• About Us
  • Get Insights to Your Inbox
Friday, May 9, 2025
Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors
Search in posts
Search in Author
Search Events
Filter by Categories
Action Learning
Artificial Intelligence in Business
Book Club
Books
BU Today
Business Challenges
Business Education
Business Functions
Business Policy & Markets
Corporate Strategy
Digital Business
Digital Business Institute
Diversity, Equity & Inclusion
Entrepreneurship & Innovation
Events
Expert Take
Feature
Finance & Accounting
Future of Business Education
Future of Work
Global Media
Harvard Business Review
Health, Biopharma, & Health-Tech
Human Resources Policy Institute
Innovation
Insights Live
Institute for Sustainable Energy
Journals
Language of Business
Leadership & Management
Local Media
Marketing
Media Mention
Multimedia
National Media
Newsletter Spotlight
Op-Ed
Operations
Opinion
Our Insights
Partners in Business Ethics
Podcast
Publications
Research Institutes
Risk
ScienceDirect
Silicon Valley Bank
Sloan Management Review
Social Impact
Special Series
Susilo Institute for Ethics in the Global Economy
Technology
The Brink
Thinkers50@BUQuestrom: Passion & Purpose
Videos
Insights@Questrom
  • Our Insights
    • All
    • Business Challenges
    • Business Education
    • Business Functions
    Massachusetts Economy at Risk from Trump Administration Policies  

    Massachusetts Economy at Risk from Trump Administration Policies  

    Small businesses may take the brunt of tariffs, even when they’re based in the US 

    Retail’s latest tariff challenge? Setting prices. 

    Bureaucrats get a bad rap, but they deserve more credit − a sociologist of work explains why

    Bureaucrats get a bad rap, but they deserve more credit − a sociologist of work explains why

    Gordon Burtch Named Finalist for the 2025 Bradford-Osborne Research Award

    Gordon Burtch Named Finalist for the 2025 Bradford-Osborne Research Award

    Best Personal Loans for a 600 Credit Score

    Why have car insurance premiums been increasing over the past years? 

    Trump looking at cutting US drug prices to international levels, sources say 

    Trump looking at cutting US drug prices to international levels, sources say 

    Small businesses in the US may take the brunt of tariffs 

    Small businesses in the US may take the brunt of tariffs 

    Executive Insights: Ned Rimer, Faculty Director, Health Sector Management Program, Questrom School of Business, Boston University (video)

    Tariffs are expected to worsen the divide between Main Street and Wall Street 

  • Videos & Podcast
    • All
    • Podcast
    • Videos
    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Tariffs and Their Economic Impact

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Navigating Internet Privacy: Unpacking Cookies, Dark Patterns, and Future Data Protection Challenges (2)

    Beyond Prototypes: Rethinking Innovation in Complex Ecosystems with Prof. Douglas Hannah

    Beyond Prototypes: Rethinking Innovation in Complex Ecosystems with Prof. Douglas Hannah

    Is Business Broken? Season 2 out now! 

    Is Business Broken? Season 2 out now! 

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Redefining Retirement: Navigating Emotional and Social Transitions with Insightful Strategies

    Life After Cookies: Who Uses Google’s Privacy Sandbox? – Garrett Johnson

    Life After Cookies: Who Uses Google’s Privacy Sandbox? – Garrett Johnson

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Real Estate Ripples from a Landmark Settlement

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    The Hidden Wisdom of Cultural Pushback

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Fusion Strategy: Navigating the Industrial Evolution

  • Insights Events
    • Events
    • Insights Live
    • Questrom Institute Events
  • In the Media
    • All
    • BU Today
    • Global Media
    • Local Media
    • National Media
    • Op-Ed
    • The Brink
    Small businesses may take the brunt of tariffs, even when they’re based in the US 

    Retail’s latest tariff challenge? Setting prices. 

    Best Personal Loans for a 600 Credit Score

    Why have car insurance premiums been increasing over the past years? 

    Trump looking at cutting US drug prices to international levels, sources say 

    Trump looking at cutting US drug prices to international levels, sources say 

    Small businesses in the US may take the brunt of tariffs 

    Small businesses in the US may take the brunt of tariffs 

    Executive Insights: Ned Rimer, Faculty Director, Health Sector Management Program, Questrom School of Business, Boston University (video)

    Tariffs are expected to worsen the divide between Main Street and Wall Street 

    How AI Chat Search Could Disrupt Online Advertising

    Boeing aircraft, duty-free no more 

    How AI Chat Search Could Disrupt Online Advertising

    Compounding pharmacies must stop making versions of Ozempic and Wegovy as shortage ends 

    In a ‘work-from-anywhere’ world, where are people working?

