PowerPoint Presentation
Starbucksand Business AnalyticsTEAM 2: Stephen Allegretto,
Jeffery Daly, Christopher Rizza and Matthew Urdan
Since the return of Howard Schultz as CEO of Starbucks in 2008,
the company has been laser-locked on business analytics; which has
fueled exceptional growth and profitability. Patel and Thompson of
the SAS Institute know that Success is based on your ability to
discover more meaningful and predictive insights from all the data
you capture (Patel and Thompson, 2014, p. 1). This presentation
will examine how Starbucks has leveraged technology and business
analytics to successfully make use of its data.
1
MINING DATA FOR GOLD
In todays data rich business environments there is certainly no
shortage of quality data that organizations can use. What sets some
companies apart is how they can process, analyze, and use the
knowledge gained to make more effective business decisions on a
shorter timeline. One example of an organization on the cutting
edge of using data mining to inform their business analytics
process resulting in superior business intelligence and sales
growth is Starbucks.
2
BUSINESS ANALYTICS DEFINED
Business Analytics (BA) is defined as the practice of iterative,
methodical exploration of an organizations data with emphasis on
statistical analysis. Business analytics is used by companies
committed to data-driven decision making (Rouse, 2010). Starbucks
is one of the largest innovators in regard to applying business
analytics in order to benefit the company.
3
UNDERSTANDING CUSTOMERS
Image Source:TruLens. (2013, August 5)
Starbucks is competing in a heavily commoditized product
category, and seeks an ultra premium price point for its product
(Rose, 2013). In order to successfully execute this strategy,
Starbucks needs to create points of differentiation between its
brand and those of its competitors. Through its use of data mining
and analytics Starbucks develops a coherent and comprehensive view
of its most loyal customers, down through those who interact with
the brand on a much less frequent basis (Bhasin, 2013). But what
does that allow Starbucks to do?
4
GENERAL BENEFITS OF DATA MININIG
In general, organizations that effectively process and mine
their data gain 3 key benefits: Effective Customer Segmentation,
Market Insights, and Customer Loyalty.5
CUSTOMER SEGMENTATION
Image Source: The S Curve. (2015, June 25)
Customer segmentation gives Starbucks the ability to anticipate
customer behaviors and needs by segment so they can more
effectively market each segment with relevant products and
services.
6
MARKET INSIGHTS
Market Insights from Business Analytics helps Starbucks gain
insight into which products a customer is likely to buy allowing
them to hone their messaging to high probability up-sell and
cross-sell opportunities.
7
CUSTOMER LOYALTY
In terms of customer loyalty, data analysis allows Starbucks to
develop and execute effective customer acquisition and retention
strategies based on purchase patterns. All this has translated into
increased sales, customer and employee loyalty and growth.
8
IMPROVING OPERATIONS WITH BUSINESS ANALYTICS
Starbucks has used business analytics to improve business
operations in terms of customer satisfaction, employee
satisfaction, and new store location selection.
9
CUSTOMER SATISFACTION
Image Source: Matthew Urdan
Starbucks is able to collect large amounts of data from its
consumers just from the loyalty program. Starbucks uses SQL Cloud
Services and Oracle Siebel customer relationship management service
as its loyalty system, which is tied to the Oracle ERP platform.
Siebeldelivers a combination of transactional, analytical and
engagement features to manage all customer-facing operations
(Venkatraman, 2014, paras 2-3). A quarter of all company
transactions made in 2013 were with Starbucks cards and the mobile
app (Kaye, 2013). In January of 2015, it was noted that 16% of all
Starbucks transactions were made on the mobile app (Dormehl, 2015).
Utilizing loyalty cards and the mobile app, customers provide
massive amounts of data for Starbucks to mine. Starbucks uses card
information to segment consumers and set up business rules based on
purchase behavior, then pumps out offers immediately to them (Kaye,
2013). Starbucks transformed their loyalty card program from an
annoying business ploy to a convenient, consumer friendly tool on
their smart phones that people actually want to use.
10
EMPLOYEE ENGAGEMENT
Starbucks hired Monitor 360 to analyze employee narratives on
glassdoor.com to improve employee engagement and its employment
brand to reduce turnover and enhance recruitment (Stein,
Sakellariardis, & Cole, 2014). It costs $3000 to replace just
one barista (Stein, Sakellariardis, & Cole, 2014), so reducing
turnover has a major impact on company profitability, especially in
a company that employees 190,000 people. The narrative analytics
analysis yielded three major takeaways to improve employee
engagement in its stores: 1) amplify the positive, 2) address
middle management disconnects, and 3) identify triggers of new
threats to the companys specialty brand (Stein, Sakellariardis,
& Cole, 2014). Utilizing this information, Starbucks is able to
create an exceptional work environment for its employees.
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STORE LOCATION
With the help of the location analytics company Esri, Starbucks
used mapping software and location analytics to optimize new store
development opportunitieschoosing new store locations without
cannibalizing sales at existing locations in the vicinity (Thau,
2014).
