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Brewed, Frothed and Served: The Starbucks Mobile Strategy

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In my last post, I talked about how mobile payments and digital wallets are fast capturing the imagination of consumers worldwide. While researching for that post, I stumbled upon quite a few references to Starbucks and their innovative mobile strategies, which led me to read-up on how Starbucks became a digital leader. And that’s how I got around to writing this post, where I’ve highlighted some of the innovative consumer-driven digital initiatives from the Starbucks mobile strategy.

Howard Schultz, Starbucks CEO Quote

Starbucks today boasts of a marketcap of $70.9 billion, with 22,551 stores in 65 countries across the world, with a staff size of 191,000. But things haven’t always been this hunky-dory; in fact, Starbucks was in a serious pickle in 2007 before Howard Schultz was reinstated as CEO, taking over the reins from Jim Donald. Stock values had tumbled, jobs were cut and hundreds of outlets had to shut down, but the damage had to be undone. It took a lot of pragmatic decisions and smart digital investments to help the coffee giant reach this stage. The digital transformation the brand underwent in the last seven years, not only invigorated the brand and made it the billion dollar enterprise that it is today, it also made the company the undisputable ‘King of Coffee’.

There’s a reason why consumers buy overpriced coffee from Starbucks day in and day out – ever wondered why? It has more to do than just the fact that Starbucks is an iconic brand, or else it would have never recovered from the ’07 – 08’ crisis. Howard Schultz did for Starbucks what Steve Jobs did for Apple in 1997 – they disrupted the market. Both Schultz and Jobs concentrated on transforming their respective brands, to bring the focus back on to the customer, and their needs.

When it comes to brand loyalty, Starbucks’ customer retention strategies are unparalleled; digital and mobile technologies make this possible by creating digital experiences for customers across touch-points. Schultz claimed that 90% of U.S. mobile transactions made in 2013 were at Starbucks, which translates to a whopping $1.17 billion in revenue from mobile payments alone. Today Starbucks processes over 8 million mobile transactions each week, which has contributed in the company reporting a staggering overall revenue of $14.3 billion, in just the last the three quarters. The Starbucks mobile app and digital wallet has close to 12 million active users in the U.S., who account for 19% of all transactions that happen in their U.S. stores.

Forrester Quote About Starbucks

The Starbucks mobile app allows customers to load money into their wallets using a prepaid gift card, which they can use to make purchases and collect loyalty points (My Starbucks Rewards). Customers can also use the app to track offers, find stores, download music, and place an order even before they arrive at the store (Mobile Order and Pay). Most of these services are still in their beta phase and are being rolled out to only select customers at the moment, but the brand promises to make these services available to the public by the end of 2015. According to 9to5Mac, Starbucks has recently rolled-out an option that allows customers to reload their Starbucks card with Apple Pay (only on iOS), in addition to the pre-paid facility previously available. However, the coffee king has no immediate plans of accepting payments via Apple Pay (smart choice!) at their stores and they still continue to leverage QR Codes to allow customers to pay using their smartphones. Interestingly, the Starbucks apps also integrates with Uber, just in case you have a frappuccino craving and the nearest Starbucks is miles away!

Starbucks is also making giant strides in other areas of digital technology as well. The coffee king is planning on implementing Apple’s iBeacon technology in their stores, to allow customers at its premium-coffee Roastery and Tasting Rooms to access information about freshly brewed coffee through their smartphones. Starbucks UK launched wireless Powermat charging zones in some of their London stores, where customers can connect their phone to a ‘Ring’ and place it on top of the built-in charging mats on their table, to charge their phone. Starbucks acquired Clover in 2008, a company that makes hi-tech coffee machines, which now makes it possible for coffee machines across stores to communicate with each other and a central information centre via Cloud, to enable real-time performance checks and improvements. In addition to all this, Starbucks has also tied up with NewYork Times and Spotify to deliver news and music to the users’ smartphones through the Starbucks app.

More stories on Starbucks Mobile Initiatives

Quite obviously Starbucks manages to collect a ton of data, ranging from mobile user behavior to customer preferences, which then a small team of data scientists mine for insights. The company uses the culled out actionable insights to create a unified customer profile which helps them establish a one-to-one marketing relationship with their customers. Not only does customer profiling help Starbucks employees to augment the in-store experience for their customers, it also allows them to promptly deliver tailored services and custom offers to the customers, through the app or via SMS. But how secure is the data which the customer chooses to store in the app – like their card details for example? Earlier this year, hundreds of customers had fallen prey to credit card fraud when hackers stole their data from the Starbucks app. But in a statement put out by Starbucks, the company clarified that the app’s security was not compromised and they blamed weak passwords for the fraudulent activity. Looks like their data security measures needs a bit more tweaking.

The think-tanks at Starbucks HQ are in overdrive, brewing fresh strategies to deliver better customer experiences and boost brand loyalty. The brand also plans to fortify its position as a market leader by serving new ‘types’ of brews, like tea and booze for example, to cater to a larger audience segment. Bottom-line is that, with the right mix of technology, products and services, the company has carved a niche for itself and it’ll be a while before other players can even think of dethroning this undisputed king!

Rahul Aggarwal

As Managing Director and a founding member of Endeavour, Rahul ensures that all internal functions at Endeavour run like a well-oiled machine. He plays a crucial role in identifying and grooming future leaders for Endeavour; he also works very closely with the marketing and sales functions, to align their strategies and objectives with the organization’s goals. Rahul’s penchant for marketing and strategy has helped Endeavour define its vision for 2020 and beyond. Outside of work, Rahul is a marathoner and enjoys running with others and making friends along the way.
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