What Starbucks Got Right With Its App: The Coffee Company Wins Big with E-commerce

The popular coffee company wins big in e-commerce, attracting 23.4 million consumers aged 14 and up, more than any other mobile payment method, including Apple Pay, GooglePay and SamsungPay

You may be surprised to discover that the most popular mobile payment method isn’t a technology giant, but a coffee company. Starbucks dominates consumer preferences for mobile payment, with its app offering the most popular mobile payment method. The coffee chain is essentially functioning like a bank.

According to market research firm eMarketer, 23.4 million consumers ages 14 and up use the Starbucks app to make an in-store purchase at least once every six months in 2018. This means that Starbucks has more users than mobile payment products directly from Apple (Apple Pay), Google (Google Pay) and Samsung (Samsung Pay). Apple Pay comes in second with 22 million users, followed by Google Pay with 11.1 million consumers and Samsung Pay with 9.9 million.

Shocking as this may seem, it starts to make sense when you put this news in perspective - the rise of Starbucks app’s popularity occurs at a time where the coffee company is a household name worldwide, consumers consider commerce platforms their own personal assistants and many users get their news from social media. The convenience of ordering a drink and food from your smartphone cannot be underestimated.

Starbucks is expected to maintain this lead for the next few years foreseeably as the company brings value to its customers in ways that the tech giants do not offer directly, such as the Starbucks Rewards program. Currently Starbucks Rewards members receive two stars for every $1 spent. This can be redeemed for free food and drinks, birthday rewards and free in-store refills. One of the biggest conveniences of the app is the ability to order ahead and pay by phone - not an option for other fast food restaurants. The app also eliminates the need to carry cash and with the mobile payment option, customers can enjoy picking up their food without having to wait in line.

Benefits for the customer include:
- ease and convenience
- saving time
- avoiding long lines at the register (mobile orders)
- gaining rewards and special offers

In the first quarter of 2016 alone, Starbucks had over $1.2 billion loaded onto Starbucks cards and its apps, according to a 2016 MarketWatch report. This amount was more than all the deposits at several financial institutions including California Republic Bancorp ($1.01 billion), Mercantile Bank Corp. ($680 million) and Discover Financial Services ($470 million). Starbucks first started offering mobile payments back in 2011.

Starling Bank in the UK, has capitalized on the mobile trend, recognizing how customers love the ease and convenience of doing their financial transactions all from their smartphones.

In some respects, the popular coffee company functions like an unregulated bank. Mobile payments are expected to rise annually. While Samsung Pay is accepted by the most merchants, the app is the least used of mobile payment options. Apple Pay is the most popular mobile payment option among the three tech giants and was the first app to launch. Google Pay, while not as commonly used by consumers, does come preinstalled on Android devices.

Additional merchant-branded apps are entering the market now, including fast food chain McDonald’s, Dunkin’ Donuts, Target and Walmart. These companies aim to capture valuable data about their customers while adding rewards programs to build customer loyalty.

Profile: Jeff Bezos, The Remarkable Founder of Amazon, Blue Origin and More

Few entrepreneurs have had such an impact on the American landscape as entrepreneur Jeff Bezos. Known to many as the founder of Amazon, the world’s largest e-commerce store, Bezos is also the founder of other enterprises such as Blue Origin, his space company. Here we take a closer look at lessons we can learn from this visionary and exceptional individual.

Have a Vision and Plan for the Long Term

While the founders of most tech startups were eager to rake in the dollars and establish their ‘credibility’ to investors through immediate profitability, Amazon founder Jeff Bezos took a decidedly different path. He shared his innovative ideas and long-term vision early on in his letters to shareholders and his team, asking them to make up their own minds whether his venture was worth investing in or not. He was frank about it, sharing that most investors did not think so in his first 1998 Letter to Shareholders.

Despite the low expectations set by financial pundits, Amazon defied such dire predictions. Shockingly enough, the stock price went from $5 a share to over $1800. There were times in between as well where the stock dipped but unlike many others, Bezos did not see the value of the business defined by its share price alone. From day one, it was clear that Amazon had a long-term vision and intended to expand at scale, as fast as it could to meet that vision.

Amazon is truly a story of longevity and remarkable employment. In terms of business longevity, Amazon has outlasted many other competitors and players in the same field, while achieving a remarkable feat - employing over 500,000 people and thus becoming America’s second largest employer after Walmart.

Establish and Grow High Standards in Your Company Culture

In his annual letters to shareholders, Bezos is refreshingly honest and direct, while explaining his long-term vision for the company.

“How do you stay ahead of ever-rising customer expectations? There’s no single way to do it — it’s a combination of many things. But high standards (widely deployed and at all levels of detail) are certainly a big part of it. We’ve had some successes over the years in our quest to meet the high expectations of customers. We’ve also had billions of dollars’ worth of failures along the way. With those experiences as a backdrop, I’d like to share with you the essentials of what we’ve learned (so far) about high standards inside an organization.”

— Jeff Bezos, 2017 Shareholder Letter

Jeff Bezos’s 2017 Letter to Shareholders

Be customer-obsessed.

