Published date: Friday, 1 December 2017

Holy Frap: How Starbucks is using data to increase customer acquisition

This is our last instalment of our ‘Data Champions’ series which looks at those championing ‘big-data’ and using it to achieve their business objectives. Read our earlier blogs which look at Under Armour and Morrisons.

Starbucks is approaching its 50th anniversary, but have recently adopted AI to improve their offering.

Dubbed the ‘digital flywheel’ strategy, it looks to improve their store sales through their Starbucks Rewards programme, which currently accounts for 36% of US company-operated sales.

It’s designed to boost customer acquisition and spend-based rewards, offering personalised consumer offers.

Using algorithms Starbucks can look at numerous factors and data sets (including order history, time of day, current weather conditions, location and more!) to make suggestions via push notifications from their app.

Crucially, Starbucks have recognised that their mobile customers are receptive to these schemes. With this in mind, they’ve designed an app with the sole purpose of driving customer loyalty.

Starbucks have really grasped the idea of ‘value exchange’ with consumers giving their personal data to Starbucks regularly in return for discounted products.

Not only is the programme a way in keeping up with a mobile-first world, it also shows how companies can create personalised experiences to encourage loyalty.xMAS

A recent report by KMPG said that ‘customized promotions’ helped to influence customer loyalty. Millennials are the most receptive to personalised promotions with 29% of respondents saying that it creates loyalty between them and a brand. Gen X and baby boomers were 28% and 25% respectively.

Matthew Ryan, Global Chief Strategy Officer at Starbucks commented on how this strategy had benefited them:

“The data is clear that when we acquire a new customer, the act of signing up for a digital relationship results in a sudden and sustained lift in spend as measured by careful pre-post tracking.”

“That’s how we’re able to drive so much value from a relatively small portion of customers, 13.3 million active reward customers compared to a total of approximately 75 unique customer visits to our stores each month. We know that even modest increases in the total universe of active customers drive tremendous long-term value.”

Under Armour, Morrisons and Starbucks are three of thousands of companies using data to enhance their business.

Find out how you can use data and AI to support your marketing goals: