The Future of Starbucks

In my presentation I talked about how Starbucks is currently using technology that allows for mobile payments, mobile ordering, and promotions. These initiatives have been extremely successful. In September of 2016, mobile ordering accounted for 7% of transactions (which has since increased to 8%) and mobile payments accounted for 19% of transactions in the United States. A large part of this success is due to this technological innovation.

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http://www.businessinsider.com/heres-how-mobile-order-and-pay-could-lift-starbucks-2016-11

However, Starbucks is not stopping here. They are planning on taking mobile ordering and personalized promotions one step further.

Starbucks is planning on rolling out My Starbucks Barista. This is an AI based system that allows one to voice order through their smart phone. The primary target of this is consumers that are abroad so they do not have to worry about different apps or currencies. However, the convenience of this tool will make it marketable to everyone.

As I mentioned in my presentation, Starbucks uses all of the data they collect to make personalized promotions for each consumer. However, these recommendations are not made using a specific algorithm. Instead, they are using AI to generate recommendations based on every customer’s unique, individual behavior and expected behavior.

Starbucks is using AI to develop a system that will be even more convenient than mobile payment. This system will give the customer a recommendation on their wearable device as they walk in the door. The customer won’t have to open the Starbucks app or event take out their phone. Starbucks is, once again, using convenience to appeal to their customers.

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They are also hoping that they can take this technology to the drive thru. As soon as a customer drives up, the drive thru syncs with the customer’s phone or watch and then brings up a personalized recommendation.

Starbucks is revolutionizing the coffee shop industry with their technological advancements. However, as we have talked about in class, there are always risks with using personal data. Many customers may be reluctant to adopt this technology. It’s only saving them a couple seconds but it involves syncing several devices and gives Starbucks access to large amounts of personal data. I am sure Starbucks will put more thought into the issue as this technology is closer to roll out but they have already stated that they will use this information “with respect and with permission” from the customer.

It is also important to recognize that Starbucks is first and foremost a coffee shop and therefore, are still looking for new flavors and food to add to their menu. They are just using technology to create a competitive advantage over Dunkin’ Donuts and McDonalds.

6 comments

  1. Great follow up to your presentation! The voice feature is really interesting and I could see it being very useful, especially for the abroad/language barrier problem.

  2. Wow! It’s really interesting to see how a traditional business model like the coffee shop now has to integrate technology to compete. Starbucks is taking advantage of AI and wearables and Dunkin Donuts partnered with Timehop, Waze, and Amazon Alexa to gain competitive advantage. I like your final thought about still trying to innovate their product but I think we have gotten to the point where that is almost not enough to compete in a digitally-enabled world.

  3. Really interesting article! It is interesting how starbucks is using AI to enhance the customer experience. In the end I believe that the companies that will prevail are those who focus on the customer first than any other thing, and this seems to be the case at starbucks. It will be interesting how you mentioned, where do we draw the line between privacy and personal information

  4. Great presentation last week! I am really intrigued by how Starbucks currently personalizes offers based on a customer’s ordering habits. I think that by having the first mover advantage in mobile ordering/payment, they can leverage the vast amount of data they’ve collected and further re-purpose it to drive revenue, such as through AI, as you suggested. I’m curious how they approach privacy as well, especially with the recent headlines of major companies failing to maintain consumer privacy (whether it’s data breaches, unauthorized data collection, sharing data with third parties – you name it).

  5. This is a really cool expansion on your presentation! I was wondering about how they were going to integrate their technology with their drive thru. So many Starbucks have drive thru options that customers use in an effort to save time so combining with some sort of mobile ordering capability would make the process even faster. Also having the ability to custom predict choices for each customer allows them to upsell in certain areas, but not have it feel as commercially. If it is specifically tailored to you, you’re more likely to give in and try it!

  6. Interesting. I wonder if they’ll develop it themselves, or just piggyback on Siri, Alexa, etc. I see merits to both approaches. Nice followup!

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