M&C Saatchi and Costa Coffee have found that offering free coffee and birthday cake as part of Costa’s loyalty program has generated an extra £1.2m in incremental profit each month.
In September, Costa Coffee tasked M&C Saatchi and Pablo London to revamp its 11-year-old Costa Coffee Club loyalty program. The Whitbread-owned coffee chain ditched its points-based system in favor of customers getting a free drink for every eight cups purchased and a slice of cake on their birthday.
Since the relaunch, Costa Coffee has seen total transactions grow by an impressive 16%. “We can see that the increased simplicity and generosity of the revised proposition is returning a large incremental profit each month,” said James Calvert, chief data strategy officer, M&C Saatchi London.
Customers redeeming their free coffee now account for 8% of all transactions and 23% of transactions logged through Costa Coffee’s free app. According to Costa, that is double the rate of its previous free drink initiative in July 2020, which handed out beverages when customers registered with its Costa Club app.
<!-- inArticleBlock -->
As part of the relaunch, M&C Saatchi also updated Costa’s app in a bid to migrate people away from the physical loyalty card and make digital transactions. The new app hosts a rewards page, has a click-and-collect function and features a tab to purchase gift vouchers. Now over 70% of Costa Coffee Club transactions are made via the app.
Offering a free slice of cake for a customer’s birthday has also boosted sales, with 60% of those claiming their cake having brought something else within the same transaction. One in 10 loyalty members redeemed their cake and 71% returned to Costa within a month.
For customers using a reusable cup, they could claim their free coffee after four drinks. According to Calvert, members using reusable cups are “visiting more frequently and spending more heavily.” He says that’s “proof that a sustainability offering of receiving a free drink after any four hot or cold handcrafted drinks have been purchased using a reusable cup is business positive.”
Calvert says the increased appeal of the new loyalty proposition has helped “grow week-on-week” new registrations and “accelerated sign-ups to pre-pandemic levels.” The figures suggest that generous loyalty schemes can generate healthy returns, says Calvert.
<!-- inArticleBlock -->
The results come at an interesting time for loyalty schemes. Brands such as Waitrose have moved away from freebies, having scrapped its free coffee and newspaper offers and replaced them with a personalized discount model. Its sister company John Lewis also ended its monthly free coffee and cake reward, but now hands out sporadic freebies, competition entries and perks such as three free months of Apple Fitness+.
Established brands including McDonald’s and Pizza Express have only just entered the loyalty game in the UK, with McDonald’s ushering in a points-for-purchase scheme and ‘The Pizza Express Club‘ rewarding customers with points for every meal bought.