Starbucks Mobile Payment Success Secrets

The term “mobile payments” is often associated with the majority of users with banking applications, payment systems like Visa and MasterCard, or individual fintech projects. In this material, the experts of the processing company PayOnline decided to consider the experience of organizing mobile payments of the world coffee giant Starbucks.

What is the reason for the fact that the coffee giant is one of the few companies whose business in the field of mobile payments is going well? Open Mobile Media journalist Susan Kuchinskas found out why so many customers are using the Starbucks application to get their dose of caffeine, and what other companies can learn from the company's success story.

Issue 1: Mobile NFC payments market: key players, current situation and future prospects
Issue 2: The future of p2p payments: when the smartphone replaces cash
Issue 3: Apple's mobile payment system: practical use and development prospects
Issue 4: Apple Pay will be available on mobile websites, and will also be fully launched in Russia by the end of this year.
Issue 5: How does Apple Pay affect the payment industry?
Release 6: Starbucks Mobile Payment Success Secrets
Issue 7: This fall Apple Pay will be available in Russia, Japan and New Zealand
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“No other company has made such a massive use,” said Yoram Wurmser, retail analyst at eMarketer. “Starbucks clearly stands out from other companies in this regard.”

According to the latest earnings report for 2015, the flow of visitors to the company's coffee shops around the world increased by a total of 4%, which led to an eight percent increase in sales. In the fourth quarter report, representatives of the caffeine king said that mobile orders and payments accounted for 10% of operations performed in the most popular establishments, providing significant support to overall sales growth.

On September 22, 2015, Mobile Order & Pay service became available in coffee shops throughout the United States. In total, the service processes more than 6 million operations per month. This figure is growing, and the coffee giant is already working on bringing the service to the international market.

It is important to remember that the Starbucks mobile app appeared in the early days of mobile mania, back in 2009. That initial, very simple version of the application did only two things: it fixed the purchases for the My Starbucks Rewards loyalty program and allowed the coffee-dependent to pay using phones. At the same time, the loyalty program was actually tied to mobile payments.

With this, a quite ordinary process of accustoming customers to use applications began. However, this is not the only factor that influenced the success of the company.

Iterative approach

The application will soon be 7 years old, and its menu has now been supplemented with a whole range of functions. In it, you can search for the nearest stores, and then find the shortest path to them using cartographic applications. You can download checks, pay tips, check balances and add funds to the card, track and use loyalty points. Thanks to the advent of Mobile Order & Pay, you now have the opportunity to order coffee at a specific store of the chain and get it right on arrival at the establishment. And finally, you can even download free music.

All this functionality was not available in the application initially. Then, in 2009, when users were not as advanced as they are now, so much variety might seem redundant. And such an application would be too cumbersome and inoperable.

According to Wurmser, “Starbucks have adopted an iterative approach to working on the application and the loyalty program. People have become accustomed to the application and to the fact that it was associated with a system of bonuses. By the time the company introduced the payment component, using an application to place an order seemed a natural continuation of its capabilities. And then Starbucks improved the application based on customer experience. ”

Almost unique case

Starbucks is in a unique position, easily coping with the problem of low popularity that many application developers face. According to Google, every fourth installed application never opens by the user who installed it.

The question arises: What principles guided Starbucks, winning the market?

Omnipresence : How many more retailers can boast the same large number of points of sale? In many cities, the old joke about the fact that every new Starbucks that has been opened can be seen sitting in the old institution of the company, has long become a reality. Be that as it may, Starbucks has long and firmly established itself in many countries around the world: from Brunei to Monaco and from Vietnam to Colombia, people always have at least one of the 23,043 coffee giants around. Compare this number with the data of the National Federation of Retailers for 2015, according to which the number of Walmart stores worldwide was 11,453, Carrefour - 12,296, and Costco - 698.

Customer Stability and Limitations of Their Preferences : Many people go to Starbucks every day and, as Seth Lippinkot, an analyst at Nucleus Research, notes, these visits have long been part of their daily routine. He also adds that many people make the same orders every day, which reduces the intellectual costs required to use the application.