    Rising drug prices are hammering patients, employers, and insurers. Is there any end in sight? 

    How Retailers Can Capitalize on the “Refund Effect”

    How to Monetize Volunteer-Driven Platforms 

  • Publications
    • All
    • Books
    • Harvard Business Review
    • Journals
    • Sloan Management Review
    How Retailers Can Capitalize on the “Refund Effect”

    How to Monetize Volunteer-Driven Platforms 

    How Retailers Can Capitalize on the “Refund Effect”

    Leading Global Teams Effectively 

    How Retailers Can Capitalize on the “Refund Effect”

    Research: When Prototypes Don’t Yield Useful Insights 

    Transforming Products into Platforms: Unearthing New Avenues for Business Innovation

    Transforming Products into Platforms: Unearthing New Avenues for Business Innovation

    How Retailers Can Capitalize on the “Refund Effect”

    We’re Still Lonely at Work

    How Retailers Can Capitalize on the “Refund Effect”

    17 Team-Building Activities for In-Person, Remote, and Hybrid Teams

    3 Ways to Support Employees with Bipolar Disorder

    3 Ways to Support Employees with Bipolar Disorder

    Will That Marketplace Succeed?

    Will That Marketplace Succeed?

    How Retailers Can Capitalize on the “Refund Effect”

    Research: Why Companies Should Disclose Their Lack of Progress on DEI 

  • Questrom Book Club
Insights@Questrom
  • Our Insights
    • All
    • Business Challenges
    • Business Education
    • Business Functions
    Massachusetts Economy at Risk from Trump Administration Policies  

    Massachusetts Economy at Risk from Trump Administration Policies  

    Small businesses may take the brunt of tariffs, even when they’re based in the US 

    Retail’s latest tariff challenge? Setting prices. 

    Bureaucrats get a bad rap, but they deserve more credit − a sociologist of work explains why

    Bureaucrats get a bad rap, but they deserve more credit − a sociologist of work explains why

    Gordon Burtch Named Finalist for the 2025 Bradford-Osborne Research Award

    Gordon Burtch Named Finalist for the 2025 Bradford-Osborne Research Award

    Best Personal Loans for a 600 Credit Score

    Why have car insurance premiums been increasing over the past years? 

    Trump looking at cutting US drug prices to international levels, sources say 

    Trump looking at cutting US drug prices to international levels, sources say 

    Small businesses in the US may take the brunt of tariffs 

    Small businesses in the US may take the brunt of tariffs 

    Executive Insights: Ned Rimer, Faculty Director, Health Sector Management Program, Questrom School of Business, Boston University (video)

    Tariffs are expected to worsen the divide between Main Street and Wall Street 

  • Videos & Podcast
    • All
    • Podcast
    • Videos
    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Tariffs and Their Economic Impact

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Navigating Internet Privacy: Unpacking Cookies, Dark Patterns, and Future Data Protection Challenges (2)

    Beyond Prototypes: Rethinking Innovation in Complex Ecosystems with Prof. Douglas Hannah

    Beyond Prototypes: Rethinking Innovation in Complex Ecosystems with Prof. Douglas Hannah

    Is Business Broken? Season 2 out now! 

    Is Business Broken? Season 2 out now! 

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Redefining Retirement: Navigating Emotional and Social Transitions with Insightful Strategies

    Life After Cookies: Who Uses Google’s Privacy Sandbox? – Garrett Johnson

    Life After Cookies: Who Uses Google’s Privacy Sandbox? – Garrett Johnson

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Real Estate Ripples from a Landmark Settlement

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    The Hidden Wisdom of Cultural Pushback

    S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

    Fusion Strategy: Navigating the Industrial Evolution

  • Insights Events
    • Events
    • Insights Live
    • Questrom Institute Events
  • In the Media
    • All
    • BU Today
    • Global Media
    • Local Media
    • National Media
    • Op-Ed
    • The Brink
    Small businesses may take the brunt of tariffs, even when they’re based in the US 

    Retail’s latest tariff challenge? Setting prices. 