Bezos explains how it is much more important to focus on the customer instead of your competitors. You have to identify your customer.

“The No. 1 thing that has made us successful by far is obsessive compulsive focus on the customer as opposed to obsession over the competitor.”

— Jeff Bezos, Interview with the Economic Club

By focusing on what customers want or need, Amazon has won customer loyalty and thus high profitability. A great example of this is Amazon Prime which offers free, fast shipping to its customers. That thinking has paid off. Amazon Prime customers spend an average of $1,300 in a year, approximately twice that of non-members. Amazon has over 100 million Amazon prime customers.

“Who is your customer for the Washington Post? Readers. Full stop. Where do the advertisers want to be? Where the readers are.”

— Jeff Bezos, interview with the Economic Club

Invest in ideas with unlimited upside.

“A dreamy business product has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time—with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.”

— Jeff Bezos, 2014 Shareholder Letter

Jeff Bezos’s 2014 Letter to Shareholders

The 2 Pizza Rule: Get focused work done with small teams.

Bezos is famous for his “2 Pizza Rule” where he suggests that you work in smaller teams and never have meetings that require more than two pizzas to feed everyone present. This helps the group stay focused and nimble, and avoid long, unproductive meetings.

Every new idea has started out with a small group of people.

“I want it to always have the heart and soul of a small company.”

— Jeff Bezos, Amazon CEO

Decentralize decision-making and delegate.

Bezos, like many successful CEOs and leaders of large organizations have said before, emphasizes the importance of delegating and decentralizing decision-making. This enables swifter, agile responses to any customer need and opens up the door to innovation and new ideas. Bezos recognizes the potential for invention and creativity here and takes it a step further.

“We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture — great innovations, large and small, are happening everyday on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation.”

— Jeff Bezos, 2013 Shareholder Letter

Jeff Bezos’s 2013 Letter to Shareholders

Focus on inputs and the outputs will take care of themselves.

Unlike a majority of publicly traded companies that invest a lot of time and energy discussing actual financial results and debating projected financial outputs, Amazon puts its energy and time into improvement.

“To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. . . . Our goal-setting sessions are lengthy, spirited, and detail-oriented. We have a high bar for the experience our customers deserve and a sense of urgency to improve that experience.”

— Jeff Bezos, 2009 Shareholder Letter

Jeff Bezos’s 2009 Letter to Shareholders

Measure your company by free cash flow.

“Why focus on cash flows? Because a share of stock is a share of a company’s future cash flows, and, as a result, cash flows, more than any other single variable, seem to do the best job of explaining a company’s stock price over the long term.”

— Jeff Bezos, 2001 Shareholder Letter

Jeff Bezos’s 2001 Letter to Shareholders

Nurture your young ideas to grow into large enterprises.

Few companies or leaders are as patient as Amazon or CEO Jeff Bezos have been regarding the time it takes ideas to take root, grow and be financially viable and self-sustaining.

“In some large companies, it might be difficult to grow new businesses from tiny seeds because of the patience and nurturing required. In my view, Amazon’s culture is unusually supportive of small businesses with big potential, and I believe that’s a source of competitive advantage.”

— Jeff Bezos, 2006 Shareholder Letter

Jeff Bezos’s 2006 Letter to Shareholders

R&D is part of every department.

While Amazon is famous for its emphasis on a data-driven approach throughout its online and physical stores, Bezos also points out how essential research and development, achieved through experimentation, brainstorming and invention is to the company’s internal work processes.

“And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches.”

— Jeff Bezos, 2010 Shareholder Letter

Jeff Bezos’s 2010 Letter to Shareholders

Build on Top of Existing Infrastructure, Embrace Change and Accelerate Growth

“The current online shopping experience is the worst it will ever be. It’s good enough today to attract 17 million customers, but it will get so much better. Increased bandwidth will result in faster page views and richer content. Further improvements will lead to ‘always-on access’ (which I expect will be a strong boost to online shopping at home, as opposed to the office) and we’ll see significant growth in non-PC devices and wireless access. Moreover, it’s great to be participating in what is a multi-trillion dollar global market, in which we are so very, very tiny. We are doubly-blessed. We have a market-size unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal.”

— Jeff Bezos, 1999 Shareholder Letter

Jeff Bezos’s 1999 Letter to Shareholders

Know Your Strengths and Work at Your Most Productive Times.

In an interview with David Rubenstein at the Economic Club of Washington D.C., Bezos explained that he aims to have his ‘high IQ’ meetings in the morning before lunch. He prioritizes sleep, exercise and time with his family.

“I like to read the newspaper, I like to have coffee, I like to have breakfast with my kids before they go to school. So, I have my puttering time—it’s very important to me.”

— Jeff Bezos, interview with the Economic Club

He spends time with his family in the morning, reads the newspaper, enjoys coffee and personal time before diving into work at Amazon and his other ventures.

“I like to do my high-IQ meetings before lunch. Anything that’s going to be really mentally challenging—that’s a 10 o’clock meeting. Because by 5 p.m., I’m like, ‘I can’t think about that today. Let’s try this again tomorrow at 10.”

