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05/02/2018

Starbucks Focuses on Digital to Lure in Occasional Customers

During a Q2 earnings call with analysts, Starbucks Corp. shared how it’s “highly focused on driving more digital relationships” outside of its loyalty program, Starbucks Rewards, to help develop relevant marketing and offers for more occasional customers. Starbucks Rewards has 15 million members, and the coffee roaster has 75 million customers a month at its 8,000+ U.S. locations. The majority of its customers visit one to five times per month.

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One of the aims of Starbucks' Happy Hour is to gain PII from occasional customers.

"We know that many of these customers, largely those whom we don't have a digital relationship, do not visit as frequently and have a low awareness of either new product introductions or many of our great core offerings," said COO Rosalind Brewer.

Over the past year, only one in four of these non-Starbucks Rewards occasional customers were aware of the retailer's new offerings and key promotions compared to twice that of its frequent Starbucks Rewards customers. These customers make up nearly 50% of the volume sold in the afternoon, making them "a material part of our current afternoon challenges," she said.

To drive momentum in the U.S. business,  Brewer said the Seattle-based coffee roaster and retailer’s priorities include: digital relevance and the expansion of its digital relationship; innovation in products and marketing; and ”an unwavering focus on the customer experience in our stores.”  

Brewer said there is less of “a drumbeat of promotional offerings, which have not led to sustained growth, leading us to decrease the number of time-limited offerings by nearly 30% versus a year ago.” Instead the new approach is centered on targeting personalized offers to each customer, a technique that was echoed at MURTEC during the seminar Decoding Loyalty Data to Get Beyond Discounts. 

Timing – including day parts and seasonality -- matters too, she said. Its revamped Happy Hour program is being used to sign occasional customers up for direct digital relationships. And Starbucks now requires customers to provide their email addresses, first and last names, and ZIP codes to access the free Wi-Fi.

“This one-to-one offer will leverage our personalization capabilities and drive significant incrementality,” Brewer said. Other benefits include more predictable and efficient scheduling and an ongoing promotional opportunity to feature new beverages and drive afternoon traffic, which is typically slower.

Early results are promising. “In Q2, we had our first Happy Hour using this new approach and saw strong incremental profits and appealed disproportionately to customers outside of the Starbucks Rewards program,” Brewer said.