“Only 4 percent of companies are prepared to serve their customers in their mobile moments. This is a major business transformation, and it’s very hard to do.” -Julie Ask
Coffee lovers on the go know they can order and pay for a cup of joe at Starbucks over a mobile app. The Starbucks app also ties into a loyalty program, so if it’s your birthday and you’re a regular Starbucks customer, you’ll automatically receive a gift such as a coupon or free coffee.
The Seattle-based coffee brand is “brilliant” at using mobile technology to deeply engage customers, says Julie Ask, principal analyst at Forrester and co-author of The Mobile Mind Shift. So if you want to win over customers in their mobile moments—defined by Forrester as “a point in time and space when someone pulls out a mobile device to get what he or she wants immediately, in context”—you could learn a lot from Starbucks.
Mobile brews profits
To the winners of the mobile moment go the spoils. Starbucks began rolling out a mobile order and pay feature in Oregon stores in December 2014, expanding to additional markets in early 2015, and reported in July that its fiscal third quarter same-store sales were up 8 percent globally and 9 percent in the United States. Moreover, 18 percent of all Starbucks transactions come from mobile, according to Marketing Land.
“Mobile Order & Pay is enabling us to serve more customers more quickly and efficiently and to significantly reduce attrition off the line,” said Starbucks Chairman and CEO Howard Schultz, as quoted by Fortune. (Starbucks declined to comment for this article.)
Last week, Starbucks announced the hiring of Adobe CIO Gerri Martin-Flickinger as chief technology officer. It’s seen as another sign of Starbucks’ transformation to a digital business. Starbucks says Martin-Flicklinger’s expertise in cloud, big data, analytics and mobile, along with years of experience in Silicon Valley, will help the company navigate the future.
Given Starbucks’ success, you’d think every retailer would be jumping on the mobile bandwagon, but that’s not the case. “Only 4 percent of companies are prepared to serve their customers in their mobile moments,” Ask says. “This is a major business transformation, and it’s very hard to do.”
Conversely, there’s always risk of taking things too far.
In May 2014, San Francisco-based Philz Coffee, a small but growing coffee retailer, ignited privacy concerns with in-store Wi-Fi technology designed to collect information on people at or near a Philz. Amid customer complaints, Philz dropped the technology. As of this writing, the company says on its website that it has withdrawn its iPhone app and that it is “working on upgrading the app and hopes to launch a new version in near future.”
Customer loyalty is the key metric
Hedging against privacy concerns, Starbuck’s mobile app ties into its popular customer loyalty program. As of the third quarter, there were 10.4 million active members, an increase of 28 percent the year before. Loyalty members account for about 30 percent of Starbucks’ North America business.
Overall, Starbucks’ mobile app has shown strong traction. Nearly seven out of 10 U.S. Internet users who were aware of the app downloaded it, according to a January 2015 Market Force Information poll, as reported by eMarketer. That’s a higher penetration than for all other brands in the coffee, bakery and doughnut category and 10 points ahead of second-place Dunkin’ Donuts, eMarketer notes.
Here are three lessons from Starbucks on how brands can make the most of their customers’ mobile moments, as well as challenges that lie ahead.
1. The mobile app is the customer experience.
Customers use the Starbucks mobile app throughout their engagement with the brand, Ask explains—not just for ordering and paying for coffee.
Initially, customers rely on the app to find and navigate to the nearest Starbucks. When they’re standing in line, they can use the app to download free music or apps and check email using the free Wi-Fi. Customers can use the app on their phone or smartwatch to pay using the credit or debit card linked to their loyalty card; Starbucks was an early adopter of mobile payments. Purchases earn points toward free food or beverages, too.
Customers can tip the barista using the app, check their loyalty card balance, and reload the card with funds either manually or automatically. And they can order drinks and food in advance and pick them up at the closest Starbucks.
The “ease of ordering, paying, adding money to my electronic card and special offers makes Starbucks a winner when it comes to engaging customers,” says Starbucks loyalist Jeff Durosko, president of JD Communications.
2. Mobile moments lead to more mobile moments.
Not only does Starbucks own a lot of mobile moments with customers, the company manufactures them through the right amount of alerts, birthday drinks, free music and other perks, says Ask. She defines manufacturing mobile moments as creating “new opportunities to engage with customers by offering utility, education or entertainment.”
It doesn’t stop at the cash register, either. Starbucks rewards customers for regularly using the Starbucks app by offering special incentives.
Mitch Goldstone, president and CEO of ScanMyPhotos.com, says Starbucks’ mobile moments have “transformed the retail experience” for him to such a high degree that he wants other merchants to “catch up.”
3. Create a culture that encourages experimenting.
As a large corporation, Starbucks has the bandwidth and resources to experiment with different ways to capture customer mobile moments. For instance, Starbucks has been experimenting with mobile since 2001 when it first began offering Wi-Fi in stores to keep customers coming in or hanging around during off hours.
But startups and smaller companies can also create a culture in which experimentation is encouraged—the key is to dip a toe in the water instead of diving in. “Starbucks is good at trialing by starting small, understanding the impact, and then moving forward,” Ask says.
Despite its successes, Starbucks still faces hurdles in capturing customers’ mobile moments. Some Starbucks coffee drinkers feel the app doesn’t go far enough in engaging them. In-app videos could provide information on the brand’s coffee growers or your local baristas, suggests James A. Gardner, digital strategist, Connective DX. Another Starbucks regular, Harold Mann of Mann Consulting, feels the company could further engage customers with giveaways and contests and provide ways to offer feedback on employees.
Starbucks must also walk a fine line with its partners, such as Google and Apple, in giving them access to customers via the Starbucks mobile app, Ask says. The challenge is to choose the right third-party services that will resonate with customers and reflect positively on the Starbucks brand.
Perhaps even more daunting is the major transformation companies must undergo in order to hit mobile moments and win the customer relationship. Consistently capturing customer mobile moments requires investing in a large infrastructure, as well as process changes to emphasize online orders over those made in person, Ask says.
James A. Martin is an award-winning, San Francisco-based journalist. He started covering mobile technology sometime after the Apple Newton bellyflopped but before the PalmPilot went viral. You can reach him at email@example.com.