Starbucks has long been cited as a business with a great loyalty offering, as a leader in free WiFi and mobile payments, going digital in 2009 with its My Starbucks Rewards app – a feat many retailers haven’t yet achieved even in 2016.
At the beginning of 2015, there were more than 9 million My Starbucks Rewards members, and mobile app payments represented 20% of all in-store transactions in the US. Given that 6 years earlier they faced declining same-store sales, with its share price being nearly cut in half over the prior two years, this is quite a dramatic turnaround – a turnaround driven by digital technology.
However, Starbucks is far from complacent about its positioning as a leader, and is continually looking at ways to improve its offering. They have an entire website dedicated to user-generated ideas, for everything from the food and drinks to the atmosphere and merchandising.
Crowdfunding ideas cuts R&D costs, but also ensures that the ideas they implement are actually wanted by customers. Coupled with market and customer research, this provides Starbucks with a robust view of areas for development, enabling them to really target investment.
Click, Collect & Caffeinate
One idea which was rolled out across the USA and has recently been launched in select stores across London is Mobile Order & Pay. Using the Starbucks mobile app, customers are able to select and customise their food and drinks (ideal for those inclined to order a Venti Extra-Hot Double Shot Skinny Extra-Dry Cappuccino), select the collection store and pick it up minutes later.
Starbucks is infamous for asking your name when they take your order, so that you are easily identifiable when it has been prepared. Mobile ordering is no different – because you order through the app, your customer details are attached to the order so they can still identify you when you arrive to collect it.
A key benefit of Mobile Order & Pay is that the customer can skip the queue to collect their order. Yes, that’s right – I said skip the queue. In Britain. I’ve done this a few times now, and I can tell you honestly that the incredulity on some other customers’ faces is both amusing and alarming.
At the moment, this is a differentiating proposition. However, there will be a saturation point at which it no longer becomes advantageous for the consumer. If enough people are ordering on their phone for collection, it becomes no faster – and perhaps slower – than queuing normally in-store.
I recall a recent trip abroad when a friend and I rented a car from Avis. He, along with seemingly everyone else in the depot, was an “Avis Preferred” member. As a result, the ‘priority’ queue he had “exclusive” access to was three times as long as the non-preferred queue, which invalidated the whole point of it. When everyone is special, nobody is.
Starbucks have already begun looking into other options to prevent this from becoming reality. For example, they ran a pilot of a ‘Green Apron’ delivery service in New York’s Empire State Building. Adding delivery to your infrastructure allows you to free up some of that crucial in-store space, allowing you to keep the queuing customers, queue-skipping customers and delivery customers happy all at once.
It is too early to say at the moment how successful this will be, but I can see it being a big winner with employees doing ‘the coffee run’ for their colleagues, allowing Starbucks to steal business from elsewhere purely for the sheer convenience of it all.
Additional customers, additional sales and an opportunity for an improved Net Promoter Score (although, with a current NPS of 77, they aren’t doing too badly in that area) will all be other benefits that Starbucks may see.
It’s important to note that to be able to use Mobile Order & Pay, customers must first register for the Starbucks’ loyalty programme mentioned earlier, My Starbucks Rewards. You will still earn your rewards for transactions ordered in advance, but what I find interesting is that Mobile Order & Pay is advertised as an offering in its own right – not just as part of the loyalty scheme.
Starbucks is activating new customers, without them necessarily realising. Once they provide their details, start collecting stars, receiving their free coffees or their free syrups, this will become the norm and they will continue to want these rewards.
And of course, Starbucks now has information about your coffee-purchasing behaviour, but more importantly it has your money pre-loaded into the Starbucks Rewards card – not money that you can spend in cash or credit in another coffee shop.
Similarly, partnerships with Spotify, Lyft and The New York Times are described by Starbucks itself as core parts of its ‘Digital Loyalty Ecosystem’, but are nowhere to be found as part of the description of benefits of joining the loyalty scheme.
By providing these offerings as standalone services, Starbucks is creating multiple routes into its loyalty programme. As an app, there isn’t the same physical association with a loyalty scheme as there would be with a physical plastic card. In addition, it gives Starbucks the freedom to withdraw less successful ventures if need be whilst leaving the core loyalty proposition untouched.
With these ventures and more – including free wireless charging – Starbucks is at the forefront of digital innovation, driving customer engagement to both retain and acquire customers. CEO Howard Shultz stated in 2013 that “as a result of our digital capabilities and insight, we have been able to do things that almost no other consumer brand or retail company have done before. And we’re just getting started.”
In doing so, Starbucks is creating customer loyalty that is integral to its future strategy and yet separate from its core loyalty proposition; it is a strategy of inclusion and relevance, rather than exclusion and consequence.