Customer loyalty programs have become a cornerstone of modern retail strategy, helping businesses strengthen customer relationships, increase purchase frequency, and differentiate themselves in increasingly competitive markets. While rewards programs often begin with generous incentives to attract members, their long-term success depends on creating sustainable value for both businesses and consumers. As retailers refine their loyalty strategies, many are discovering that the structure of a rewards program can be just as important as the rewards themselves.
The contrast between coalition loyalty programs and merchant-specific ecosystems illustrates this challenge. Coalition programs seek to create value by allowing consumers to earn and redeem rewards across multiple brands, while proprietary programs focus on building deeper engagement around a single retailer’s experience. Examining approaches such as Plenti and Starbucks’ loyalty program highlights how customer engagement, brand strength, and digital integration can ultimately determine whether a rewards strategy thrives or struggles.
Mercator Advisory Group analysts follow the latest developments in the payments world. Below Joseph Walent of the Emerging Technologies Advisory Service shares an email exchange he had recently with two colleagues on the relative merits of different loyalty rewards strategies. He discussed Plenti and Starbucks’ loyalty program with Alex Johnson, Director of Mercator’s Credit Advisory Service, and Raymond Pucci, Associate Director, Research Services, whose research focuses on merchant services.
Joe: I just received an email from AT&T Mobility, my wireless provider, letting me know about a change in the way my payments for its goods and services accrue Plenti points. Ironically, even though I never registered for the rewards, which just appeared one day when I was checking out at Rite Aid, I couldn’t help feeling a bit miffed that AT&T is pulling back on Plenti points. Now I‘ll get only 1 Plenti point for every $2 dollars I spend. I get a sense that AT&T was not realizing the benefits it expected and is trying to wean customers off the rewards.
A converse strategy seems to be in play at Starbucks, which has changed its loyalty program to equate Stars earned with amount spent (2 Stars per $1 spent) rather than number of transactions. This makes the program more effective for customers like me who typically buy several items when visiting a Starbucks store. Some very vocal customers apparently preferred the previous, “1 Star per transaction,” reward value.
Alex: It’s interesting that one of the first emails you received about Plenti (after not actively signing up for the program) was to inform you that Plenti is becoming less valuable. Great news!
The contrast between the rewards strategies of Starbucks and AT&T is fascinating. Most loyalty programs start with overly generous rewards offers aimed at building initial enthusiasm and participation. When a program is adjusted reducing the rewards value, it’s because either the program was so successful in engaging customers that it’s no longer necessary to be so generous or the program hasn’t taken off and the initial generosity failed to generate a compelling ROI. With Starbucks and AT&T, it seems pretty clear which case is which.
Ray: I just received the same email notification from AT&T Mobility regarding Plenti points—which, by the way, I have never used. I recall getting signed up for Plenti when I bought an iPhone at an AT&T store late in 2015. The sales rep was enthusiastic about the loyalty program but had scant details about it. In the ensuing weeks, I received a few cursory emails welcoming me to Plenti and naming participating merchants. None of them were retailers where I shopped regularly if at all.
So my Plenti membership has been gathering dust in my virtual collection of loyalty programs. Plenti seems to suffer from a lack of enthusiasm from the merchant partners. What was supposed to have been a strong coalition is weakened by a lack of marketing clarity and limited perceived value from a consumer’s view. It’s no surprise that AT&T is taking steps to devalue the program, and it seems likely that others may follow suit.
Joe: One notable aspect of Plenti is that, at least in the case of Rite Aid, the points program can run in tandem with the merchant’s own in-house loyalty and rewards program. Rite Aid has a tiered system called wellness+ which awards enrolled customers 1 point per $1 spent on anything in the store except tobacco, alcohol, and a few other items and 25 points for any prescription filled in the store’s pharmacy. Amassing enough points in a year to meet certain thresholds qualifies the customer for discounts on total purchase for the remainder of that year and the next. Once I achieved gold status entitling me to 20% off, I avoided buying health and beauty aids, cleaning and laundry supplies, and the like when shopping at grocery stores or other retailers, purchasing them instead at Rite Aid to use the discount. I was apprehensive of the Plenti program when Rite Aid first announced it because I thought it would supersede the existing rewards program. I was relieved when it did not.
It would be interesting to learn the lift per Rite Aid store that Plenti membership has generated, given that the purpose of any loyalty program is to increase overall sales or visits or influence the size of the sales made in individual transactions.
Alex: I’m guessing the lift provided by Plenti varies quite a bit by merchant. I would imagine that a retailer like Macy’s, which sells more expensive discretionary goods, is likely to see at least a small bump in sales from Plenti. Yet, how many consumers are going to switch insurance providers (hello Nationwide!) in order to earn more Plenti points? Not many, I’m guessing.
