Tag Archives: p2p payments

Starbucks missed a golden opportunity to enable mobile payments to increase consumer value

I am a Starbucks loyal customer mostly due to their convenient locations, innovative marketing programs and mobile application.  Yes, as a coffee guy I prefer the flavor of Peet’s, but let’s face it, there are simply more Starbucks locations.  I use the mobile application several times a week, have scheduled auto-reload and have downloaded the free app of the day once in a while.  I also like how Starbucks informed me of The Share Event through the app’s messaging feature.  Well done, Starbucks.  What a great way to keep me connected to you and to increase my lifetime value as a customer.

Given all of this Starbucks love, I was SHOCKED by what happened to me this morning when I bought a small drip (dark roast, by the way) coffee.  I paid using my mobile app and the Starbucks guy handed me this…


“If you buy 5 holiday beverages you get one free.  Carry this with you and collect the stickers…it’s a good deal,” he said.


Starbucks knows what I buy broken down to the transaction level.  Now I’m required to remember to pull out a wrinkly loyalty card from my wallet after I buy a holiday beverage….even after I paid for this beverage with my mobile app?  In a panic, I opened up my mobile app and checked “Messages” for a note that tells me how to sign up for this program through my phone.  Nothing.  Sigh.

However, this is not the only mobile marketing program fail that occurred this morning. My lovely (and I mean lovely) wife received an email from Starbucks regarding the Holiday Star Dash.  The email requested that she click through the link and enter a 9-digit code on her Starbucks.com account page.  She popped open the mobile app hoping to find an easier way defined in “Messages.”  Nothing. Sigh.

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So why does this upset me so? Well, for one it’s clear that the online marketing and mobile marketing teams are not communicating.  I would imagine that the mobile marketing team is a separate group.  The mobile team should be an integral part of the overall marketing organization to avoid these kinds of consumer experience disconnects.  However, the biggest offense to me is that Starbucks has missed a huge opportunity to demonstrate how mobile can drive engagement and loyalty through incentives.

Several articles have been written about the challenges of driving mobile adoption and engagement…specifically in the mobile payments space.  Imagine if Starbucks focused the “buy 5 holiday beverages” program on the mobile audience by guiding people to pay with their mobile phone?  Or enabled Holiday Star Dash activation through the mobile app?  Engagement and redemption metrics would increase…and the lifetime value of these customers would increase.

By enabling online and mobile app participation, Starbucks will be able to compare the ROI across both channels.  It would not be a stretch of the imagination to guess redemption rates will be higher for mobile and that the life time value of the mobile user would increase with the right incentives. The most interesting metric would be the lifetime value of  users who pay for their Starbucks items using their mobile device. Starbucks has the opportunity to show real leadership in how mobile payments can help drive revenue.

When can I buy more than coffee with my mobile device?

The concept of making a payment with a smart phone sounds very logical and conversationally appealing. We send text messages, share photos, check-in, buy things online and save travel itineraries with these devices.  So why not use it as a wallet too?  It would be great to have to carry one last thing in our pockets.

I think the CONCEPT of doing this makes sense to millions of consumers…but the reality is that it’s not happening as quickly as technology analysts or consumers predicted.  An eMarketer report predicts that mobile payments in the United States will cross the $1 billion threshold this year, which is a number far less than previously estimated.

This slower adoption rate reminds me of the slow broadband Internet adoption in the late 1990s.  I worked at Excite@Home and we promised to deliver high speed Internet access and robust content worthy of broadband to millions of homes and small businesses across the US.  I still have a t-shirt that says “broadband access, across all devices, all the time.” How cool was that promise!?  I expected to have this big pipe Internet connection into my home by the end of 2000.  What happened?

Similar to mobile payments, broadband Internet access was thwarted by multiple providers, convoluted access points and technologies.  It took a while for the cable networks to decouple from Excite@Home and offer broadband themselves.  DSL Internet providers slowly gained momentum to provide similar services, but not without a fight with telephony providers who controlled the coveted “last mile.”

Many of these technical and business challenges are faced by the mobile payments industry. A single mobile payment system has yet to emerge as a clear leader for consumers.  Making things more complex, no mobile payments system has emerged as a solution for small business to accept mobile payments.   With such confusion, business owners will be reluctant replace their POS card readers with a slick payment system that runs on an iPad.  Investors will also continue to be cautious as indicated by Capital One pulling out of its investment in Isis.

So, what to do?  Consumers and small businesses will need to take a wait and see approach.  Consumers will continue to make payments using a credit card, debit card or cash. But until a provider can develop a payments system easily adopted by small businesses, consumers will stick to only making mobile payments to buy their Starbucks coffee.

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