Starbucks wants to grow its digital marketing and sees even those averse to Starbucks Rewards as a big opportunity.
By Kelly Shermach
Of the 75 million monthly Starbucks customers, only 15 million have been active in Starbucks Rewards in the past 90 days. Starbucks wants to have digital relationships with the remaining 60 million because virtually all the company's comp growth comes from the digital relationships with Starbucks Rewards members. In fact, more than one-third of all Starbucks sales are connected to Starbucks Rewards, with mid-to-high single-digit growth quarter over quarter.
Successful 1:1, personalized offers “drive a high level of incrementality that has not slowed," Starbucks CFO Scott Maw told attendees of the UBS Global Consumer and Retail Conference on March 8.
In 2018, Starbucks plans to do engage non-Starbucks Rewards coffee quaffers in three ways. Returns are expected as early as 2019.
- Open Mobile Order & Pay to all customers through an app that will capture contact information and deliver in-app and other marketing. This will move new customers into the personalization engine and feed some MSR growth. But if consumers opt not to join the program, Starbucks will still track spending, frequency and other behaviors. Already Mobile Order & Pay has opened to a small group of non-MSR customers. Maw said it will achieve full roll-out by year end.
- Reactivate MSR customers who have not visited in more than 90 days. Marketing has had some success in this effort, but Starbucks is going to make richer offers like bigger discounts.
- Require Wi-Fi users to sign up. This strategy is still in investigatory mode. The plan is to require customers to submit their email addresses once to use free Starbucks Wi-Fi, then automatically connect their devices every time they enter a store. Consumers get convenience; Starbucks gets email addresses.
Maw said Starbucks believes it can continue to grow comps in the mid-to-high single-digit range quarter over quarter as it starts and builds relationships with customers outside Starbucks Rewards. And the coffee retailer anticipates 10% year over year Starbucks Rewards growth from its triple-shot strategy. In the most recent quarter, Starbucks Rewards accelerated membership by 11%.
“Starbucks is a leader in digital marketing and continues to strengthen [its] digital flywheel vision, encompassing rewards, personalized offers, ease of payments, and fast and convenient ordering,” says Margaret Meraw, president of Effective Execution Consulting and member of the Customer Strategy Network.
She predicts success will yield “a natural progression for non- or inactive [Starbucks Rewards] members to add the benefits of the program to their Starbucks experience.” That benefits Starbucks through additional customer insight around the offers that best drive business growth and customer satisfaction.
Maw acknowledged that Starbucks needs to expand Rewards offerings to keep the program engaging and suggested the company may introduce lower level rewards. Already Starbucks Rewards members receive an 8% discount on every purchase. The retailer will attempt to grow comps through the program this year by using data to predict consumers’ next likely product, increasing personalization in gamification and trying more in-app suggestive selling.
Kelly Shermach is a Business Reporter at The Wise Marketer
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