Starbucks plans to extend its Mobile Order & Pay offering beyond its loyalty program members to kick-start U.S. sales - but the coffee giant is also going to want your e-mail address in exchange for free WiFi.
Now with Facebook being hauled over the coals over gathering personal data, this may not appear to everyone to be the best time to be chasing email addresses from customers who just want a cup of coffee, but for Starbucks CEO Kevin Johnson, it’s seen as a priority:
We’re now working to expand our digitally-connected customer relationships well beyond their current state. We want to reach millions and millions of more customers digitally.
Around 75 million customers visit Starbucks stores every month. While the Starbucks Rewards program is regarded as a success, only about 15 million of those customers are members who can be targeted with personalized marketing.
So here’s the cunning plan. Starbucks will require customers who use its free in-store wi-fi to enter their e-mail address in the first store where they get connected. The device will then be remembered and connect automatically. That would give Starbucks new email addresses for up to 60 million customers who are not Rewards members, email addresses that Starbucks could target with promotions.
The firm also intends to make the Mobile Order and Pay option currently only on offer to Rewards members accessible to all customers. Johnson says:
Starbucks has been investing in this, in mobile, in our app, in the transaction systems, in the platforms, building out the capability to extend the connection we have with our customers in The Third Place [Starbucks claims to be the third place in daily life after home and work] to a digitally connected world, and those investments are showing up in our performance. Now, in fact, more than 30% of all U.S. customer transactions are paid for with the mobile app.
We have opened up Mobile Order & Pay to all customers. We’ve created digital coupons and promotions for customers that will be utilizing for our happy hours. We’re utilizing our personalization engine to provide more relevant personalized content. And the opportunity goes well beyond that.
Brewing the digital future
The person charged with delivering much of this is Roz Brewer, who became Starbucks first woman and African-American Chief Operating Officer last September, joining the firm from Walmart where she ran Sam’s Club, the warehouse club division. She argues that this latter role has served her well:
Having just completed 10 years with the world’s largest retailer, Walmart, having honed design thinking and processes that are key to their culture and creating digital retail at scale and solving logistics and operations challenges and in this new world of retail, I personally feel uniquely capable of being a service to the next growth of Starbucks.
If I’ve learned nothing else, I’ve learned just what it takes to win this race and the importance to be strong operationally, while you innovate for profitable growth. Having operated more than 2,000 big box stores and at peak more than $100 billion in sales, I’m excited to transfer those skills in this new role.
She takes up the job at a time of great change, not only within Starbucks:
I get to do this at a time when we are experiencing a seismic shift in retail. Our customers are demanding convenience, they’re demanding customization, they’re demanding choice.
Technology has enabled the immediacy mindset and shopping patterns have shifted dramatically, with 96% of Americans shopping online. Mobile payments in just the last year in the fast food industry grew 75% just between 2016 and 2017. That’s just one year.
Our customers...continue to seek respite from the busy day of multi-tasking, constantly in transition, creating the need for me time and human connection. But timing, timing is everything.
The key to kick-starting faster sales growth in the U.S. is going to lie, in part, in growing the digital relationship with customers, she argues:
We want to serve the customer in the many ways that they want to interact with us. It’s the customers’ choice. So now, from how customers want to react with us to in-store and how we engage them on a personal digital level, we now have more than 15 million, that’s 15 million active Starbucks Rewards members. This number has grown 11% year-on-year. We know how powerful digital engagement is as a driver of customer satisfaction and increased spend with Starbucks, and we plan to see double-digit growth in our Rewards members this year.
All of which leads back to the opening up of Mobile Order & Pay, which Brewer pitches as a new opportunity:
There remains 75 million unique customers coming through our doors every month. We have plenty of opportunity to form active relationships with millions of more customers by providing access to [Mobile Order & Pay] for all customers, improved marketing to millions of lapsed Starbucks Rewards customers, and Wi-Fi or e-mail sign up - all of this work is underway.
Then once we have these, we turn on digital marketing and one-on-one personalization, and that’s been really successful in our Starbucks Rewards to a very large group and that extension is important to us. This allows us to bring product innovation across coffee, refreshment, and food to customers with focused marketing and all of the work that we need to do to stay ever present in front of our customers. We take true pride in continuing the drive for innovation across the company as a whole.
The convenience challenge
This expansion of the Mobile Order & Pay initiative is particularly interesting as it was a victim of its own success when first introduced. The app allows customers to place an order and pay for it before reaching the physical store to collect it, skipping the line. But while that sounds very convenient, Starbucks ran into fulfilment issues which resulted in users finding themselves standing in line anyway.
Addressing that glitch was made a priority and the implication is that Starbucks is now confident it has that under control. But that bump has also clearly inspired some thinking around the balance that needs to be struck around pursuit of convenience versus practical delivery. Johnson posits:
Certainly, in the realm of retail, oftentimes convenience has been the enemy of the physical store, instant has been the enemy of brand loyalty, fast has been the opposing force of great experiences. Now, some in the industry believe that you must either be focused on a retail experience that is about community or a retail experience that is about convenience - you cannot do both.
We reject that thinking. We do not buy into the false trade-off. In fact, we’ve refused to succumb to the pressure of the tyranny of form. The work we are doing in store design, store locations, operational routines in our stores and digitally on our app, are all focused on embracing the concept that we can better serve multiple experiences our customers’ desire, experiences around community and experiences around convenience. Now, over the past five years The Third Place has been extended, extended digitally, and we are innovating in ways to better serve experiences around both community and convenience.
I love that the COO of a coffee company is called Brewer!
That apart, the expansion of the Mobile Order and Pay option to everyone is a sensible strategic move. As noted above, this may not be the best climate in which to asking for more personal data from your customers - and the GDPR implications might be interesting - but this could be a revealing test of consumer attitudes in the U.S.