Coffee drinkers in Seattle have an edge, and it’s not just from the caffeine in their lattes. Thanks to a pilot program initiated last September in twelve Seattle area stores, loyal Starbucks customers never have to wait in line for their favorite drink.
The program, called Starbucks Express, allows users to order coffee drinks by dialing in to an automated service from their mobile phone while they’re on their way to the store. The drinks are then charged to the user’s credit card and are waiting for them at the counter when they arrive. For a service fee of $0.25 per order, it’s perfect for caffeine addicts with limited time.
And Starbucks Express isn’t the company’s only wireless venture. Last summer, Starbucks announced an agreement with MobileStar to place WLAN hotspots in 350 Starbucks stores across the US, offering wireless access for $30 a month. When VoiceStream Wireless, now T-Mobile Wireless Broadband acquired MobileStar in January, it also acquired the Starbucks agreement.
Seattle, the company’s hometown, is known as a high-tech center, but there’s more to the company’s use of wireless than an affinity for gadgetry. In a broad sense, Starbucks has simply made it a priority to improve their customer relationships—and wireless technology is a means to that end.
Speed is Satisfaction
The Starbucks Express program, run through Ontain Corporation’s Ontain Mobile Order and Pay service, was initially implemented as a pilot program: it was supposed to end in January of this year. Thanks to enthusiastic customer response, though, the company has decided not only to keep it going in Seattle but to expand it into another, larger market (yet to be announced) this August.
Lovina McMurchy, Starbucks’ Director of Venture Development, says the company was thrilled with the response to the service. “It really increased people’s satisfaction,” she said. “They felt more valued as customers, they were much more satisfied with our speed of service—and they thought we were giving them better value for money, even though there’s a service fee attached.”
The minimal service fee, McMurchy says, hasn’t been a deterrent—and the increase in customer loyalty has been a great benefit. “People seemed to think it was a pretty good deal to have the added convenience of being able to get in and out of the store quickly,” she said. “And because of that, people who use the service are coming even more often because we can guarantee that predictability.”
The point, of course, is that Starbucks coffee is essentially a luxury item to begin with, so adding a small amount to the cost in order to improve the customer experience makes perfect sense. “It’s a discretionary product,” McMurchy said. “If we can make it more predictable when they’re in a hurry, then they tend to take the opportunity more often to stop and grab a drink.”
The Right Kind of Customer
McMurchy says services like Starbucks Express are more a reflection of Starbucks’ customer base than of the company itself. “If you compared a Starbucks customer to the average American, we run roughly twice the rate of adoption of new technologies,” she said. “In many ways, we’re just reflecting what we think our customers want from us.”
Starbucks customers, she says, have a number of distinctive traits—all of which point to very active use of computers, the Internet, and mobile phones. “If you look at the sort of people we serve, they’re very well educated, they’re often managerial, they make quite a lot of money, and they are themselves very large users of technology,” McMurchy said.
And detailed information on those customers can be valuable. Ontain Corporation, which supports Starbucks Express (as well as a recent trial for McDonald’s called McQuick), declined requests for an interview—but their web site points out that customer data is a great side benefit. “We give you the ability to track buying behavior, personalize promotions and deliver other value-add services,” the site states.
Anne Saunders, Vice President of Starbucks Interactive, agrees that the customer data that Starbucks Express provides is extremely useful. “Our business is 90-plus percent cash,” she said. “Getting to know who our customers are, what they like to buy, what their behaviors are, and having a way to get in touch with them on an ongoing basis so we can learn more about what they want, it’s certainly valuable to us.”
A Third Place
Starbucks’ other use of wireless technology, offering wireless Internet access in its stores, has an effect that’s the exact opposite of Starbucks Express. Rather than enabling customers to dash in and out of its stores without waiting in line, the T-Mobile offering is intended to turn Starbucks locations into places to gather, stay, think, and work—and, of course, to drink more coffee.
In his book “The Great Good Place,” first published in 1989, sociologist Ray Oldenburg coined the term “third place” to describe community gathering places (as opposed to the first, the home, and the second, the workplace). “Though a radically different kind of setting from the home, the third place is remarkably similar to a good home in the psychological comfort and support that it extends,” Oldenburg wrote.
Saunders says the “third place” concept has long been central to Starbucks’ philosophy—and offering wireless Internet access has helped to support the idea of Starbucks as an attractive destination. “We don’t think of ourselves as just selling a cup of coffee,” Saunders said. “What we do is provide an environment for customers: a place to go.”
McMurchy says that, like Starbucks Express, the company started offering WLAN access to answer a perceived customer need. “For several years, we’re been aware that Starbucks is a place that’s used to take time out of your day to sit and think—and sometimes that involves working,” she said. “So the wireless LAN initiative reflected a need that we were seeing from customers.”
The WLAN offering was initially set up through MobileStar Network, until that company pulled the plug on its services shortly before filing for bankruptcy last November. When VoiceStream Wireless acquired MobileStar soon afterwards, it took on the company’s WLAN network as part of its range of services—and as a subsidiary of T-Mobile International, it renamed the company T-Mobile Wireless Broadband.
Laurie Stixrood, Executive Director and General Manager for T-Mobile Wireless Broadband, explains that T-Mobile’s service fits in well with the idea of the third place. “When we talk to potential site partners of ours, we are very clear with them that their location will become a destination,” she said. “Our average log-on in a Starbucks right now is running about an hour.”
The network that was MobileStar is now just one element of T-Mobile’s strategy to develop an offering that combines GPRS and 802.11b networks, letting customers switch between the two at will: Stixrood points out that each has its place. “For text applications, GPRS is a great way to log on from wherever you are—and if you’re pushing a lot of bandwidth-intensive things, then you want to go to a hotspot,” she said.
Starbucks’ future plans for the technology include significant expansion. Saunders says the company plans to grow from about 1,000 stores in 26 countries to 20,000 stores worldwide within the next decade. That’s a lot of hotspots for mobile customers to visit—and with companies like McDonald’s exploring similar opportunities worldwide, Starbucks just might have a whole new trend on their hands.
Jeff Goldman is a freelance writer covering a wide range of topics for a number of online journals. He currently writes regular articles for Internet.com's ISP-Planet. Brought up in Belgium, Jeff spent the last decade in New York, Chicago and London; he now lives in Los Angeles.