Starbucks brings back chance to win free coffee for life

How To Win Free Starbucks For a Year

Starbucks (NASDAQ: SBUX) has built its loyalty program around the idea of earning free coffee.

On a basic level, members of the Starbucks Rewards program earn two stars for every dollar spent at the coffee chain. Earn 300 stars and you bump up to the Gold level, where 125 stars get you a free drink. It's a fairly generous offer designed to encourage members to spend more money at the company's locations by making cashing in with a free beverage very attainable.

This has decidedly been a good program for the company, adding nearly 2 million members in a year, including 300,000 in Q3, according to CEO Howard Schultz in the Q3 2016 earnings call (transcribed by Seeking Alpha). With 12.3 million Rewards users in the United States, that directly leads to higher spending.

"We are already seeing the percentage of tender from Starbucks Rewards U.S. customers rise to 33% in Q3, up three full points from last year, continuing an established pattern in which revenue growth from Rewards customers typically outpaces revenue growth from non-Rewards customers," Schultz said. "And we are seeing both incrementality of spend and increase in total profit per customer, both directly attributable to a customer's having joined the Rewards program."

Because of those strong numbers, Starbucks has a strong incentive to drive membership growth and engagement for its Rewards members. To do that, the company has decided to offer a summer edition of its "Starbucks for Life" promotion.

The goal of Starbucks for Life is driving Rewards program membership and store traffic. Image source: Starbucks.

Click through below to learn the difference between various coffee drinks:

Coffee and espresso drinks explained
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Coffee and espresso drinks explained

A latte is espresso and steamed milk with a small amount of milk foam on top.

(Photo by Derek Davis/Portland Press Herald via Getty Images)

A cappuccino should be equal parts espresso, steamed milk, and milk foam. 

(Photo by Florian Gaertner/Photothek via Getty Images)

dry cappuccino features less of the traditional steamed milk and more milk foam in its place.

(Photo by Etienne Voss via Getty Images)

cafe au lait is traditional black coffee mixed with warmed milk.

(Photo by Waring Abbott/Getty Images)

Espresso is specially brewed coffee, created with finely ground coffee beans brewed under pressure with nearly-boiling water. 

(Photo by Jeremy Piper/Bloomberg via Getty Images)

macchiato, traditionally, is a 'stained' espresso -- espresso with just a dot of milk.

(Photo by Nigel Noyes via Getty Images)

An Americano is espresso mixed with hot water. 

(Photo by Ben Monk via Getty Images)

cortado is espresso that is 'cut' with an equal amount of milk. 

(Photo by Anthony Collins via Getty Images)

red eye is for the severely under-caffeinated -- espresso shots mixed in with a regular black coffee

(Photo by Dima Sobko via Shutterstock)


What is Starbucks for Life?

Starbucks for Life is a classic, traffic-driving promotion that rewards consumers with chances to win based on how often they visit stores. In some ways, it's a lot like the McDonald's (NYSE: MCD)Monopoly promotion, which hands out game pieces that let people win immediate prizes or collect them for chances to win something bigger.

In Starbucks' case, it's basically running Monopoly without the official tie-in. During the promotion period (in this case, Aug. 2 through Sept. 12), Rewards members earn a chance to play the Starbucks for Life game each time they make a purchase using a registered Rewards card or the chain's app. They can earn up to two games per day by making separate purchases and get a chance to receive two extra daily bonus plays if they spend more than $10 in a single transaction.

To redeem their earned games, Starbucks members must visit a special webpage, log in, and play. To win, members must collect the game pieces in a given row on their digital game board.

Seven people (five in the U.S. and two in Canada) will win the grand prize of Starbucks for Life (delivered as a daily credit for a free drink or food item for 30 years). Another 30 split between the two countries will win free Starbucks for a year while 150 will get a month for free and 550 will win Starbucks for a week. People who do not win the big prizes can win Bonus Stars in increments of 125, 25, 10, and five stars.