Minor risks : According to Wurmser, buying coffee and a croissant is a sure way to get used to mobile payments without any awareness of the possible risks. "Trust is growing gradually, little by little, as people use the service once or twice a day."

A variety of payment methods : Starbucks allows you to choose the most convenient payment method yourself, while continuing to add new solutions from other partners to your existing list of ApplePay, Visa Checkout, PayPal and credit cards. Recently, the company announced the immediate support of Chase Pay.

Real reward

It can be assumed that there is another, more fundamental success factor: the principle of reward, the essence of which was first formulated by Ivan Pavlov. We must not forget that the company has a loyalty program that allows you to get free drinks and food.

By the way, as a result of a study conducted by analysts of The Wall Street Journal, it turned out that Americans are paying no less attention to the issue of accumulating Starbucks bonus points than deposit bank accounts. According to the results of the 1st quarter of 2016, the total accumulation of Starbucks coffee houses regulars on maps and mobile applications amounted to $ 1.2 billion. This amount is not on deposits even with some US banks. For example, California Republic Bancorp, Mercantile Bank Corp. and Discover Financial Services. And the number of active participants in the Starbucks loyalty program today is 12 million people.

But think about this: every time you use the mobile pre-order service, you get an instant Pavlovian reward in the form of sugar, fat and caffeine.

“We call this“ reinforcement of a conditioned reflex, ”that is, when you do something, you get an award,” says Jason Gray, a psychologist and founder of Dopamine, a company that advises businesses in terms of behavioral psychology and helps entrepreneurs create more attractive products. . - In simple terms, you use the application and two minutes later you are already drinking a great drink. As a result, a strong association is created in the mind.

According to Gray, Starbucks mobile payment can also benefit from three other psychological phenomena. One of them - the rejection of losses. When you replenish your card with funds, you feel obliged to use them, you do not want the money to be thrown to the wind. Another phenomenon is the “reframing” of the purchase. The funds transferred to the Starbucks card are no longer perceived by the buyer as seriously as ordinary money, and payment by phone makes this process even less “tangible”.

And finally, we must not forget about the human thirst for achieving status. Buying more, Starbucks cardholders are raising their “buyer's level” higher and higher and, ultimately, get a name card. Even in spite of the fact that such an approach, in fact, encourages spending, the clients involved in the process no longer notice this, because the main thing for them is the feeling of their own “toughness”.

Should your company try to become the next Starbucks?

Despite the fact that Starbucks did everything right, it should be noted that the development of a mobile application and the introduction of payments into it fit very well into the company's business model. Wurmser from eMarketer, for example, believes that not every retailer should worry about developing a mobile application, not to mention adding mobile payments. If the application does not offer an obvious application scenario, he believes, then customers simply will not download it or download it, but forget about it.

As Lippinkot noted, the cost of developing and implementing mobile applications today has significantly decreased. While Starbucks has developed an application within the company, modern applications may exist as an additional service to the existing retailer’s retail platform. The expert, however, agrees with the opinion that no application can be successful, being useless.

“Most companies hardly need to“ duplicate ”Starbucks software achievements, but it’s quite realistic to make an application that informs users with push notifications,” he adds. - The process of advertising services, however, should not exhaust the user. He needs to be approached with strategic caution. ”

According to Wurmser, the average consumer uses five to six applications per day. If you are not going to get into the hit parade of the most popular of them, then it makes no sense to develop an application that only a few of your customers will use.

The latest generation of retail applications no longer places such a strong focus on mobile commerce, instead offering a mobile directory or just a more mobile-friendly version of websites. Instead, successful applications try to improve the user experience before going to the store or the time it spends in it. Here, as an example, Wurmser cited the Target application, which provides coupons to customers directly during shopping.

In general, if you manage to offer customers a convenient user-friendly script, your mobile application can easily “push” sales just like Starbucks, especially if you find a way to “sweeten” the buying process for your customer. Thus, the coffee giant demonstrates to the world the harmonious combination of mobile payments and loyalty programs, becoming a global retail network, giving even a handful to some banks in terms of user savings.

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