Strategic Analysis: Starbucks Odyssey, Web 3.0 NFT-Based Loyalty Program

On Sep. 30, 2022, Starbucks announced it will be launching Starbucks Odyssey, a Web 3.0 NFT-Based Loyalty Rewards Program, in partnership with Polygon, a leading Ethereum-scaling network. It will be among the first Fortune 500 companies to integrate NFTs into its industry-leading loyalty program, Starbucks Rewards.

Starbucks Odyssey Overview

Starbucks Odyssey is a Learn-to-Earn NFT Rewards program that will onboard its existing Starbucks Rewards members into Web 3.0.

Here’s how it works:

1. Launch Odyssey using your existing Starbucks Rewards login credentials via the Web or on a mobile browser.
2. Play Starbucks ‘Journeys’ (daily games/challenges) to learn more about coffee and Starbucks.
3. Earn NFTs called Journey Stamps through the completion of Journeys or Odyssey accolades.
4. Each Journey Stamp has a point value based on its rarity. Accumulate Journey Stamps to accumulate points. (Ex. Rarity Grading: Normal — 1pt, Uncommon — 2pts, Rare — 3pts, Rare — 4pts, Legendary— 5pts)
5. Once you’ve collected a certain amount of points, you will unlock rewards and experiences at different levels. Potential rewards include unique merchandise, artwork, virtual espresso martini-making classes, invitations to Starbucks Reserve Roasteries, or trips to Costa Rica to visit their coffee farms.

By playing these games and learning more about Starbucks, users are incentivized to continue to engage with Odyssey by earning these NFT rewards which are tradeable on their in-app marketplace powered by Nifty Gateway. Okay, but how is Starbucks “onboarding” users into Web 3.0?

How Odyssey Onboards Users into Web 3.0

The current challenges with Web 3.0 are centered around user experience. Odyssey removes these complexities for users by abstracting away digital wallets and NFTs. Through its partnership with Polygon and its reuse of the Starbucks Rewards login, Starbucks can automatically create a digital wallet tied to a user’s Starbucks Rewards account. Members won’t need to know what a seed phrase is, figure out their crypto address to transfer assets, or how to switch between the Ethereum or Polygon network. They can just play games and earn NFTs.

In addition, Starbucks will be releasing Limited Edition NFTs that can be bought with credit cards and fiat dollars; no cryptocurrency is required. This allows users to transact on the marketplace without requiring the purchase of Bitcoin or Ethereum. Through their partnership with Nifty Gateway, all NFT transactions can be made in fiat currency.

Starbucks’ 2022 Corporate Strategy

If Starbucks already has a loyalty program, why did it create Odyssey? To understand this, let’s look at its corporate strategy for this year.

Starbucks’ 2022 corporate strategy is focused on sustainability, growth, and innovation.

“It’s important to being both people and planet positive while growing the business responsibly with focus and discipline” — Rachel Ruggeri, Starbucks EVP & CFO

As one of the largest companies in the world, Starbucks is committed to becoming a planet-positive company while growing responsibly through innovation. At its 30th annual shareholder meeting in March, it announced its aspirational goals for 2030 to act as a north star for its strategic decisions as well as its Growth at Scale agenda highlighting 5 key growth pillars.

Aspirational Goals by 2030

• Become a resource-positive company giving back more than it takes
• Enhance the well-being of 1 Billion people globally
• Lead the retail industry in decarbonization solutions

Key Growth Pillars

• Elevating the customer experience (SO)
• Expanding digital customer relationships (SO)
• Innovating for sustainability (SO)
• Expand physical locations
• Creating relevant beverage innovations

How Odyssey Fulfills Key Growth Pillars

Elevating the customer experience:

• Creating fun ways to educate and help customers learn more about coffee and Starbucks
• Meeting customers where they will be — Web 3.0
• Providing ownership of digital collectibles that have value and utility

Expanding digital customer relationships:

• Creating a new medium of engagement for its members where they are playing games and learning as opposed to buying coffee
• Enabling the trading of digital collectibles with other members
• Connecting Starbucks Rewards members with each other

Innovation for Sustainability:

• A portion of NFT sales donated to planet-positive causes
• Creates opportunity to create customer incentives through NFTs to be more sustainable
• Launching new innovative experiences while adhering to long-term sustainability goals

Main Objectives of Starbucks Odyssey

Now that we understand Starbucks’ corporate strategy, where Starbucks Odyssey fits, and its focus on sustainability, growth, and innovation, let’s unpack the objectives of Starbucks Odyssey.

