Starbucks Prepaid Thrives through Social Media and Mobile

by Mercator Advisory Group 0

On the last Starbucks earnings call CEO Howard Schulz called out major technology themes as contributors to the company’s resurgent performance. Citing social media and mobile commerce in particular, Schulz described the connection of the channel, for social interaction and payments, to the overall customer experience. That connection has given the Starbucks brand, a premium brand at that, an edge during leaner times. Schulz’s words, captured thanks to, say it best.

And I would list 3 major areas in terms of the seismic change: One is that as a result of the recession, there is a significant amount of pressure on the consumer, whether they’re buying luxury or mass in terms of value. The second is, as a result of the technology and the web, social digital media has become a primary vehicle to gain access information…And the third is the unbelievable way, in which mobile payment and mobile commerce is going to change the way in which consumers buy things. On the issue of value, the question was asked earlier about transactions and ticket.

One of the differentiating factors of the last year or so has been the loyalty and the stickiness of the Starbucks Card. There’s almost 4 million people holding that card. 1 of every 4 people are buying with the card…

with regard to social and digital media, there probably isn’t very many companies in America that has created the capability and the discipline that we have with almost 40 million worldwide fans on Facebook, leading company in Twitter on Foursquare, what that has done, has given us the ability to lower our cost of customer acquisition in terms of traditional advertising, and build a more enduring emotional relationship with our customers.

The third issue is that Starbucks today, and this is an important point, we are the #1 company not in the U.S. but in the world in terms of mobile payment, transactions and dollars. Now all of this is wrapped into the relevancy of the Starbucks brand and the experience, and this is what is driving much of the incrementality that we are experiencing.

These 3 things wrapped into what Cliff and his team have been able to do in the U.S. is build a customer experience. And to think that today, we are serving more customers than ever before in our history, despite the economic downturn, and this year’s stores that opened 12 months ago, are performing at the highest level of any other time in our history. So I think it’s very important that you understand that the macro issues that are facing many companies, we have been able to turn into a competitive advantage with regard to value, social digital media and mobile payment.

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