Why Every Smoothie Shop Has An App

So Many Apps
Updated:

Ever thought to yourself, “what’s the world coming to?” Yesterday I had that moment.

It started when I got breakfast at Starbucks. I used the points on my Starbucks app to get a free sandwich.

Later for lunch I went to SweetGreen. I have their app as well, so I made sure to scan it for my free points.

A couple hours later I stopped to get a smoothie. As I was checking out, there was a sign to download their app. I looked at it for a solid 5 seconds.

Why the hell does every eatery have an app now? And why am I slowly pulling out my phone to take a photo of the QR code? Join and get $5 off? Free points on every purchase? I’d be dumb not to join!

As I was walking home and sipping on my Morning Glory smoothie, I decided I needed to figure out what the hell is going on. Why does every smoothie shop need an app? How is it profitable? And why is my phone full of them?

meme about loyalty

Loyalty

After some research I found the painfully obvious answer: loyalty.

Loyalty has become a pillar for companies, especially in the digital age. Today, 90% of companies have some sort of loyalty program.

And there are two key reasons why companies have spent large sums of money to build and staff these loyalty programs.

1. Returning customers are better than new ones

The value of a returning customer is high. It’s much more expensive to acquire new customers than sell to existing ones. Makes sense.

But acquiring new customers is getting increasingly expensive. Ad costs are rising, and conversion rates are lowering. A volatile ad market is a big reason behind the recent media layoffs.

If you can get me to come back and buy more from you, it’s hell of a lot cheaper than trying to find someone new. And if I come back enough, I become a loyal customer. An ambassador. Which is El Dorado for these businesses.

Businesses are always trying to find and retain high value customers. It’s why airlines switched their loyalty program from distance-based to spend-based. Customers willing to spend more on better seats are worth more to the airlines, so they’re treated better. And a loyal customer will not only bring in more revenue, but they’ll recommend your business to other people, bringing in even more revenue. Cha-ching.

2. Customer data

Businesses are always looking for ways to get your data – I mean get to know you better. It informs all of their business decisions.

Every time you enter a loyalty program you give identifying information. And all purchases made through the app are tied to your identity. Businesses then use your data to improve products, personalize marketing, inform strategy and so on.

After creating a loyalty program, Macy’s saw 70% of their transactions tied to it. And afterwards decided to roll out billion dollar programs focusing on data science and other methods to create personalized marketing campaigns.

Starbucks started experimenting with digital menus in their cafes. The menus change based on consumer behavior. Crazyyy.

How lucrative are they?

So just how lucrative are these loyalty programs? They have to be profitable enough to justify the dev and staff work hired to build them, right? Let’s see:

Starbucks has 30 million members in their loyalty program now. And it accounts for a whopping 60% of their total revenue. I’d say that’s valuable.

From their CFO: “We know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully.” Ya, uhh I can be a testament to that.

Amazon Prime surpassed 200 million members. Basically giving them a path to retail dominance. In fact if someone belongs to a paid loyalty program (as opposed to a free one like Starbucks), there’s a 48% chance it’s for Amazon Prime.

Chipotle created a loyalty program that has grown to 24 million people. And the program has led to digital sales of $2 Billion, half of total sales.

So clearly these loyalty programs are working. And they’ve become a mainstay in this age of digital shopping. In fact the average US consumer belongs to 16 loyalty programs! So much loyalty!

Next time you’re wondering why your local smoothie shop has an app, realize there’s a big green reason for it. And I’m not talking about kale!

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