How Starbucks is Using Mobile Apps to Significantly Increase Sales
Starbucks is a company that has long known that the future of retail is tied to technology. Back in 2009 it launched its mobile app. Then it began offering in app payments in 2011. By 2014 Starbucks had rolled out mobile pre-order and pay before it was common to do so. Customers using this feature can skip the line (most of the time) in store by placing their favourite order from the most convenient location whether that is at home or on the way to work. Barron’s has even said that: “Starbucks identified the smartphone revolution years before most bricks-and-mortar firms.”
Starbucks’ mobile payment app is so popular that a few years ago it had the most mobile payment users in the United States. Only within the last few years has Apple passed Starbucks with over 40 million mobile payment users while Starbucks comes in second with over 30 million users. That is a staggering accomplishment given that Apple users can make payments at a range of retailers while Starbucks users only have one option.
That high usage rate has lead to 25% of Starbucks’ transactions being processed through Starbucks’ app. “We continue to leverage the advantages of our mobile app to elevate the personalization of the customer experience and deepen customer engagement….Our digital channels convenience has proven successful in driving demand,” says Kevin Johnson, the former CEO of Starbucks.
Starbucks’ mobile app uses machine learning to provide customers with personalized recommendations for additional products they may want to purchase based on their purchase history. According to Starbucks' former chief technology officer, Gerri Martin-Flickinger, it uses “a data-driven AI algorithm based on your own preferences, your own behaviour as well as behaviours that [Starbucks is] trying to drive.” Starbucks has said that its personalization initiative “is the single biggest driver” of improved spend per customer it has seen. Forrester Research says that Starbucks: “has [delivered] possibly the most successful mobile ordering app of all time.”
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Starbucks’ mobile app is also tied to its loyalty program. With one quick scan using the app you can make a payment and accumulate rewards towards discounts on Starbucks’ purchases. The lure of quickly and easily accumulating rewards creates an incentive to use the app on a regular basis. The results speak for themselves. Starbucks has around 30 million people enrolled in its loyalty program and over half of Starbucks’ sales pass through that program.
One of the tactics Starbucks has used to increase app usage and uptake is to open pickup only stores. In 2019 Starbucks opened up its first pickup only location in the United States. These locations are small and often do not have seating and are meant to cater to customers ordering using the Starbucks app who want to grab and go. Starbucks is in the process of building out its network of pickup only locations. "Our vision is that each large city in the US will ultimately have a mix of traditional Starbucks cafés and Starbucks pickup locations," said Starbucks in a statement.
A key lever Starbucks used to solidify its strength in mobile was to hire a CEO with a technology background. Johnson, the former CEO of Juniper Networks and a former executive of Microsoft, replaced Howard Schultz as CEO in 2017. Johnson has said that: "digital relationships drive significant long-term value to Starbucks through more frequent occasions, increased spend, improved customer retention, and marketing efficiency." The company has also stated that: “digitally engaged customers purchase 2 to 3 times as many products as those that are not digitally engaged."