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Evan Schuman: Starbucks and the art of persuasion

Evan Schuman | Jan. 15, 2014
The coffee chain was smart enough to push mobile by not initially pushing mobile. It's an approach that can work for your business too, internally and externally.

Starbucks

Business would be so much easier if we didn't have to deal with human beings, with all their fears, hesitations and general avoidance of anything new. Human beings have a tendency to resist all your great ideas to make things better, be they your employees saying no to your aggressive cloud program or your customers ignoring your attempts to move them to mobile payment or biometric identification. And it can seem that the harder you push, the more they resist.

Maybe the answer is to stop trying so hard. Maybe the model you should emulate is the go-slow — you might even say decaffeinated — approach taken by Starbucks. The coffee purveyor seems to have some insight into how humans think.

Starbucks is considered the most successful U.S. retailer when it comes to handling mobile payments and, for that matter, mobile anything. So what makes it so different from everyone else? Pretty much everything. Most retailers interested in moving their customers to mobile payment would have seen the 2013 holiday shopping season as an opportunity to push their mobile app and encourage their shoppers to load dollars onto the mobile apps of their intended gift recipients. Not Starbucks, though. Although it is very interested in moving customers to mobile payment, it chose to not push mobile at all during the holidays. Instead, it encouraged the purchase of old-fashioned, plastic Starbucks cards, the kind that fit neatly into holiday stockings.

But wait; how is that a mobile-payment strategy? Ah, well, as soon as January rolled around, Starbucks launched a massive campaign to encourage people to take those plastic cards and use them to pour digital dollars into a Starbucks app. How did things work out? For starters, Starbucks sold a lot of Starbucks cards. On just one day (Dec. 19), the chain saw 2.4 million new card activations. In the fourth quarter, sales of cards totaled $160 million, "a significant increase over last year," said Starbucks spokesperson Linda Mills, who declined to give an actual percentage. She added that while Dec. 19 is now the title holder for new card sales, two other days (Dec. 23 and Dec. 24) also broke company records.

And what about the conversion of all those Starbucks cards to smartphone payment apps? It's still early in the month, so Starbucks isn't saying. But this isn't the first year that Starbucks has pursued this strategy, and the company will say that January is typically its No. 1 month for mobile conversions. And as I said earlier, Starbucks is generally thought to be the mobile-payment king of American retail.

So just how did Starbucks come to be so far ahead of everyone else on mobile payment? Part of the answer is luck. Many years ago, it decided to get its customers to migrate from paying with credit cards and instead to use those stored-value cards. It was a pretty easy transition, from one plastic card to another. Starbucks had no intent at the time for that to be the first step in a mobile-payment strategy, but that's what it has turned out to be. Now, years later, it is just much easier to move customers to mobile because they have already gotten used to pulling out a Starbucks-only payment "device." They only had to master one new behavior (going from using a Starbucks card to using the Starbucks app) rather than two (stop using a credit card to do something retailer-specific, and that retail-specific thing is on the customer's smartphone, not a bit of plastic in his wallet) that other retailers were faced with.

 

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