A very smart promotion

Starbucks has created a promotion that not only drives people to join its Rewards program, but also incentivizes existing members to visit more often. Better yet, it has done that without spending heavily on prizes or promotion. The chain is giving away coffee and food items -- things it has in abundance -- in a way that costs it very little money.

It's a valuable prize with a negligible cost. In general, Starbucks has done very well with its member promotions. Schultz mentioned during the Q3 earnings call that "2015's Frappuccino promotion drove a 30% increase in revenue over the prior year."

The company has not provided details on how previous Starbucks for Life promotions have done, but the fact that it's launching a summer edition suggests that it's worked well. This will bring more traffic to stores, increase short-term customer spending, and drive memberships, which have proven to increase long-term customer purchases. That's a sort of perfect storm, making this a very smart decision for Starbucks' bottom line.

RELATED: Check out the evolution of Starbucks cups through the years:

Starbucks cups, different looks through the years
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Starbucks cups, different looks through the years
CHENGDU, SICHUAN PROVINCE, CHINA - 2015/09/13: Coffee cup on table in a Starbucks cafe. Starbucks is streamlining the ordering process so customers are able to get that cup of coffee faster than usual. (Photo by Zhang Peng/LightRocket via Getty Images)
A cappuccino coffee sits in a Starbucks Corp. Reserve cup, used for specialist coffee, on the counter at a Starbucks coffee shop in London, U.K., on Friday, Oct. 16, 2015. Coffee futures fell the most in seven months after Colombia announced measures that will increase exports, spurred by the plight of farmers in the country who are dealing with drought conditions linked to the El Nino weather pattern. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
BEIJING, CHINA - 2014/12/24: A paper coffee cup and Starbucks logo. Starbucks will continue its expansion in China in 2015 and double its China store count to 3,000 by 2019. In its first-quarter fiscal report, the coffee giant shows optimistic expectation for its robust expansion plans in 2015. (Photo by Zhang Peng/LightRocket via Getty Images)
A Starbucks employee writes a message on a cup of freshly brewed coffee at a local store in Washington, DC on December 26, 2012. Starbucks stirred the political pot Wednesday by urging its baristas to write 'come together' on its cups as a way to pressure US lawmakers to compromise on a deal to avert a year-end fiscal crisis. Starbucks chief executive Howard Schultz said the American coffee giant was recommending its first-ever message on the side of tall, grande and venti (small, medium and large) drinks sold at its Washington stores as a way to help break the capital's gridlock on the so-called 'fiscal cliff.' Lawmakers and the White House have less than a week to work out a deal aimed at preventing tax hikes from hitting all Americans and a series of deep, mandated spending cuts from kicking in beginning January 1. AFP PHOTO/Eva HAMBACH (Photo credit should read EVA HAMBACH/AFP/Getty Images)
A Starbucks coffee cup is seen in this photo taken August 12, 2009. AFP Photo/Paul J. Richards (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)
MIAMI - JANUARY 18: In this photo illustration, the new Starbucks 31-ounce Trenta size ice coffee is seen on the right next to a tall cup of Starbucks coffee on January 18, 2011 in Miami, Florida. Starbucks rolled out the newest member of its lineup of drinks which is available only for Tazo shaken iced teas, iced tea lemonades and iced coffees. (Photo illustration by Joe Raedle/Getty Images)
TOKYO, JAPAN - SEPTEMEBR 26: Starbucks Coffe Company's news product 'Starbucks Discoveries'(Espressso (L), Latte (R)) are seen during a preview party on September 26, 2005 in Tokyo, Japan. 'Starbucks Discoveries' is the company's first chilled cup coffee product which will be available at convenience stores on September 27 in Japan with the same coffee beans used at Starbucks stores. (Photo by Junko Kimura/Getty Images)

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Daniel Kline has no position in any stocks mentioned. He has been working at Starbucks all week while his son goes to NERF zombie camp. The Motley Fool owns shares of and recommends Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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