    Best Personal Loans for a 600 Credit Score

    Why have car insurance premiums been increasing over the past years? 

    Trump looking at cutting US drug prices to international levels, sources say 

    Trump looking at cutting US drug prices to international levels, sources say 

    Small businesses in the US may take the brunt of tariffs 

    Small businesses in the US may take the brunt of tariffs 

    Executive Insights: Ned Rimer, Faculty Director, Health Sector Management Program, Questrom School of Business, Boston University (video)

    Tariffs are expected to worsen the divide between Main Street and Wall Street 

    How AI Chat Search Could Disrupt Online Advertising

    Boeing aircraft, duty-free no more 

    How AI Chat Search Could Disrupt Online Advertising

    Compounding pharmacies must stop making versions of Ozempic and Wegovy as shortage ends 

    In a ‘work-from-anywhere’ world, where are people working?

    Rising drug prices are hammering patients, employers, and insurers. Is there any end in sight? 

    How Retailers Can Capitalize on the “Refund Effect”

    How to Monetize Volunteer-Driven Platforms 

  • Publications
    • All
    • Books
    • Harvard Business Review
    • Journals
    • Sloan Management Review
    How Retailers Can Capitalize on the “Refund Effect”

    How to Monetize Volunteer-Driven Platforms 

    How Retailers Can Capitalize on the “Refund Effect”

    Leading Global Teams Effectively 

    How Retailers Can Capitalize on the “Refund Effect”

    Research: When Prototypes Don’t Yield Useful Insights 

    Transforming Products into Platforms: Unearthing New Avenues for Business Innovation

    Transforming Products into Platforms: Unearthing New Avenues for Business Innovation

    How Retailers Can Capitalize on the “Refund Effect”

    We’re Still Lonely at Work

    How Retailers Can Capitalize on the “Refund Effect”

    17 Team-Building Activities for In-Person, Remote, and Hybrid Teams

    3 Ways to Support Employees with Bipolar Disorder

    3 Ways to Support Employees with Bipolar Disorder

    Will That Marketplace Succeed?

    Will That Marketplace Succeed?

    How Retailers Can Capitalize on the “Refund Effect”

    Research: Why Companies Should Disclose Their Lack of Progress on DEI 

  • Questrom Book Club
Insights@Questrom
Home Our Insights Business Challenges Business Policy & Markets

Starbucks fans are steamed:

The psychology behind why changes to a rewards program are stirring up anger, even though many will get grande benefits

Huseyin KaracaJay ZagorskybyHuseyin KaracaandJay Zagorsky
March 14, 2023
in Business Policy & Markets, Marketing
37
0
Starbucks fans are steamed:

The rewards price to get a free cup of hot coffee at Starbucks is going up. AP Photo/Elaine Thompson

Share on FacebookShare on TwitterShare on LinkedIn

Starbucks, the coffee chain giant, is modifying its rewards program, and the news is full of stories of outraged consumers.

The main focus of their ire is that, starting Feb. 13, 2023, it will cost twice as many of the program’s reward points, called stars, to earn a free cup of hot coffee.

When companies pare rewards programs back, there is often significant customer pushback. A recent example in the coffee market was seen in the fall of 2022 when Dunkin’ made it harder to get free items with its rewards program, also leading to customer backlash.

We are business school professors who study frequent flyer and other rewards programs. While we don’t drink very much Starbucks coffee, we are fascinated by the reaction of Starbucks customers – and what they seemed to miss.

Building loyalty

Reward and frequent flyer programs are designed to build loyalty, as they provide a form of rebate to regulars. They also are seen by consumers as a good way to save money, particularly when inflation is high.

They are also meant to lock customers into a particular company or airline. In the case of Starbucks, the rewards program reduces the likelihood that its customers will buy coffee from competitors like Dunkin, Costa Coffee, Tim Hortons or Peet’s Coffee.

Even though airline rewards programs have been around for years, rewards programs among large restaurant chains are relatively new. Sandwich chain Subway, for example, didn’t start one until 2018. Fast-food company McDonald’s only launched its loyalty program in 2021.

And now, even small businesses are finding it valuable and easier to start loyalty programs, thanks to the acceleration of digital technology in restaurants during the pandemic. About 57% of restaurant chains now have a loyalty program.

Rewards math

Starbucks, however, is an old-timer, having started its rewards program all the way back in 2008.

