On Tuesday, Starbucks announced its quarterly earnings, and, unlike a lot of other companies right now, things seem to be going pretty well. The company beat expectations and reported seeing its sales grow 9 percent--despite the effects of inflation and the threat of a recession. 

Starbucks seems to have avoided the problems facing other restaurant companies, mostly because its customers continue to spend money on coffee drinks--especially iced and frozen drinks. That's good news for founder and CEO-for-the-third-time Howard Schultz

I guess, technically, Schultz is "interim" CEO this time around, but that hasn't stopped him from launching what he calls a "reinvention" of the coffee chain. As an example, Schultz  announced that at the company's upcoming Investor Day, it would roll out major changes to its rewards program. 

"We have been working on a very exciting new digital initiative that builds on our existing industry-leading digital platform in innovative new ways, all centered around coffee and, most important, loyalty, that we will reveal at Investor Day," Schultz said during the call. 

The company's Starbucks Stars rewards program is, by all accounts, a massive success. The company has mastered the art of gamifying rewards for spending money in its coffee shops. Given the company's results, it seems to be working.

I'm not sure why you'd want to mess with a good thing, but it appears Starbucks just can't resist getting in on the latest craze. Schultz went on to explain:

We believe this new digital Web3-enabled initiative will allow us to build on the current Starbucks Rewards engagement model with its powerful spend-to-earn-stars approach while also introducing new methods of emotionally engaging customers, expanding our digital third place community, and offering a broader set of rewards, including one-of-a-kind experiences that you can't get anywhere else, integrating our digital Starbucks Rewards ecosystem with Starbucks-branded digital collectibles as both a reward and a community-building element. 

There's a lot to unpack in that quote. First, Starbucks says it's launching a "new digital Web3-enabled initiative." It's a risky move for a brand like Starbucks. Web3 is controversial, to say the least. 

Mostly that's because--to a lot of people--Web3 is synonymous with crypto, which is basically a scam at this point. That's not to say there aren't other things besides crypto going on in the Web3 world, it's just that no one who is thinking about stopping at Starbucks on the way to drop a kid off at soccer practice is thinking about any of them. 

At the same time, there's another group of customers who will probably love this. The key phrase is "digital collectibles." Or, put another way, Starbucks is getting ready to incorporate NFTs into its rewards program. Instead of cashing in stars for a free grande Caramel Frappuccino, you can exchange them for, well, something far less useful like a digital representation of a frozen coffee stored on the blockchain. 

The goal--for Starbucks--is to create "new methods of emotionally engaging customers." That's the entire point of Starbucks Stars in the first place. And it's a great strategy. 

One of the most powerful things you can do to create brand loyalty is to engage your customers emotionally. Starbucks has always been about more than just selling coffee. It's always been about creating an experience--a feeling--an emotion. 

The thing is, emotions go both ways. There are few things that generate emotions as strongly as Web3. Some people aren't going to like this move at all. That's a risk Starbucks seems willing to take.