This winter, Starbucks plans to launch a co-branded Visa credit card through JPMorgan Chase. According to CEO Kevin Johnson, this is another one of Starbucks’ many efforts to encourage “continued investment in our loyalty and technology platforms.”
Last Thursday, Johnson announced the company’s plans during the fourth-quarter earnings call. Starbucks already offers a rewards program where customers can earn points for purchasing items through the Starbucks mobile app. This new credit card will allow Starbucks customers to receive rewards for purchases made both in and out of the company’s stores. Starbucks also has plans to offer a prepaid Visa card.
This move is not surprising for a company that has always sought to define its brand by offering a superior customer experience. Starbucks has long credited the rewards program for its ability to survive the economic downturn in 2008 and continue to increase its sales in the United States. Former CEO Howards Schultz even stated that the customer loyalty program is one of the company’s most important drivers for revenue because of the long-term customer loyalty it creates.
But some see this move as a marketing tactic in a country riddled with credit card debt. According to a recent survey, more than a quarter of all Americans have credit card debt and over 40 percent have carried a balance for over two years. Robert Harrow, a credit card analyst for ValuePenguin, stated that businesses like Starbucks offer credits cards because, “…It locks you in. It gets people coming back.”
News of the Visa card did arrive on the heels of a disappointing earnings report from Starbucks. Company shares fell by as much as four percent when it was revealed that store sales were lower than expected during the third quarter.
Hurricanes Irma and Harvey were partially to blame for the drop in sales as Starbucks was forced the company to close 1,100 of its stores. However, excluding the extenuating circumstances involving both hurricanes, sales still fell below expectations.
Starbucks has yet to release more details about the new credit card.
Author: Andrew Rombach
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