Problem Set #1: Starbucks

Introduction

Starbucks is a world-renowned premium coffee brand that adopted its name from Moby-Dick’s novel, in which the first mate on board was named – Starbuck. Since 1971, Starbucks has grown immensely in the luxury coffee market as well as secured itself in the digital space. Through the use of first, second- and third-party data, Starbucks has stated that they are able to “perform customer service functions, for security and fraud prevention, for marketing and promotional purposes, and to perform website and mobile application analytics.” For the purpose of this assignment, our goal is to increase the number of users who are pre-ordering through the mobile app.

First Party Data

In the context of Starbucks, first party data can be defined as the information that the company has obtained through the website or mobile application. This includes the collection of cookies, customer relationship management (CRM) data and other relevant business analysis tools. Any avid Starbucks consumer would voluntarily sign up for the star rewards incentive program, which in 2019 “jumped 14%, to 16.3 million” (Cheng, 2019).Starbucks is then able to collect information such as birth dates, GPS location, past purchases on beverages of foods and time of product interest. Starbucks first party data is evident in the personalized browsing on the application, using past order history to determine what the customer might like or want to try next, according to its relevance.

Second Party Data

Starbucks may use second party data when they are not able to gain access to or target a specific demographic that is not within their marketing frame. This may include seniors, teenagers under the age of 18 (which make up only 2% of sales) or adults over 40 years which hasn’t been Starbucks' target demographic. In order for Starbucks to obtain this data, they have to build trusted relationships with partners who would have this data and the company would then be able to target customers above their current target demographic or those that are vulnerable to the Covid-19 virus and who want to pre-order through the mobile app and pick-up from store or opt for curbside pick-up.

Third Party Data

Due to Starbucks rapid worldwide growth and penetration into different international markets, the company may obtain third party data from external data collection companies who sell their data at a fixed or negotiated price. This data is collected from large aggregators that mine it from other websites or social platforms and is used to assist the company’s goals of expanding their audience whilst understanding a particular demographics’ behaviours and interests.

However, third party data is not only specific to one company, as the same data can be bought by other companies and in this case Starbucks competitors. These include Tim Hortons in Canada, Dunkin Donuts in the U.S, Costa Coffee in the U.K and many others. With this being said, Starbucks can also collect the rapidly changing data from their competitors and implement the trends, behaviors and needs of other customers into their marketing scheme. They would then be able to develop on a faster and more reliable pre-ordering system that could personalize and build on Starbucks goal of ‘building a human connection’.

Types of data collected

As stated above, Starbucks collects an array of data from its customers. According to their website, the company collects your first and last name, a personalized username and password, an email address, your postal address (GPS location), phone number, full birthdate, demographic information such as your gender, tracks your voice, the time of day you visit the application, the frequency of when you place orders and financial account information such as credit or debit card numbers. This data is collected from those who sign up for a rewards card or those who want to use the mobile application.

In addition, the mobile application now offers a deeper more personalized experience which includes recommendations for various foods and drinks. These recommendations factor in many geo locations, such as “local store inventory, popular selections, weather, time of day, community preferences, and previous orders” (James, 2020). As Starbucks is in over 80 different markets, they have invested heavily into their mobile application and have implemented new data into their coffee machines which allows for people to “send new coffee recipes directly to machines in the click of a button” (James, 2020) making this a faster and more efficient method of adapting to culture and getting orders out faster, through the mobile app.

Achieving the business goal

How can we expand our star rewards program to include more incentives or entertainment (such as mini games) for new and current users who pre-order through the mobile app during the pandemic?

In the midst of the Covid-19 pandemic, many Starbucks locations are closed and drive-thru or curbside pick-ups are offered instead. This results in customers using the mobile app more frequently to order-ahead, skip any lines or be offered with personalized suggestions. With this, the company can expand its incentive program by creating minigames for customers to play in which they can collect points in the shape of coffee mugs at a fraction of the star value and redeem them as Starbucks reward stars in the future.

Furthermore, the company could increase the number of stars earned for those who reside within a city that is under quarantine and who pre-order through the app, by using geolocation data, addresses that have the highest coffee consumers, the time of day that customers pre-order and this could also tie in with Starbucks entertainment section called “Discover Music” which allows you to listen to what is playing in the store and discover new artists. The company could further advance this by allowing users to connect their preferred platform such as Apple Music, Spotify, SoundCloud or YouTube Music to the Starbucks mobile app and have the Starbucks store playlist sync with their accounts.

https://www.youtube.com/watch?v=H93jvfEnwUA

How can we efficiently utilize third party data to improve and personalize the customers experience when pre-ordering through the mobile app?

Starbucks obtains a lot of third-party data from external companies and uses that data to track and optimize people’s browsing experience, to make it easier, faster, reliable and more relatable. By utilizing this data, the company is effectively able to improve, manage and better the application software to meet the needs of the many millions that use the app to pre-order items. Third party data would also allow the company to track the frequency and demand of one product over another given a specific location. Therefore, increasing the supply of that product or diversifying using that product's ingredients would attract more customers to try these new items.

Data & Analytics

In order to increase Starbuck’s incentives within the rewards program, Starbucks needs to identify the number of users who want to engage personally with the brand. According to CNBC News, as of March 2020, the Starbucks rewards program has 19.4 million active users in the United States alone and they contribute to 48% of the total sales (Lucas, 2020). According to a study from Ipek Su, a Product Marketing Consultant at LoyaltyLion, 57% of customers want to engage with the loyalty program and redeem rewards via mobile devices (Su, 2020). Moreover, 78% of them would become loyal to a brand if “they are individually recognized and rewarded for their loyalty” (Su, 2020). Thus, knowing how to personalize a customer's experience will help Starbucks increase its users through the pre-ordering app.

As the customers are becoming increasingly tech-savvy, they expect a fast and flawless customer experience. According to BlogTo, all the beverages and food items of Starbucks would be delivered “within 30 minutes” (O’Neil, 2019). During the Covid-19 pandemic, pre-ordering through the mobile app and picking up from stores are becoming more and more widely used and it might raise an issue about on-time delivery. Therefore, the amount of time Starbucks delivers the beverages and food items for customers is very important.

Insight & Solution

Based on the data and analytics available, Starbucks customers truly want to be recognized and rewarded for their loyalty throughout the mobile app. Moreover, they also care about how fast and convenient the customer experience is.

Personalizing promotions and offers to encourage customers to try new products is an effective way to achieve our business goal. Starbucks can persuade customers to use the app by giving Starbucks star points for customers who check in the app at least once a day. Besides special birthday discounts, Starbucks can also base their data collection on the weather, the traffic, and the purchase patterns to navigate customers’ desires. For example, if the weather forecast will be hotter than average in a specific location, Starbucks can use information collected to promote cold beverages with extra Starbucks star points.

In order to increase the number of users pre-ordering through the mobile app, Starbucks can take advantage of GPS tracking and time slot choice. The reason why customers want to use the pre-ordering app is because they want to save time and get rid of the long lines. Therefore, using GPS tracking and time slot choice really help control the workload. For example, when a customer orders a beverage, they can choose from a series of available times to pick it up. Then, as the customer is on their way to the pickup location, the GPS tracking in the app would tell the Barista and it would help the Barista know exactly how long it takes for the customer to arrive. By doing so, it is not only fast and convenient but it also makes sure that the beverage and food is fresh and warm and ready to serve to the customer.