Starbucks Isn’t a Coffee Business: It is a Data Firm

Starbucks: CRM and Competitive Advantage

It is a pioneer in combining loyalty systems, payment cards, and mobile apps.
Five examples of how Starbucks uses Data, A.I., and IoT for competitive advantage.
They suggest there might be a compelling argument that Starbucks is no longer a
coffee business but is a data technology company in the food and beverage space.

Example 1: Personalized Promotions: The classic use of customer data is

personalizing the offer to an individual consumer. An important focus is on
suggesting new products a consumer might enjoy, based on what else they order.

But it is not just about personalized promotions. A large part is still delivering
conventional mass campaigns, but direct to each consumer in the target segment.
These might include cold drinks on hot days, product launches, or seasonal menus.
 Starbucks: CRM and Competitive Advantage
Example 2: Insight-driven products: Personalized promotions are undoubtedly
effective, but equally important to Starbucks is use of customer data in developing
its product range.

One powerful way Starbucks uses data arises from the buying habits across large
consumer numbers. Insights from this data suggest variations and developments
from existing products.

For example, there was a cute idea over 15 years ago to introduce pumpkin-flavored
drinks at Halloween.

This has become a whole range of global pumpkin-inspired products. One result is a
huge spike in footfall during autumn months.
 Starbucks: CRM and Competitive Advantage
Another way Starbucks uses data is across channels. The most significant example
of this is probably the firm’s push into the coffee at home space in 2016.

This was the mainstream launch of products into supermarkets, for customers to
make coffee at home.

In-store data gave it a strong basis for deciding which products to target for the
home drinker. It could even road-test take-home products like instant coffee in the
regular stores.

It also added products like unsweetened versions of home products. Another

variation that in-store consumption data suggested was versions with and without
milk.
 Starbucks: CRM and Competitive Advantage
Example 3: Sophisticated real estate planning: Planning where to open a Starbucks
store is now a complex piece of data analysis.

The way Starbucks uses data for this covers every conceivable factor you would
expect. The system also considers the location of existing Starbucks outlets.

It considers the impact of a proposed new store on existing revenues in nearby

areas.

The A.I. technology at the heart of this application is location-based analytics. This
is also known as mapping or GIS (Geospatial Information Systems).
 Starbucks: CRM and Competitive Advantage
Example 4: Dynamic menus: One implication of the examples above is that
Starbucks has the ability to continually refine and adjust its offerings.

The way Starbucks uses data means it can make revisions based on customer,
location, and time. This affects products, promotions, and pricing.

However, if you display your in-store offerings on printed menu boards above the
counter, there’s a disconnect with the ability to continually adjust things.

Starbucks, answer is a roll-out of digital signage in stores, with menu displays set up
by computer. It focused efforts on pushing selected products based on local
circumstances like weather or time of day.
 Starbucks: CRM and Competitive Advantage
Example 5: Optimizing machine maintenance: Another example is coffee machine
maintenance, and in-store machinery in general.

The typical in-store Starbucks transaction is relatively low cost and short duration.

Where Starbucks has taken things forward a step is in developing a new coffee machine,
the Clover X.

This is currently only used in flagship and concept stores. As well as being cutting edge in
its ability to make coffee, it’s also cloud-based.

This doesn’t just allow for a more comprehensive collection of operational data. It also
allows for remote diagnostics of faults, and even remote repairs.
 Starbucks: CRM and Competitive Advantage
Similar concepts will apply to other machines. For example, stores now have a
standard oven, which is also computer-controlled, for consistent preparation for hot
products globally.

However, the current machines need to be updated by USB drive. In the future, this
will become a direct cloud connection, also creating more A.I. opportunities.

Starbucks is a typical example of a leading modern global business, which uses data
and technology to create great consumer experience.