It’s a sure sign of program success and maturity—launching a co-branded credit card. From the launch of the very first co-branded by General Motors in 1992, they’ve become a status symbol of sorts for companies looking to extend their brand and increase consumer engagement through accelerated earning in the loyalty program. In the case of the airlines, of course, they’ve also demonstrated the ability to generate impressively massive revenue. With the co-branded credit card market now saturated, the challenge now is for new entries is to stand out. With Starbucks CEO Kevin Johnson announcing on an analysts’ call last week that the company will soon launch its own card, the question begs: Is the prospect of free lattes enough to move a Starbucks credit card to the top of consumers’ wallets?
By Rick Ferguson
Details about the upcoming Starbucks Visa Card, soon to be issued by JPMorgan Chase, are scant. Money quote from the Puget Sound Business Journal:
“The co-branded credit card will let customers rack up Starbucks Rewards ‘with their purchases both in and out of Starbucks stores,’ Starbucks CEO Kevin Johnson said during a call with analysts Thursday to discuss fiscal year results. No more details have been released about the card or a previously announced pre-paid Starbucks Visa card… The Starbucks co-branded card and the pre-paid card, which will come shortly after, ‘will afford options, a very rich rewards proposition for people who spend on credit, and the unique store-value product offering rewards for customers who prefer debit,’ Johnson said.”
The phrase “very rich rewards proposition” has us intrigued, particularly when considering the recent trend of new reward credit cards to launch with very rich bonus offers and relatively generous funding rates—so rich, in fact, that some JPMorgan Chase executives, for example, have questioned the profitability of the Chase Sapphire card. Even as credit card rewards get richer, affluent consumers are revolving balances at lower rates than the past, and are quicker to switch credit cards when an enticing new bonus offer comes along. Oh, and didn’t we mention that Millennials are taking up credit cards at far lower rates than their predecessors?
None of these factors have prevented Starbucks from jumping into the credit card fray, along with other recent entrants such as Uber. So, what might we expect from the new Starbucks card? There are no details forthcoming, but we might expect a rich sign-up bonus, points accelerators for purchases made in-store, and perks for higher-tier cardholders. The Points Guy is optimistic:
“While details on the Starbucks credit card are pretty scarce at this point, for those who are big on loyalty — and coffee — there are plenty of possibilities. One thing to look at from a credit card maximization point of view is that the Starbucks card will have to offer cardholders enough return in order to lure them away from using a premium credit card, such as the Chase Sapphire Reserve Card, which offers 3x points on dining. As long as the Starbucks co-branded Chase card offers cardholders a good return and valuable rewards, this card could prove to be a game changer.”
Let’s hope so! Let’s also hope that more customers don’t cop the attitude of the card jockeys over at r/churning, as summed up by Redditor bdiddy0428: “Hoping for a decent signup bonus like $200 or $500 and free gold membership. Then card gets placed in sock drawer.”
Rick Ferguson is Editor in Chief of the Wise Marketer Group and is a Certified Loyalty Marketing Professional (CLMP).