That gets to the heart of the problem for me. It’s really difficult to build a compelling multi-merchant rewards network when the chief consideration in adding a new partner is whether that merchant is competitive with the existing network participants instead of what value that merchant’s participation would bring to the end customer. This is the very same network-building problem that MCX ran into, and look how that turned out!
In fact, Starbucks is currently establishing a network of partners as part of its “digital loyalty platform” but seems to be taking a more deliberate approach, focusing on partners that can enhance the experience Starbucks is trying to create for its customers.
Ray: That’s right, Alex. Maybe Starbucks should stick to its wildly successfully in-house loyalty program rather than co-brand with a high-visibility bank or credit card network as some reports suggest will happen later this year. Let’s face it: Who can argue with the results of Starbucks’ loyalty program? The company claims to have 12 million active loyalty members in the United States, noting an 8% quarterly gain in Q2 of this year. Loyalty members also spend more and provide great analytics data that Starbucks mines to offer promotions as well as to drive business during off-peak store times.
Now for the recent bad news of the Starbucks program—the points devaluation news, which was greeted with rumblings of a boycott threatened by many of the program’s most fervent fans. In my visits to Starbucks in the last month, though, I’ve seen no reduction in store traffic, probably because customers get used to patronizing specific locations for their convenience. I am curious to see what Starbucks will choose to say about impact of the points devaluation in its next quarterly report. It’s probably no coincidence that Dunkin’ Donuts just enhanced its DD Perks loyalty program by introducing On-The-Go ordering to rival Starbucks Mobile Order & Pay.
For my coffee money, the best loyalty-enhancing features are these mobile pay-ahead apps. What incredible timesavers, especially during the morning commute, when coffee shop lines and wait times are usually longest. Starbucks Mobile Order & Pay works for me. On my way out the door in the morning, I pull up the Starbucks app and choose from a short list of recent orders. The app then shows the closest store (about 5 minutes away) and estimated pickup time, usually 3–6 minutes. Arriving at the store, I bypass the order line, which is usually at least 10 people deep, and go straight to the pickup counter. Typically my order is ready, and I’m out of the store in literally under 1 minute.
Joe: Starbucks does seem to be playing chess while many other retailers are still playing tic-tac-toe. Starbucks’ loyalty program clearly reached a popularity tipping point where it could be reconfigured as less of a giveaway promoting certain behavior and more of an inclusive model enabling customers to earn coffee beverages and the like by trying other, non-Starbucks goods and services. (Could that have been the aim of Plenti as well?) Starbucks seems to have realized that its product is desirable enough to be an incentive that can be licensed to other companies hoping to raise their profile. In other words, Starbucks can sell its own product to companies to offer to consumers as a reward for trying out their own business. Did Plenti seek to do the same thing? If so, it appears that the coalition of participating merchants lacked an anchor brand that would act as the point of entry, a position that Starbucks appears to be leveraging. This is just a wild theory. What do you think, Alex? Do I need to stop thinking so much during my commute and listen to some sports talk radio instead?
Alex: Joe, I wouldn’t wish Boston sports radio on anyone, but I think your theory is a perfect way to summarize the difference between Plenti and Starbucks’ loyalty program. Plenti was designed to be symmetrical. That is, each participating merchant has equal status. No competitors are allowed, and Plenti points can be spent at any merchant in the Plenti network. This approach allowed Plenti to quickly build out a network of impressive participating brands. The problem is that the most compelling loyalty programs are asymmetrical. They have, as you put it, an anchor brand that the rest of the network participants revolve around. This is the model Starbucks has employed so well.
Perhaps the most telling point about Starbucks’ digital ecosystem partners is that their products all have some inherent connection to customers’ experience of going to a Starbucks coffee shop. This enables Starbucks and its partners to create compelling use cases for the customers they have in common. Do you like that song you are hearing while standing in line to order your latte? Do you wish you could find out more about it and maybe save it to a playlist? Starbucks and Spotify have you covered. And Ray recently told me about a new Starbucks partnership that is integrated with Microsoft Outlook to enable “Outlook Coffee” users to schedule a meeting at a nearby Starbucks and send the invitee a Starbucks gift card without ever leaving Outlook. Farben Piedrahita, the resident Starbucks addict on our Mercator Advisory Group sales team, is going to rejoice when we let him know about that Outlook add-in.
The evolution of loyalty programs demonstrates that successful rewards strategies extend far beyond simply offering points or discounts. Programs that create meaningful customer experiences, integrate seamlessly into consumers’ daily routines, and reinforce a strong brand identity tend to generate higher engagement and stronger long-term loyalty. Digital capabilities—including mobile ordering, personalized offers, and ecosystem partnerships—have become increasingly important differentiators in achieving these goals.
As retailers continue to invest in customer loyalty, the emphasis is shifting from broad coalition models toward more focused, experience-driven ecosystems built around anchor brands. While coalition programs can provide value under the right circumstances, the Starbucks example illustrates how combining a compelling rewards program with digital convenience and carefully selected partnerships can create a more sustainable competitive advantage.