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ANALYTICS = SERVICE, CROSS-SELLING AND PERKS
Image Source: Matthew Urdan
Starbucks has been able to supply customers with exceptional
service by gathering a great deal of customer information. Many
companies use some form of Customer Relationship Management (CRM)
software to keep track of customer information. Starbucks tracks
customer information through their mobile app and loyalty cards.
Starbucks continually tracks customer buying habits. Based upon
buying habits Starbucks sends personally tailored offers to Rewards
Members smartphones. On an iphone, these offers show up on the
notification screen and in the Starbucks app. For regular Starbucks
customers, these deals result in bonus stars. Stars are earned
after each purchase. Twelve stars earn a customer a free beverage
or food item of their choice. For infrequent customers, different
incentives and deals are used like Buy One Get One free offers or
other discounts. These deals are targeted at customers whose
purchasing habits show that they may not be coming back soon.
Loyalists who constantly go to Starbucks don't get the deals, since
the coffee-seller isn't worried about losing them (Bhasin, 2013,
para 6).
13
CONVENIENCE
Image Source: Matthew Urdan
Further, the use of and increasing prevalence of the mobile app
drives increasing loyalty and increasing salesoften by just
informing rewards members of new or seasonal products, but also by
speeding the payment process. Through the scan-and-go mobile pay
system, customers are able to pay for purchases the fast and easy
way without the hassle. Since everything is electronic, it reduces
the use of plastic gift cards, promote a more efficient ordering
process whilst providing more advantages to customers (Geisel,
2014, para 5).
14
MOBILE ORDER AND PAY
Image Source: Matthew Urdan
The mobile app now allows for orders to be placed before a
customer even reaches the store and eliminates waiting. The idea
with Mobile Order & Pay is to offer customers a faster
alternative to waiting in line. Using a simple, touch-based
interface, you can select food and beverage items from the in-app
menu, choose which store you want to pick up from by referencing an
included store list and map, then pay using your Starbucks card to
complete the transaction (Perez, 2015, para 3) before even arriving
at the store.
15
MORE DATA!
Image Source: Matthew Urdan
Mobile Order & Pay provides Starbucks an enormous amount of
data to increase efficiencies and store offerings in addition to
eliminating wait times. Knowing what is purchased at each store
will help fine-tune inventories and prevent over or understocking.
Knowing what each customer orders down to the number of pumps in a
chai latte improves product development and special offer
targeting. It also allows store managers and employees to better
understand the needs of their local clientele, which can result in
specific training strategies to improve customer service in each
market. Mobile app ordering enhances the companys ability to
compile customer data to provide patrons with exactly what they
needwhich will soon include delivery to homes and offices. In
short, the Mobile app has been key to creating and improving
Starbucks reputation as an unparalleled leader in customer
service.
16
SERVICE = SALES
Image Source: (Bakker, 2015)
The mobile app has driven sales increases every year since it
was introduced in 2009, and it continues to contribute huge profits
for Starbucks. The company mobile transactions exceeded $1 billion
in 2013, according to one estimate. The company has revealed that
its mobile payment and loyalty app is used by 10 million people and
generates an average of 5 million weekly transactions (Elgan, 2014,
para 17).
17
TECHNOLOGY DRIVES LOYALTY
In addition to its mobile app payment, rewards and ordering
system, instore technology is also driving customer loyalty.
Starbucks offers high speed Wi-Fi and wireless charging which
entices customer to want to linger and spend time inside their
stores, possibly resulting in additional purchases. Along with
Wi-Fi and wireless charging, Starbucks is also embracing the
internet of things. Many Starbucks stores have super high-tech
Clover coffee machines, which connect to the cloud to communicate
their performance and track customer preferences (Elgan, 2014, para
15).
18
APPLES iBEACON TECHNOLOGY
Image Source: (Industry Perspective and G2, 2014, May 14)
Starbucks is also testing the use of Apples iBeacon Technology.
This will further help Starbucks mobile app strategy. With iBeacon
technology users who are close to a store will be sent messages and
possibly promotions on their smartphones. Starbucks servers will be
able to tell when customers are close to stores. Proximity will
trigger the messages. With iBeacon location information, Starbucks
will be able to analyze how much time customers spend in close
proximity to a Starbucks location and determine if an association
between purchase activity and proximity exists. Or, if customers
are nearby but not entering the store, iBeacon messages can entice
them to do so when without an enticement they otherwise might not
visit a Starbucks on that day (Barris, 2014, Boardroom Insiders,
2014 and Elgan, 2014).
19
CONCLUSION
All of this technology, data and commitment to engagement for
both Starbucks customers and its employees synergistically provides
Starbucks customers with an outstanding experience that keeps them
coming back, and helps Starbucks stay ahead of its competitors.
From constantly gathering information and customer preferences
through data mining and analysis Starbucks is able to find new
patterns and relationships to inform its product offerings and
fine-tune its service delivery. Starbucks uses business analytics
to continually optimize their business processes and enjoy blue
ocean strategic success.
20
ReferencesAll Images used in this presentation, unless otherwise
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