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Starbucks generates 10pc of US revenue from mobile

By
April 29, 2013

The Starbucks mobile app

While overall mobile payment adoption is moving slowly, this is not the experience for Starbucks, which continues to experience significant growth in the number of customers using smartphones to complete a purchase.

Every week, Starbucks is seeing close to four million mobile payment transactions, up from two million near the end of last year and three million a month ago. Additionally, mobile now accounts for approximately 10 percent of Starbuck’s total U.S. tender.

“Starbuck’s success shows that mpayments can be done right and successfully if you understand your customers well, you are committed to making it a success and continue to evolve over time to get the experience optimized for users,” said Gene Signorini, vice president of mobile insights at Mobiquity, Wellesley, MA.

“For companies who are either just beginning to implement mobile payments, or haven’t started yet, Starbuck’s success is a good thing,” he said. “Every new technology innovation requires a few leading edge companies to act as trailblazers, and Starbuck’s is filling this role.

“By watching what they get right, and even what they might get wrong, other companies can adapt these lessons to their own specific business requirements and become fast-followers in mobile payments.”

Rewards membership grows
The update to Starbuck’s mobile payment volume was made during a recent call with analysts to discuss the company’s fiscal second quarter financial results.

Starbucks also reported that its mobile apps now have than ten million active customers and that it is adding approximately 80,000 new My Starbucks Rewards customers each week.

The coffee giant expects to double the number of active members enrolled in the Starbucks Rewards program from 4.5 million at the end of fiscal 2012 to nine million in 2013.

Additionally, Starbucks card tender now exceeds $3 billion annually.

During its fiscal second quarter, Starbucks drove My Starbucks Rewards membership by offering a $5 credit for U.S. Starbucks cardholders who became a program member.

The program resulted in nearly one million new registered members and nearly 500,000 mobile app downloads during the two-week offer period alone.

The company also reports that My Starbucks Rewards is seeing similar growth rates outside the U.S. in countries such as China, Korea and Canada.

Formula for success
Starbucks’ success in mobile payments is a result of a loyal customer base that regularly frequents its locations, the brand’s strong commitment to mobile and its continual focus on evolving the mobile experience.

“Starbucks has a loyal customer base that visits repeatedly and frequently, and therefore develops a personal relationship with the brand,” Mr. Signorini said. “Mobile is inherently a very personal, tailored experience, just like ordering your own Starbuck’s latte to your tastes so the two things mesh well together.

“Starbuck’s has been both committed and vocal about mobility,” he said. “They went out strong in their rollout with payments, and have been very public about it, which has raised awareness among consumers.

“They haven’t been content to stand still, but have continued to tweak and evolve the mpayments experience. Mobility is a constantly evolving medium; mobile payments is a new technology for consumers – this means that companies need to continuously iterate to get it right.”

Cross-channel rewards
Going forward, Starbucks will likely further drive growth for mobile payments with a new program that will begin in May, expanding My Starbucks Rewards cross-channel into the grocery channel.

This will enable members to earn stars for purchases of Starbucks packaged coffee in stores that can be redeemed for free food or beverage at Starbucks locations.

“It’s very hard, I think, to actually explain this in the kind of detail or the attachment that we think this is going to do, and this gives us a significant competitive advantage over other like coffee products that are sold in grocery, and we’re going to see incrementality as a result of that in our own retail stores,” said Howard Schultz, president and CEO of Starbucks, during the conference call to discuss the company’s results.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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