Companies Restrict Customer Rewards Programs, Including Birthday Perks — Here’s Why

by Ethan Kim
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Customer Reward Programs

Brands have traditionally leveraged rewards programs, encompassing birthday treats and discounts, as a means to nurture customer loyalty and stimulate spending. However, recent changes indicate a tightening grip on these perks, catching the attention of customers.

For instance, last autumn, Dunkin’ decided to substitute its free birthday drink offer with triple loyalty points on customer purchases, a move that was met with disapproval. Similarly, Sephora introduced a $25 minimum purchase criterion for online customers seeking a free birthday gift and 250 loyalty points. Red Robin also added a dine-in and $4.99 minimum purchase condition for customers to avail their free birthday burger.

Such modifications to birthday perks or redemption criteria are not a novelty. Starbucks, known for gifting rewards members a free drink or food on their birthdays, has been steadily reducing the redemption period over the years, ultimately setting it to the exact date of the birthday in 2018.

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According to industry experts, the financial burden of running loyalty programs, coupled with inflation and changes in consumer behavior post-COVID-19, might be prompting companies to re-evaluate these perks.

Marshal Cohen, Circana’s chief industry advisor and a retail expert, spoke to The Big Big News, stating that businesses must scrutinize the effectiveness and cost of these programs, just as individuals assess their personal expenses.

For instance, Sephora’s Beauty Insider birthday rewards members can still redeem their free gift in-store without a minimum purchase. However, online sales entail shipping costs, Leora Lanz, assistant dean and assistant professor at Boston University’s School of Hospitality Administration, pointed out. Sephora declined to comment on the matter when contacted by The Big Big News.

While customers have voiced dissatisfaction, some firms argue that adjustments to rewards programs are merely mirroring customer behavior. Starbucks, in a statement to The Big Big News, noted that most members redeemed their birthday reward on their actual birthday.

Dunkin’ contended that its revamped rewards program offers customers more flexibility and a wider choice of food and drinks. The company further noted that members can earn triple points on birthday purchases within a three-day window, allowing them to extend their birthday celebrations. However, the announcement did not sit well with many Dunkin’ customers, prompting online complaints and jokes that they “no longer run on Dunkin.”

Experts emphasize that the communication strategy for changes in rewards programs is critical. Lanz advises brands against frequent changes and underscores the importance of clear communication to prevent customer surprises.

Furthermore, others suggest that focusing on what customers stand to lose can spark backlash, and providing transparent alternatives is essential for consumers to feel valued.

For example, Red Robin said it implemented the dine-in and $4.99 minimum purchase requirements for its free birthday burger to uphold the promotion’s integrity and provide customers with a superior dining experience. The chain also unveiled a half-birthday treat in 2023 to express additional appreciation.

Marshal Cohen predicts that consumers will continue to witness alterations to birthday perks and loyalty programs due to the diminishing discretionary budget for such items and the intensifying competition amongst businesses for those limited funds. He added that companies would continue to re-assess their programs in a bid to drive business more profitably.

This could potentially result in further cutbacks in rewards programs, though the opposite could also occur. Julie Ramhold, a consumer analyst with DealNews.com, proposed that some retailers might enhance their birthday rewards to entice customers to splurge on non-essential items.

Frequently Asked Questions (FAQs) about Customer Reward Programs

Why are companies restricting their customer rewards programs?

Companies are tightening their customer rewards programs due to the high costs of maintaining these programs, recent impacts of inflation, and changes in consumer behavior since the start of the COVID-19 pandemic.

What are some examples of companies changing their reward programs?

Some companies that have recently altered their rewards programs include Dunkin’, Sephora, and Red Robin. For example, Dunkin’ replaced its free birthday drink offer with triple loyalty points on customer purchases, while Sephora started requiring a $25 minimum purchase for online customers to claim a free birthday gift.

How have customers responded to these changes?

Many customers have expressed disappointment and frustration at these changes, especially when the changes were not communicated well in advance. In some cases, customers have taken to social media to voice their concerns and discuss potentially taking their business elsewhere.

What is the expert advice on how companies should handle changes to rewards programs?

Experts suggest that companies should communicate clearly and in advance about any changes to their rewards programs to prevent customer surprises. They also advise companies not to make too many changes too often as it can upset customers and potentially backfire.

How might these changes to rewards programs affect consumer behavior in the future?

While it’s hard to predict exactly, some analysts suggest that some retailers might enhance their birthday rewards to entice customers to splurge on non-essential items, potentially shifting consumer behavior. Other companies might assess their programs and make changes to drive business in a more profitable way.

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