The program, which had been regarded by some as one of the most rewarding, gained members steadily during its first two decades but exploded in growth during the pandemic. At the end of 2022, about 29 million people were enrolled, up from a little over 16 million in early 2019.

The rewards program’s rules are quite complex: The legal language runs about five times longer than this article.

Briefly, customers earn credits by spending money. Each dollar spent on food or drinks earns one star. However, preloading money onto a Starbucks gift card or mobile app earns two times the stars.

Stars can then be spent on drinks, food or merchandise. Under the current program, the simplest and cheapest reward, for 25 stars, is adding a free shot, dairy substitute or flavoring to a drink. The highest cost items, for 400 stars, are merchandise, like a branded cup or a bag of ground coffee.

Several hands hold two clear plastic cups of iced coffee on a table
Iced drinks have become Starbucks’ most popular beverage – even in winter. Chris Hondros/Getty Images

Consumer friendly?

Starbucks announced changes to the terms and conditions of its rewards program in December, adjusting the “price” for some of its items.

The change that received the most attention was that the cost of a cup of plain hot coffee or tea would double from 50 stars to 100.

At first glance, Starbucks’ modification to its rewards program might be perceived as bad for consumers. But there is more to this change than meets the eye. What went less noticed is that the company is also lowering the price to get a free iced coffee or tea from 150 points to 100.

To an unsuspecting consumer, the points reduction for iced coffee may not mean as much against the points increase for hot coffee. The coffee business, however, has radically changed over the last few years. The change is best summarized by a recent New York Times headline, “Does anyone drink hot coffee anymore?” Iced or cold-brewed coffee is now the rage – even in winter – and growing quickly. Cold beverages have accounted for at least 60% of Starbucks’ total sales every quarter since early 2021, thanks in part to the popularity of iced drinks among Gen Z customers.

This means that for a large share of Starbucks customers, one part of the rewards program is actually getting more generous.

So why the uproar, if one of the more popular items on Starbucks’ menu is getting cheaper?

Loss aversion, a key concept in behavioral economics, provides a simple explanation. Loss aversion means people perceive something they lose as a bigger deal than something equivalent they gain. People who need to spend 50 more stars from now on to get a hot coffee feel more pain than customers who will spend 50 fewer stars to earn a free iced coffee. This extra pain leads to more complaints from those hurt and little praise from those benefiting.

Rewarding customers

Starbucks, for its part, explained the new rewards system this way:

“This change allows us to improve the health of our program while making member favorites like iced coffee easier to earn.”

While its critics may disagree about the reason for the decision, ongoing research by one of us conducted into a tea chain suggests retailers have a profit incentive to make their rewards programs more generous. The reason is simple: When rewards are easier to earn, customers become more motivated to collect points, especially as they approach a reward they can redeem. This is why airlines see some customers doing mileage runs at the end of the year, just to earn better status.

From the company’s perspective, the benefits from customers shopping more frequently can surpass the costs incurred by providing more rewards. And so for companies and consumers, rewards programs can benefit everyone.The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Tags: consumer behaviorJay ZagorskySami KaracaStarbucks
Huseyin Karaca

Huseyin Karaca

Huseyin Karaca is a Clinical Assistant Professor at Boston University's Questrom School of Business, where he also serves as the Faculty Director of the Undergraduate Analytics Program. His research and teaching focus on various aspects of the digital economy, including digital marketing, artificial intelligence, machine learning, data analytics, and behavioral economics. Additionally, he has expertise in advertising strategy, business analytics, customer analytics, and strategic brand management.

Jay Zagorsky

Jay Zagorsky

Jay Zagorsky is Clinical Associate Professor in Markets, Public Policy, & Law and is a cross-disciplinary researcher who has spent over two decades of researching a wide variety of personal wealth topics. He tries to explain why some people become rich, others are poor and some move between these two states. He is currently synthesizing this research into a book that presents the results of his academic research and other wealth researchers in an accessible format.

Related Insights

Push to roll back electric vehicle subsidies brings uncertainty for automakers 
Business Challenges

Lower gas, oil prices ‘a good news story for America’ amid inflation, tariff uncertainty 

April 10, 2025
State Laws Banning Abortion Linked to Increases in Mental Health Issues
Business Policy & Markets

Brink Bites: Studying Cigarette Restrictions, the Life of a Famed Poet, and Shifting Attitudes Toward Capitalism 

March 4, 2025
Could $5,000 DOGE stimulus checks really happen? Here’s what economists say 
Business Challenges

Could $5,000 DOGE stimulus checks really happen? Here’s what economists say 

March 2, 2025
Wendy’s plans to roll out dynamic pricing
Business Policy & Markets

Will Americans get $5,000 checks from DOGE savings like Trump, Musk claim? 