3 Main Objectives of Starbucks Odyssey:

1. Positioning itself to become a Web 3.0 leader
2. Increase the stickiness of existing Starbucks Rewards members
3. Reinventing the Third Place

As discussed above, Odyssey is positioning itself to become a Web 3.0 leader by onboarding existing users into the space. In 2021, the Starbucks Rewards app had 31.2M users. With the tactical approach of reusing the Starbucks Rewards login, the company doesn’t need to start from scratch in order to attract users. It can funnel them from the mobile app to Odyssey. As Web 3.0 looks to onboard its first 1B users, Starbucks is riding this tailwind to achieve one of its aspirational goals — to improve the well-being of 1B people by 2030. While Starbucks can’t educate the entire market, it can help facilitate this transition by introducing Web 3.0 to its customers. This helps customers to familiarize themselves with NFTs and digital wallets so that they may gradually shift their behaviors to fit this new paradigm. Ultimately, it’s a bet and a hedge for Starbucks that Web 3.0 will take off and it wants to be in the driver’s seat.

With 1 in every 4 transactions happening on mobile and mobile orders accounting for 53% of US store revenue, the Starbucks Rewards app has played a central role in Starbuck’s dominant growth over the last decade. With the launch of this new Web 3.0 loyalty program, Starbucks Odyssey is not looking to replace the current rewards app. Instead, it aims to increase the stickiness of existing Starbucks Rewards members. By creating a gamified experience that encourages users to return to the Web experience, Starbucks’ is creating a new medium of engagement for users when they aren’t buying or loading their Starbucks card. It’s giving them a new reason to open the Rewards app when they don’t want coffee. Through playing Starbucks journeys and earning NFTs, users are incentivized to continue to open Odyssey as there’s real value and utility to owning these NFTs by unlocking benefits and coffee experiences. In addition, Starbucks is creating ownership of digital assets for its customers turning them into investors and advocates of the brand. Moreover, these digital collectibles could increase in monetary value through trading activity on the marketplace, but also provide discounts, access to new merchandise, or VIP experiences through continued ownership of certain NFTs.

For as long as the company has been around, Starbucks has been renowned for being a Third Place, where you socialize and connect with others away from home and work. With Starbucks Odyssey, they want to reinvent the Third Place and bring it into Web 3.0 and the metaverse. While Web 3.0 and the metaverse are still in their infancy, 94% of crypto buyers are Gen Z and Millennials and 51% of metaverse users are under 13. Thus, Starbucks is positioning itself to meet its future and existing customers where they are going to be.

As it appeals to a younger demographic, increases the stickiness of existing members, and positions itself to become a Web 3.0 leader, the purpose of the inception of Starbucks Odyssey is to prepare itself to transact in the metaverse. Imagine this, you’re playing on a VR headset or on a virtual game/experience on your phone and you start to get thirsty. Through your 3D avatar, you visit a virtual Starbucks store, order a drink, and continue playing the game. In 5–10 min, that drink then shows up at the front door of your physical house. This is the future that Starbucks is setting itself up for.

What does this mean for other companies?

This is the future of loyalty — a combination of NFTs, digital wallets, and virtual experiences in metaverses. These are the core components that companies should add to their current loyalty experiences.

• Creating DTC relationships with customers through new mediums of engagement via games and virtual experiences
• Ownership of digital collectibles for customers to create stronger brand affinity and convert them into advocates.
• First-party data capture through identity management of customers in an anonymous environment
• Token-gated commerce and experiences that help identify loyal customers based on the level of engagement with a brand

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