The news: Starbucks is testing Coffee Loop, a new rewards program that gives customers a free coffee for every nine beverages they buy, per Modern Retail.

• The chain last week began emailing some Rewards members offering access to a time-sensitive Coffee Loop pilot, noting that space is limited.
• The program currently exists as a separate website and does not live within the Starbucks iOS app.

The context: Rewards customers are a critical ingredient to Starbucks’ success, but with the company’s US comparable store sales declining for six straight quarters, it is clear that the current rewards program isn’t boosting participation.

• The program offers users one star per dollar they spend if they pay as they go, or two stars per dollar spent if they use preloaded funds. It also includes integrations with Delta SkyMiles, Marriott Bonvoy, and Bank of America.
• That approach is “too much of a one-size-fits-all” discount-focused model rather than one aimed at driving engagement, CEO Brian Niccol said during the company’s Q3 earnings call.
• Coffee Loop should help Starbucks learn whether a simpler punch-card-style perk—akin to what many independent coffee shops offer—can drive more frequent visits.
• The company will likely test other loyalty levers that might appeal to different customer segments in the coming months.

Our take: Revamping its rewards program is just one piece of the larger puzzle Starbucks must solve to revive its business. The company is clearly trying to address its problems—from speeding up service and refreshing its menu (particularly its food) to re-energizing its stores. But the real test is whether initiatives like Coffee Loop are the right prescriptions to restore its health.

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