February 25, 2025
Analysis: Trump announced he is getting rid of the penny. What are the consequences? 
Business Policy & Markets

Analysis: Trump announced he is getting rid of the penny. What are the consequences? 

February 16, 2025
How AI Chat Search Could Disrupt Online Advertising
Business Policy & Markets

When prices fall in the PPI, do prices fall at the store? 

February 13, 2025

Upcoming Events

June 2025
Jun 07 2025

Mayor WU, BU Questrom Team Up to Host Civic Summit 2025

Boston University Questrom School of Business
No event found!

Get Our Insights Newsletter

Get Insights straight to your inbox by signing up now.

    Popular Insights

    • Massachusetts Economy at Risk from Trump Administration Policies  

      Massachusetts Economy at Risk from Trump Administration Policies  

      16 shares
      Share 6 Tweet 4
    • Ethical Implications of ChatGPT in the Educational Setting

      211 shares
      Share 84 Tweet 53
    • 2025 Digital Marketing Symposium: Sponsored by the Digital Business Institute

      8 shares
      Share 3 Tweet 2
    • Compounding pharmacies must stop making versions of Ozempic and Wegovy as shortage ends 

      8 shares
      Share 3 Tweet 2
    • 2025 Wadsworth Family Distinguished Lecture in Business Leadership & Technology Innovation – Peter Levine 

      8 shares
      Share 3 Tweet 2

    Boston University Questrom School of Business
    595 Commonwealth Avenue
    Boston, MA 02215

    Follow Us

    Newsletter

    © 2023 Trustees of Boston University

    • About Us
    • Digital Business Institute
    • Human Resource Policy Institute
    • Susilo Institute for Ethics in the Global Economy

    Welcome Back!

    Sign In with Linked In
    OR

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In

    Add New Playlist

    Generic selectors
    Exact matches only
    Search in title
    Search in content
    Post Type Selectors
    Search in posts
    Search in Author
    Search Events
    Filter by Categories
    Action Learning
    Artificial Intelligence in Business
    Book Club
    Books
    BU Today
    Business Challenges
    Business Education
    Business Functions
    Business Policy & Markets
    Corporate Strategy
    Digital Business
    Digital Business Institute
    Diversity, Equity & Inclusion
    Entrepreneurship & Innovation
    Events
    Expert Take
    Feature
    Finance & Accounting
    Future of Business Education
    Future of Work
    Global Media
    Harvard Business Review
    Health, Biopharma, & Health-Tech
    Human Resources Policy Institute
    Innovation
    Insights Live
    Institute for Sustainable Energy
    Journals
    Language of Business
    Leadership & Management
    Local Media
    Marketing
    Media Mention
    Multimedia
    National Media
    Newsletter Spotlight
    Op-Ed
    Operations
    Opinion
    Our Insights
    Partners in Business Ethics
    Podcast
    Publications
    Research Institutes
    Risk
    ScienceDirect
    Silicon Valley Bank
    Sloan Management Review
    Social Impact
    Special Series
    Susilo Institute for Ethics in the Global Economy
    Technology
    The Brink
    Thinkers50@BUQuestrom: Passion & Purpose
    Videos
    • Business Challenges
      • Business Policy & Markets
      • Digital Business
      • Diversity, Equity & Inclusion
      • Entrepreneurship & Innovation
      • Future of Work
      • Health, Biopharma, & Health-Tech
      • Risk
      • Social Impact
    • Business Functions
      • Corporate Strategy
      • Finance & Accounting
      • Innovation
      • Leadership & Management
      • Marketing
      • Operations
      • Technology
    • Publications
      • Journals
      • Harvard Business Review
      • Sloan Management Review
    • Insights Events
      • All Events
      • Insights Live
      • Questrom Institute Events
    • Videos & Podcast
      • Videos
      • Insights@Questrom Podcast
      • Podcast
    • Voices in the Media
    • Our Experts

    © 2023 Trustees of Boston University

    -
    00:00
    00:00

    Queue

    Update Required Flash plugin
    -
    00:00
    00:00