Things weren’t always so successful for the coffee giant. In 2008, the financial downturn caused by the housing market collapse forced Starbucks to reassess its marketing strategy, according to Business Insider. The company realized that it was able to drive up the value of homes, later thought to result in increases in housing value up to about 96%, by way of proximity. This phenomenon is now called “The Frappuccino Effect.” However, retaining that value was a challenge that Starbucks would need to tackle in order to stay ahead of inflation. CEO Howard Schultz is lauded as something of a hero among shareholders for spearheading many of the innovations that carried the company into the future, including closing over 900 underperforming locations. But his introduction of the Starbucks Rewards program was revolutionary.
Fast-forward to present day, Starbucks is able to sustain its gift card and rewards programs across over 17,700 worldwide locations because of the relationship between the programs and the international customer bases (via Motley Fool). If customers put money into the gift card “bank,” so to speak, they’re contributing directly to Starbucks’ profits. When they return to redeem those funds, they’ll create more business, which in turn generates even more profit.
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