What Can We Learn From Starbucks Mobile Payment Strategy?

Mobile payments are nothing new.  In fact there has been a whole host of technology come along for businesses to try and make payments easier and more convenient.  The problem is that most of the consumer base simply doesn't understand how to use it.  In addition to the learning curve needed, businesses don't normally integrate this into the total customer experience.

Starbucks app is a great example of how business can make mobile payments not just about the transaction, but an enhancement of the entire customer experience.  

During a recent visit to the Starbucks location at 25th and Wabash in Terre Haute I asked the barista how many of their customers used the mobile app to pay for product.  She estimated 75% to 80% pay with their smartphones.  This number was a shock to me, as I couldn't believe it would be so high.

According to a recent estimate, Starbucks was able to generate a staggering $1 billion in revenue from smartphone transactions used at sales terminals in its stores in 2013 largely due to the fanatical loyalty of its customers.

Starbucks won't comment on the $1 billion figure that was recently reported by , based on a BI Intelligence estimate. The estimate was derived using Starbucks' admission that its mobile payment and loyalty app program is used by 10 million customers with an average of 5 million weekly transactions at U.S. stores as well as past mobile revenue numbers Starbucks had given BI Intelligence.

Customers can pay for drinks and snacks with their smartphones loaded with a Starbucks card app. The app uses fairly old technology -- a barcode scanned at the point-of-sale register is used to read the stored dollar value on a user's virtual card to deduct the cost of a purchase.

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A robust loyalty program behind the app makes offers to customers that include free drinks on a customer's birthday and when they achieve a certain number of stars (a customer is awarded a star when they purchase product).

Starbucks for years has tracked alternative payment technologies to barcode scanning, such as near field communications on smartphones, but the coffee seller decided to go with what was available and proven when it launched mobile payments in early 2011.

The numbers associated with Starbucks are staggering and should serve as a "wake up call" for any business looking to add mobile payment as an option.  If you are a business owner and sell product, a system that uses simple technology like bar codes could be used to enhance your customer experience and your revenues.

The core benefit of a mobile payment system like Starbucks is in "transforming the point of sale into a point of engagement,"   Successful vendors use mobile payments as a component of a "broader, dynamic interaction" with the customer.

Posted on February 5, 2014 .