#dshenanigans

Exactly what amount of first-world anger should I direct toward Starbucks? I was curious about how the new program would affect different types of customers (ok, specifically me), and came up with a simple model here:

https://docs.google.com/spreadsheets/d/14fLCbN6tz6v1ttI-lt0s-pqwHilZSUaoesxdcXfQKTQ/edit?usp=sharing

Here are my findings:

1. Because of the spend requirement, the new program fixes the % back a customers receives on his/her purchase. In the new regime, one accrues ~8.76% back. This is pretty comparable to other coffee shops (1 free drink every 10 - 12 drinks)

2. The break-even point between the old and new regime is $5.21 per transaction. In other words, those spending on average $5.21 are indifferent between old and new plans. Those who spend more than $5.21 per transaction should actually be happier under the new program. Those who spend less than $5.21 per transaction? Not so much. The $3-latte drinkers are worse off by approximately 5%. The $2-cup-o’-joe drinkers are worse off by approximately 13%.

3. To even start to have purchase count toward rewards, Starbucks has a spend threshold in place. The switch over to dollars spent means that the $3 latte drinker has to spend an additional $55 to even get into the program; the $2 cup-o’-joe drinker, an additional $90.

Such a move is not dissimilar to how airlines changed their frequent flier miles to be based off of dollars rather than miles. It makes sense to the companies running such rewards programs, particularly toward the end-goal of rewarding the most loyal customers, rather than their most frugal / enterprising customers (i.e., those that would split purchases into separate transactions to get more Stars. Guilty as charged! Starbucks even has a special FAQ / go to hell note for these customers here: http://morestars.starbucks.com/). Given 95% of customers likely fall under the $5.21-per-transaction threshold laid out in point 2, I’m surprised Starbucks didn’t go even deeper (say, to a $7 break-even point) under the new system. My two theories:

1. Optics: they adjusted the numbers so that it wouldn’t look to start (125 stars relative to the 12 stars sounds better than 250?)

2. $5.21 is the roughly the minimum per-transaction spend of a big-fish Starbucks customers whom Starbucks would like to make feel special

Edit: The image accompanying this article has been changed to reflect this year's venue, the Seattle Key Arena. The previous picture showed last year's venue, the Seattle Opera House.

For those of who aren't familiar with Dota, Wikipedia informs me that it's a "2013 multiplayer online battle arena video game." Dota was originally created by a fan of Warcraft III (a Valve creation) as a mod(ification); the mod caught the attention of Valve developers, and the fan was eventually hired by Valve full-time to develop the game. I met up with a friend who was spectating the tournament and was quite surprised to find out the size of the prize pool. This year, the tournament awarded $11 million dollars in total, and the winning team walked away with a cool $5 million. The money was almost entirely crowd-funded through the sale of a $9.99 "Compendium" to fans. Here's the kicker: Valve pocketed 3/4 of the funding and contributed the rest to the prize pool, so the compendium sales grossed $44 million. To put the prize pool's $11 million in perspective, I looked at some of richest "real" sporting events in the world based on this Forbes slideshow. The result? Last weekend's International would be tied for sixth with the Super Bowl and just behind the UEFA Europa League (four out of the top five richest events are soccer-related). The International is also ahead of the Fedex Cup, the World Series of Poker, and the Dubai World Cup. Apart from the funding the prize pool, fans of the game paid a significant sum to spectate the game in Seattle. Ticket prices ranged from $99 - $499; at a rough average of $199 a pop and accounting for capacity at Key Arena (~17K), gross ticket sales were about $3.5 MM. Furthermore, spectators were encouraged to purchase related game merchandise at the store set up at the tournament site. Those who spent upwards of $150 would receive a 1/2 body-length tote bag to carry all their swag. By way of very rudimentary observation, nearly half of the spectators I saw (identified by entrance badges swaying around their necks) carried one of these bags. Assuming they spent an average of $199 on swag, I'd say another $1.75 MM of on-site merchandise, coupled with a similar amount online, is in the realm of possibility. This aggregates to ~$7 MM in ticket and merchandising sales during the event, on top of the ~$44 million through Compendium sales. This year's competition was even broadcasted on ESPN3, the chosen home of many non-athletic events that ESPN understands to be either lucrative or culturally significant (think World Series of Poker or the Scripps National Spelling Bee). Notable here is that a video gaming event was 1) televised on a major cable channel and 2) placed in relatively premium time slots (Fri-Sun). ESPN clearly recognizes the size of the prize -- Dota2 fans represent a huge, untapped audience that doesn't fall into its usual viewer demographic (put politely), and furthermore, this audience is clearly able and willing to pay a lot of money as spectators. I compared prize pools, ticket sales, and broadcasting presence to demonstrate the rising viability and visibility of e-sports. However, this doesn't paint the complete picture about an event's market value. For other sports, the breadth of events (i.e., full seasons of play / variety of tournaments) and willingness of fans to pay for that entertainment on a regular basis is what eventually sustains an entire league of professional athletes, along with various systems to support the sport (e.g., pre-professional / college / hi-school / recreational leagues).

Conformity is often driven by the informational cascade -- it's impossible to know everything about everything, so one of our heuristics is to notice what others do and adopt the same practice (i.e., follow the crowd). Most of the time, it tells us a lot of information about what the best "thing" is. In sports fandom, bandwagoning allows us to leverage the wisdom of the crowds to inform us who the hottest team is, even if we haven't followed along with any other development in the league. Sadly, that also means that a lot of details on team history or even team composition are lost in the shuffle for bandwagon individuals, particularly if s/he would rather attach him/herself to the cultural phenomenon and not the team. Understanding the team becomes even harder for new fans of the sport over time, since teams accumulate history and rivalries. Purist fans, though, are unforgiving: ignorance, even of current team composition, is a common insult levied on bandwagoners. You can't trust a bandwagoner

"True" fans band together to endure the tough times, and connect on their more-informed perspectives on team sports. Moreover, different enclaves of teams will proclaim the depths to which their fans will go (above and beyond fans of other teams). As with any fanatical organization, they are bound by and must project these principles even if their position is less favored by other groups or even the rest of society. The group, then, must guard against individuals who are likely to defect, even if the fan is an addition to the growth of the fanbase.

Hope, on the bandwagon?

I found thinking about these reasons helps inform those of us in the "know" about any sport on how we should act toward bandwagoners, especially as we apply these exclusions to ourselves.

When evaluating these characteristics against myself, I realize we were all bandwagoners of some sport as some point. It's just impossible for a person new to spectating sports to devote the time and energy to support one team in every major team sport with perfect knowledge and in collaboration with a network of other die-hard fans. (Yes, even if you were a sports genius born into a sports family) True, bandwagoners are an annoying bunch, especially because the loudest ones can be the least educated. But then again, some of them are just people like you or me, who are just starting to learn what real sports spectatorship is like. Let's spend time and effort educating those guys: fans who are currently bandwagoning, like you or I once did, as a stepping stone toward becoming real fans, and not as a choice of lifestyle.

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