When Stainless Steel Replaces Plastic or the Starbucks Way to Prepaid Cards

The blogosphere this morning is abuzz with commentary about the new Starbucks prepaid card, which, it seems to me, must be precisely the effect the coffee chain had intended to produce. The card in question requires a fairly sizable initial investment not just to load it up, but also to pay for the stainless steel of which it is made. To top it off, the card will only be sold online and not on Starbucks’ own website, but through a luxury goods website. So my first reaction was to ignore what to me was clearly a marketing ploy to generate some holiday buzz and move on. But then I skimmed over a couple of commentaries and realized, much to my surprise, that Starbucks might end up getting more than it had bargained for.

It turns out that plenty of people are not at all amused by Starbucks’ marketing stunt. And in some cases that is an understatement. The coffee maker is accused of a range of heinous crimes, ranging from “class warfare” to catering to the one-percenters. More moderate critics see the card as “an uncouth symbol of conspicuous consumption”. I was truly taken aback by this backlash. After all, the concept of paying for a card is not exactly new. In fact, millions of Americans have been willingly paying annual credit card fees for years. So what exactly is so iniquitous about Starbucks’ decision to charge a one-time fee? Let’s see if we can make it out.

Starbucks’ New Prepaid Card

Here is what Businessweek tells us about Starbucks’ latest prepaid offer:

The coffee company says the limited-edition card, which is good for $400 in store credit, will be available through the website Gilt.com and include gold level membership for the Starbucks rewards program. The cards will go on sale at noon ET on Friday and will be available until the supply of 5,000 cards is sold out.

Gold membership to the rewards program includes perks such a free birthday drink and a free drink or food item after the purchase of 12 drinks. Customers normally need to make 30 transactions a month to get gold membership.

So the card itself costs $50 and a quick back-of-the-envelope calculation tells me that a regular Starbucks customer would easily be able to recoup the expense in less than a year through the higher number of free drinks she would be receiving. In fact, she is likely to even save money by using the card. So, really, why are people going so crazy about this story? And they truly are.

One-Percenters and Class Warfare

Let me give you a taste of the response to the launch of the new Starbucks card. The Christian Science Monitor’s Schuyler Velasco muses about the prospect of “class warfare in a coffee cup” in his report, which he begins by reminding us that “[o]ne-percenters need their coffee too”. He then goes on to quote a cultural anthropologist who declares that the card is

all about status, and to tell you the truth, I don’t know if I’d want to be seen with one of these.

The USA Today has also published this quote, while Huffington Post’s comments section is brimming with denunciations of said one-percenters and Starbucks’ decision is declared to be “[e]xceptionally insensitive to the tens of millions of Americans”. Another commenter asks the coffee chain to “give one of those cards to all of us middle class unemployed people and a free cup of that very expensive coffee too”. You get the picture.

The Takeaway

Some of you may remember that about a month ago Sberbank, a Kazakhstani bank, announced that it would be issuing its top 100 customers with a Visa credit card made of solid gold. The card was to be inlaid with 26 diamonds weighing in at 0.17 karats and would cost $100,000 for the first year of use, of which $65,000 would go to buy the piece of precious metal itself and the remaining $35,000 would be credited to the cardholder’s account, we were told. There would also be a $2,000 annual fee from the second year onward. That card was of course the ultimate nouveau riche toy, so people had some fun with it and moved on. And anyway, who would bother about a card — golden or otherwise — issued by a bank in Kazakhstan, right?

But it turns out that many Americans would be bothered by a big American corporation’s decision to spice things up in an industry known for its conservatism. Never mind that the main charge against the Starbucks card — that it is “insensitively” expensive — just doesn’t hold. See, this is a prepaid card, so you actually get to spend the money you put in it; you’re not just giving it away in return for a glorified piece of stainless metal. Moreover, as I already noted, the card’s rewards program is much better than its regular-card counterpart, so cardholders end up being repaid for their initial investment. So I think that Starbucks should just ignore its critics and expand its program.

Image credit: Starbucks.