Content designed to drive loyalty at Marriott
Marriott innovates at Coachella, lets loyalty members bid on yurts

The Starbucks approach being adapted by loyalty startup MunchMoney

When we first heard about MunchMoney innovating restaurant loyalty, we thought hmmm... maybe we'll wait and see if this succeeds before we talk about it.  Then we saw an article about an investment analyst who downgraded Starbucks stock because they had lagging loyalty-card signups. 

Loyalty programs can drive both profits and revenue growth, especially by improving share of wallet--the amount that existing customers are spending. It's unusual to see them slammed so hard for not driving new customer growth, but we have an interesting situation here. Because the Starbucks loyalty card must be preloaded with funds (like a gift card), analysts are extrapolating revenue growth from new signups. Low signups become a leading indicator of lower future revenue. Hmm... again.*

BUT... we are not about investing—we are about designing loyalty programs, and the most important feature of MunchMoney is that, like the Starbucks program, it requires users to preload the card. However, there are major differences. 

InnovateLI: Ready to Roll, MunchMoney Already Tastes the Big Time, 2018-Mar-29 by Gregory Zeller

One day, the munchies struck again and Kane was rummaging his wallet to fund a Chipotle run – and suddenly the final piece of this creative puzzle fell into place, in the form of a nostalgic memory. The James Madison graduate found himself longing for his old college meal plan, that no-fuss, no-muss prepaid account that eschewed cash and ensured his plate was always filled with his personal dining hall favorites.

Entrepreneurial instincts twitching, Kane dove deep into Quick Serve Restaurant industry customer-loyalty programs and learned most failed to significantly drive up business. Save one: The loyalty program sponsored by ubiquitous coffee chain Starbucks is “massively successful,” according to Kane, who notes one key difference in the coffee king’s model. Starbucks works on a pre-payment model (like a phone card), wherein customers load up their accounts with cash first, then enjoy the cumulative benefits of loyalty. “So now they’re capturing this massive upfront cashflow, which is a huge advantage to them,” Kane noted. “They’re sitting on a billion dollars in cash because of their loyalty app.”

... Kane and friends officially launched West Islip-based MunchMoney Inc. in January 2017. Its mission: to become “the college meal plan for real life,” according to the CEO, while “reinventing how people interact with fast-casual restaurants.”... Debuting [in May 2018] on both Android and iOS devices, the app will allow users to deposit funds directly into accounts at participating restaurants – already a step beyond the typical loyalty program (and closer to that Starbucks model), Kane noted, with the user “paying up front and giving up the choice of spending that money somewhere else.” [Emphasis added.] ... 

MunchMoney will also guarantee a 10 percent discount on the total bill every time a customer pays through the app, while giving its member restaurants the opportunity to tack on additional incentives.

The app launches with two Hauppauge restaurants aboard, The Sexy Salad and Build a Burger, whom Kane framed as brave first adopters, willing to roll where other restaurateurs fear to tread.

*We've actually heard about another way investors may use loyalty data: Japan's Loyalty Cards Provide a Sneak Peek at Company Profits, from Bloomberg, January 2018. 

More details about the Starbucks situation. 

PYMNTS.com: Retail Analysts Whack Starbucks Over Flatlined Consumer Loyalty, 2018-Apr-16

Concerns over customer loyalty — as well as increasing competition in the craft coffee market — have caused one Wall Street analyst to cut his price target on Starbucks. In fact, Cowen analyst Andrew Charles said both factors are likely to hinder Starbucks sales over the next two years, according to CNBC. As a result, he downgraded the coffee company to market perform from outperform. The analyst also cut his price target on shares of Starbucks to $65 from $68, implying 9 percent upside over the next 12 months. Starbucks did not immediately respond to comment, but its shares fell 0.3 percent on Friday.

One of the biggest concerns for the coffee retailer is customer loyalty. Starbucks experienced an unusually light period of gift card activations during last year’s holiday season, which will have an impact on the success of loyalty efforts for 2018.

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