (or $774) to attain that level and it is again far more difficult to attain than China. Though it is unclear to me why getting the Gold-level status in Thailand is very challenging. I live in Thailand about six-eight months a year but it is also difficult for me to reach the Gold-level while I go to Starbucks everyday whenever in Thailand. On the other hand, I spend a few months a year in the U.S., and I have no problem attaining it. By the way, I always like the free-refill benefit. I believe those Thai customers must be wealthier if you see the Gold cards in their hands at a Starbucks store in coming months and so forth. Again, per capita income in Thailand is $5,500 and to attain the Gold-level status for them, they need to spend 14% of their annual income. That is impossible for them to spend the 14 percent of the income per year for Starbucks drinks unless they think that Starbucks drinks are, like toothpastes. On the other hand, the Chinese need to spend only 3.3 percent to reach the Gold level. That said, only high income people in Thailand can achieve the Gold level, which I may dislike the way Starbucks would soon separate the customers between the rich and the middle-income in a store. The company should give more chance for those growing middle-income customers, who can afford a couple of Starbucks drinks a month, to easily attain the Gold level in the year end. In that way, those customers feel not discriminated when standing on a line to grab their favorite cups of Starbucks’ products. Therefore, attaining the Gold level in Thailand is extremely challenging for local Thai and even Americans or Japanese, who live in Thailand. The average income people in Thailand will never spend 14 percent of their annual income to try to attain the Gold status. Even attaining the Green level is difficult for them (requires 5.7% of annual income to spend for Starbucks). In China, the story is much different from Thailand. The Chinese need to spend 3.3 percent of their annual income to reach the Gold level. Although it is still expensive to attain the Gold level out of their income, it would probably no problem for the upper middle-income people to reach that status. My Starbucks Rewards program is still new to China and especially to Thailand. It is very interesting to monitor how many Gold status holders will be in the future, and it is probably certain more we see them in the future, more upper middle-income people will be. Or more upper middle-income people in their countries, more Starbucks stores and Gold status members are. Sources: Starbucks, Starbucks Thailand, Starbucks China, World Bank William Blair Growth Stock Conference Presentation, June 12, 2012. China Daily, “Shanghai residents bag top disposable income,” Nov. 13, 2013. Yahoo! Finance Exchange rates as of March 15th, 2014. USD/CNY 6.1499 USD/THB 32.27 This article is solely written for academic purposes and nothing is related to Starbucks. All the contents are composed of my own opinions unless cited. |
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