Starbucks Stock (NASDAQ:SBUX) Slips as Concerns About Rewards Program Grow

It is clear that coffee giant Starbucks SBUX -2.11% ▼ can ill afford any program that does not have positive benefit, and positive benefit that shows up quickly. The Back to Starbucks plan needs to be a hit, and recent changes to the loyalty program are also being closely scrutinized. And concerns are starting to mount that the loyalty program may not be the hit that it must be. Investors seem to be getting scared as well, based on the nearly 2% drop in Starbucks shares seen in Monday afternoon’s trading.

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One great thing about the previous rewards program was that it was simple. Deliberately simple, in fact, as Starbucks users landed stars based on purchase rates, with a modifier applied for anyone using a Starbucks Card to pay for their drinks and treats. But Starbucks recently moved to change that, moving to somehow both streamline customer experience and also add complexity, a point that has some very concerned.

The new program does have benefits. It improves flexibility, offering more rewards for big spenders and keeping both points and birthday rewards active longer. It also, amazingly, offers a simplification in some regards. There are fewer rules and benefits overall, which makes it easier for the heavily-taxed baristas to explain. However, these wins did not come without drawbacks. Heavy users may feel less benefit, and thus stop being heavy users. The benefits tend to come across as “low-cost,” which also discourages response. And the points in general really lack the “aspirational” feel, reports note.

Plush Chairs, Ceramic Mugs

Meanwhile, the Back to Starbucks plan also depends on people wanting to return to the coffee shop itself, rather than just its drive-thru window. And Starbucks has responded with new store designs, new training and more. Among the “more” part are two surprisingly simple changes: a new plush chair and a new ceramic mug.

The chair looks a lot like the kind of chair that would have been seen back in 1990s Starbucks locations, back when Starbucks was often the center of coffee culture. The mugs, meanwhile, are ceramic, and ceramic at every size. This proved a challenge, as different mug sizes impact how fluids flow into the customer’s mouth. No one wanted a mug that would give a customer an impromptu espresso face-wash, and so, Starbucks had to balance the ceramics with mug shape to achieve a desirable outcome.

Is Starbucks Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 15 Buys, eight Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 15.07% loss in its share price over the past year, the average SBUX price target of $100.59 per share implies 4.25% upside potential.

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