How Starbucks became a mobile-first company
While Starbucks coffee is an acquired taste, the way they embrace mobile as a primary driver of growth is not. It’s clear they get mobile when it comes to their business. They’ve become a beacon for mobile commerce and loyalty and are being talked about by the retail, technology and business experts and are now processing 20% of payments from mobile. The question is how? How did this coffee shop that sells the furthest thing from technology learn to use the technology to sell more, reach more people more often and increase basket size and loyalty…all from an app?
The world of coffee got competitive, slowly then quickly. I used to work at a gas station and coffee was what I brewed once in the morning and drank all day. The darker the better. Not any more. Coffee is business and everyone wants a piece of it. I remember seeing my very first McDonalds McCafe in Paris (of all places) in 2006. It’s a classic Clayton Christensen moment when coffee disruptors started taking from Starbucks and Starbucks succeeded the lower value customers. Add to this the economic destruction that happened in 2009 and the results for Starbucks were catastrophic. Growth stalled, stopped, and plummeted. Something had to give.
Somewhere in the middle of all of this, right in the heart of the decline, in 2009, Starbucks dove into mobile head first instead of ignoring it. They knew they needed to start pulling people in to their stores and mobile was becoming an effective channel for reaching customers. They started with loyalty, then moved to prepaid cards, then rewards, then payments and now order and pay ahead and soon regularly scheduled deliveries. They went slowly then quickly.
They partnered with Apple for music distribution. They partnered with UBER for coffee pickup prior to being picked up. They partnered with Square for payment processing. They recently partnered with Lyft to gain rewards points for using the Uber competitor’s service (Lyft drivers also earn points and can even receive Starbucks Reward points as a tip from the riders). They partnered with Spotify to bring custom playlists that can only be accessed in select stores – something they also did with Rovio by offering new Angry Bird levels to patrons in specific locations. Starbucks also announced a partnership with the New York Times to bring certain articles to Starbucks loyalty members starting in 2016.
It’s hard to compare the growth of Starbucks to a company that may not have the same reach but there are lessons here:
- They started with an existing behaviour. They didn’t try to introduce a new process or service, they merely moved it. Complemented it. They made loyalty easier on mobile.
- They nailed the experience and only then moved on to the next. Retention was their leak. People weren’t coming in and buying. This needed this to stop. They looked to mobile to help.
- They adhered to the times. Starbucks did not introduce mobile payments before their time. They knew that, in order for payments to work for them, they needed to have an established base of ACTIVE app users already. Once they did, adding payments was just another service and people were ready.
- They committed – and continue to commit – to mobile as a growth engine. Starbucks thinks of their app as the gateway to additional products and services.
Whatever you think of their coffee or their prices the reality is that Starbucks has emerged as the leader of mobile payments because they approached it with intent. They didn’t dabble in it. They dug in. They also haven’t stopped.
Links for more on Starbucks and mobile:
– Starbucks’ Massive Mobile App Momentum
– Starbucks Hits a Mobile Milestone: One in Five Payments Are Mobile
– Starbucks Bets the Store on Mobile
– Starbucks’ App Accounts for 90 Percent of All Mobile Transactions
Podcast: This Week in Location Based Marketing #243 – Groceries are hot + Ian Dallimore of Lamar (link)
Hey retailers, here’s why no one is downloading your mobile app (link)
Chrysler has 1.4 million reasons to embrace the Internet of Things…quickly (link)
TRENDING ON UNTETHER.tv: How does retail stand up to the barrage of mobile – with futurist Doug Stephens (link)
Tactics: Retention Focus
– Simple formula for exponential growth (link)
– Why Retailers Must Optimize Mobile Sites (link)
– Understanding smartphones as an influencing device (link)
– How important is a focus on retention? Well, it cost Homejoy their business: What Really Killed Homejoy? It Couldn’t Hold On To Its Customers
– 8 Things SMBs Should Consider Before Adopting Mobile Payments (link) * A great checklist. This is probably the thinking Starbucks went through to determine when they were ready.
Industry News that Matters
Can we all agree that Facebook is a platform? They’ve clearly hit a stride with services that are addictive and in a very short time have come to dominate mobile. Now they are trying to be everything to all of us – including where we socialize and buy. Can Facebook take on Amazon to become the world’s largest retailer? Here’s a great article that explores the difference between the two behemoths: Facebook wants to own your life, not imitate Amazon. The thing is, Google is doing the same thing. Can “buy” buttons force us to buy more?
Here’s a cool idea – if you like watching advertisements. A company called Tunity is applying their listening technology to the ad world. Tunity allows you to connect to the audio of a television screen that you can’t hear or is turned down. Think about being in a bar watching a game and not being able to hear the sportscasters (a BLESSING if you ask me). The app tunes into the audio and you can listen. They are applying this tech to the ad world: Yaniv Davidson Wants to Monetize Your Ears
Have you tried Beme yet? It is another video capture and share service with a twist. I guess it’s like Snapchat but with even less thought to interface. The premise of the app is that the screen interferes with the experience of recording so it uses the proximity sensor to initiate recording. Simply launch the app and hold the phone (screen side in) to your chest and it begins to record. You get 4 seconds and no opportunity to edit or delete. Once it records it goes live to everyone. Interested in trying it? Reply to this email as I have a few keys to give away. They seem to be a commodity and have made Beme a Twitter trend. More information about Beme can be found here.
Where do you stack up? Here is a quick list of benchmarks for your app. Beat the Benchmarks to be a Winner
Case Study on retention
If you are struggling with your mobile engagement strategy then this is a must read from a good friend Greg Hickman. It’s an incredibly detailed post based on what Ace Hardware did and worth your time to read: Stop Guessing: Here’s A Mobile Engagement Strategy That Works
How Men’s Wearhouse Used Apple’s Passbook And Google Wallet To Increase In-store Redemption By 10X (link)
A question for you
How’s this email roundup helping you? Or not…
See you next week!