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Retailer "purses"

By davebirch posted Dec 22 2006 at 8:18 AM

[Dave Birch] The Starbucks card continues to interest me as an icon of retailer-issued digital money. Sandra Stark, Starbucks' director of marketing program management has said that: "The card has exceeded our expectations, absolutely... We knew it would be a great program. We had no idea that we would reach 12 percent of tender." Almost one in eight customers pays with a Starbucks card these days, Stark noted. About 96 million Starbucks cards have been activated in the United States and Canada since November 2001, and customers have reloaded their cards about 38.6 million times, bringing in $2.17 billion in revenue. No wonder the Subway ("the world's largest submarine sandwich franchise") are launching their own card. Yet there's no rational reason I can think of to have one of these cards (because I don't understand brand, marketing, customers and so on).

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Is there are future for these e-purses? Hhmmmm. The Starbucks that we go to from our office takes credit and debit cards and you don't get your coffee any quicker by not having to tap in a PIN. I assume that within a year or two the POS at our Starbucks will go contactless, so surely one might imagine that once contactless bank products are in the marketplace then customers will use those and will stop partitioning their cash between multiple pre-paid cards that don't work across multiple retailers. And yet, as I am well aware, the customers "jam jarring" money across multiple pre-paid accounts seems to be a real phenomenon. The article about Starbucks goes on to quote a customer:

"It's a lot easier to use the card when you don't have cash and you feel like an idiot putting $2 on your credit card," Erik Carels, 34, said one recent morning after using his Starbucks card in Seattle.

I certainly don't feel like an idiot: I'd buy a pack of gum on my credit card if it was convenient. If I have to take it out of my wallet, put it in a slot and punch in a PIN then, sometimes, I can't be bothered. But if all I have to do is wave my arm over the POS (because my contactless bank card is in a cuff pocket in my shirt) then I'll do it.

My opinions are my own (I think) and are presented solely in my capacity as an interested member of the general public. [posted with ecto]


I think It can be a good budget planning for customers. It is easier to track in larger cash bulk, so there would be no troubles of collecting small receipts of your starbuck's purchases.

The answer to the pre-paid cards success is hiding in the annual accounts, not in the marketing tea-room.

1. 0% financing ... and better because the money comes up front. Tell that to your bank manager.

2. Guilty insider secret: something like 25% of pre-paids never get cashed in. Can you say "licence to print money?"

Given these "fundamentals", it is no wonder that the marketing department is instructed to give away the store to get a successful card.

Customers truly are mysterious animals! I don't live in London, so haven't been able to try out the Starbucks card. But the Spinelli coffee shop near our office in Singapore issues their own pre-paid card which happens to be contactless. The benefit is that the coffee shop's paper punch card program is built into the card, so you get your 10th coffee free without having a separate card that has to be punched at each purchase. To me that's the trick, linking the merchant's promotional offers to the card. That's what will keep customers using the pricate label card that can only be used at one outlet or chain. Again, I have no idea if that's what Starbucks is doing in London or not.

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