Customers are criticizing big-name companies after they have observed their curbing of reward programs, including birthday freebies and discounts.
In particular, Dunkin' stopped giving customers a free drink on their birthday last year. Instead of a free drink, they offered triple loyalty points on a purchase. Meanwhile, beauty giant Sephora started requiring customers to spend at least $25 to claim a free gift and loyalty points when shopping online during their birthday month.
In addition, Red Robin added a dine-in only and $4.99 minimum purchase requirement for customers to get their free birthday burger.
Cost-Effectiveness of Incentives and Freebies
It is common for brands to establish rewards, such as free drinks or discounted meals, products, or services in order for them to build up loyal customer bases and incentivize spending. But these measures probably indicate they have been struggling to retain or maintain customer loyalty and reward programs without spending too much, as well as the impact of rampant inflation and changing consumer behavior since the start of the COVID-19 pandemic.
"While we're assessing our own personal expenses, so are businesses," Circana chief industry advisor and retail expert Marshal Cohen told the Associated Press. He further explained businesses have to monitor and assess which programs work and if they are working at their fullest capacity. Cohen added companies are also looking at other ways of doing things that would not cost them as much money.
In Sephora's case, customers enrolled in its Beauty Insider birthday rewards could still claim their free gift in person with no minimum purchase. However, Boston University's School of Hospitality Administration assistant professor Leora Lanz noted this approach costs the company money to ship products sold online.
Franchisers' Rationale
While changes to birthday rewards or redemption requirements are surprising or shocking, they are not new.
For example, Starbucks progressively limited the timeframe for redeeming its rewards members a free drink or food item for their birthdays. The company gradually limited the timeframe for customers to avail of their freebies, from 30 days to only the exact date of the customer's birthday in 2018.
Despite consumer pushback, some chains have argued adjustments to rewards programs simply reflect how customers behave.
In a statement to the Associated Press, Starbucks said it found the "vast majority of members were using their birthday reward on their actual birthday."
Meanwhile, Dunkin' argued its new rewards program would give its consumers more flexibility and a larger variety of food and drink options. They added, in a statement to the Associated Press last week, that the company would let members "celebrate their birthday even longer," pointing to the three-day window within which customers could triple their loyalty points on birthday purchases.
In addition, GlobalData managing director Neil Saunders told Axios that birthday rewards would "definitely [become] stingier and more restrictive," which would not always be received very well by people who are used to getting freebies.
Aside from retailers and food chains, Americans have increasingly pulled back on airline tickets, hotel stays, dining out, and other so-called "revenge spending" after two to three years of splurging on experiences they were deprived of during COVID lockdowns.
In April, McDonald's CEO Chris Kempczinski told investors customers were tightening their budgets, so much so that they have increasingly forgoing fries with their meals.
"We are seeing a slight decrease in units per transaction," he said. "Certainly the customer is being mindful about how they're spending their dollar or their euro."
Communication is Key, Experts Say
Nevertheless, the announcement made many Dunkin' customers unsettled, most of whom shared their frustrations online.
In the months following Dunkin's announcement, dozens of Twitter users have expressed disappointment over learning that the free birthday drink was gone. Some joked they "no longer run on Dunkin'," a dig at the chain's slogan, while others suggested they might take their future business elsewhere.
"Taking away my free birthday drink just ruined my day," one Twitter user wrote. "Dunkin broke my heart today," wrote another.
Experts say the way companies communicate changes to rewards programs is key.
Lanz said companies should "be very thoughtful about it" and "not make too many changes so often" as it would "start rubbing [their] audience the wrong way" and risk getting backfired. "They do need to communicate it so that it's not a complete surprise," she added.
Others also say drawing attention to what was "being lost" can also cause backlash, and that it would be better to provide clear alternatives for customers to feel rewarded.
For example, Red Robin said it began the dining only and $4.99 minimum purchase requirements for its free birthday burger "to maintain the integrity of the promotion" and give guests "the best possible experience" by celebrating and restaurants. They have also introduced a half-birthday treat in 2023 as an "added gesture of appreciation."
With that being said, consumers are likely to continue to see changes to birthday rewards and customer loyalty programs down the road, Cohen noted.
"The pie is getting smaller for a lot of these discretionary items," he explained, pointing to persistently high costs of living that consumers are facing, as well as the increased competition among businesses vying for those limited dollars. "You're going to see a lot of (companies) assess their programs to try to figure out how to drive business in a more profitable way."
Meanwhile, DealNews.com consumer analyst Julie Ramhold said while it would be possible for food chains to scale back more of their rewards programs, it could also create a butterfly effect where some retailers could offer "potentially better birthday rewards to encourage a return to spending on frivolous items."
Sephora did not immediately respond to the Associated Press's request for comment.