— - Jeff Bezos, interview at the Economic Club

Design-Driven Companies Outperform the S&P by 219% over 10 years

“When you do the common things in life in an uncommon way, you will command the attention of the world.”

— George Washington Carver

Design is a key differentiator in driving business success and customer engagement. In a study conducted by the Design Management Institute reviewing business performance for design-driven companies as compared to the S&P Index over a decade (2004-2014), design-driven companies consistently outperformed the S&P by 219%.

Design-Led Companies: A Winning Business Advantage

A well-designed customer experience that is based upon deep customer understanding and provides effective, compelling visuals and relevant interactions, can make the difference between a loyal customer and one who walks away dissatisfied.

From July-Oct 2016, Forrester Research Consulting conducted a study commissioned by Adobe to explore how design practices may create a tangible, measurable business advantage. To do this, Forrester developed a design maturity framework to evaluate how companies use design in their business practice for marketing, product and customer experience. This included interviews and surveys of decision-makers at companies in the United States, United Kingdom, France, Germany, South Korea, Australia/New Zealand, and Japan.

The study resulted in identifying 2 different categories of business - design-led firms versus those that did not place a priority on design.

What’s a design-led company?

A design-led company is one that puts design at the core of its brand. The company weaves design principles into everything it does— from research and strategy to creating content. Leadership and management at these companies think beyond transactions and focus on creating beautiful experiences that build lasting and meaningful relationships with customers. (Source: Adobe)

Design-led companies reported:

41% higher market share

46% competitive advantage overall

50% more loyal customers

70% digital experiences beat competitors

Key findings revealed that in design-led firms:

Design permeates the organization, driving culture and the ambition to do better.
There is support throughout the organization to nurture talent and to have a variety of skills from strategic to visual, technical and more with collaborative work processes.
The company embeds tactical and production-level design from strategy through application across user experience.

Also companies with less advanced design practices typically underestimate the business benefits of design-led customer experience.

Design-led firms excel at world-class customer experience strategy and implementation.

Leadership at design-led firms also have a keen awareness of the importance of design in creating an enjoyable customer experience that customers love and want to experience again. In fact, most design leaders interviewed consciously put customers first and emphasized the importance of creating an emotional bond with customers and having an advanced design practice to help support this.

Companies that prioritize design are also more likely to innovate and test ideas out with customers. They also invest in tools, training and systems to do this, and have design practices and processes in place to support their customer experience strategy.

Design-led firms also consciously aim to create seamless customer experiences across a variety of touchpoints and devices. Today so often customers begin a product search with a phone call, website visit from a desktop computer or visit to a store and then follow up on a smartphone or tablet. Your new customer may interact with your brand across multiple touchpoints before making a purchasing decision. Creating a seamless customer experience that adapts to how your customer finds and interacts with your business is key.

Disrupting Industries and Transforming Businesses

Design-driven startups have also disrupted industries. Uber transformed the transportation industry with a well-designed app to connect riders to drivers, while AirBnB also disrupted the hospitality industry with the idea of home rentals through an elegant website and mobile app. These companies definitely had innovative ideas, but they were able to pull in and engage customers through exceptional design and swift, intuitive user experiences.

Personalized Touch

Great design works hand in hand with great content. Your audiences connect with your company via excellent content that is personal and speaks to them individually. Together this leads to an engaging, enjoyable customer experience. This in turn, drives connection, loyalty, ongoing engagement and revenue.

Showing you care about your customer requires empathy and listening. In talking with your customers, you'll learn more about the decisions that led them to buy in the first place. You'll discover what both their expressed and unmet needs are. Sometimes, this in turn, will help you create a better product or service. These kinds of conversations and insight always drive better customer experiences.

Design Maturity

Through its study, Forrester identified companies with significant design-led practices as possessing 'design maturity.' A company with design maturity prioritizes design, putting design at the core of its culture and customer experience, invests in people and processes and is constantly learning and improving. This in turn, differentiates the design-led company from others and wins over the customer by often a large margin. (Source: Adobe).

Stand out in an increasingly competitive landscape with growing digital touchpoints and increasing customer expectations with design. Assess your brand's design maturity and follow the recommendations below to deliver best in class, design-led digital experiences that help you drive business results and growth.

When you have a design-led company, you can attain more satisfied and loyal customers, significant competitive advantages and greater market share than companies with a less mature design approach. You will also build an atmosphere that encourages innovation, continuous improvement in process, product and customer experience.

What You Can Do

If you are a C-level executive, manager or owner, here are a few recommendations to help you bring design to the forefront of your business and gain this competitive advantage over the long term.

1.) Include a variety of design roles

This ranges from visual and interactive design to research, interactive wireframing, and other processes that can help you uncover customer needs, plan and map out customer goals and execute customer experiences. Keep your definition of design broad so that you are not limited.

2.) Encourage design leadership across roles

Hire, train and support design leadership through training, mentorship, recruitment and support so that you bring in design thinking for continuous improvement.

3.) Establish cross-functional design processes

Add design capabilities throughout your organization from initial conceptualization to final execution.

When you lead with design, you end with great results.

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