Starbucks’ Digital Network Goes Live
Starbucks wants its customers to stick around awhile. The
chain has launched a new digital network in partnership with Yahoo that offers
free e-books, movies, local news, access to paid websites and more — all to
give its customers reasons not to leave.
"Our customers are the inspiration for the Starbucks Digital Network.
They’ve
told us they want to be the first to know what’s happening in their neighborhoods
and around the globe, to have an easy way to discover new music, great books
and important films and find ways to be more involved in their communities.
And they’re connecting with the brand digitally in numerous ways," Stephen
Gillett, Starbucks executive vice president, chief information officer and
Digital Ventures general manager, said in a statement.
The Digital Network,
available through the chain’s free Wi-Fi service, is split into six separate
channels, including: Business & Careers, Entertainment,
My Neighborhood, News, Starbucks and Wellness. Most of the free content can
only be viewed at Starbucks locations.
The site also offers paid content and
products. Starbucks gets an unspecified piece of every sale.
Discussion Questions: Will the Starbucks Digital Network bring new consumers
to the chain’s coffee shops? Will it keep customers in the shops for longer periods
of time?
You have to admire their renewed focus on their customers. Great to see them making their experience more robust on many levels. Glad I don’t have to compete for their customers.
Great example of how the internet capabilities and experiences are being brought into the physical stores to drive increased sales. Multi-channel is rapidly moving to one channel in some retail segments. Success of this specific initiative will no doubt depend on the value of the content they provide.
In any event, this is on top of last week’s announcement that you can buy a friend a cup of coffee at Starbucks via Facebook and we see that they are continuing to push a strong innovation agenda at Starbucks.
I think it’s so interesting that we went from WiFi available for a fee to not only free WiFi in the store, but free “premium” content as well. I’m not sure that it will really make a difference on attracting new customers–anyone who who is going to be tech-savvy enough to be interested in the content already goes to Starbucks for the free WiFi anyway.
But as far as how retailers go about offering this free WiFi–I think this is pretty smart. Consumers aren’t stupid–they understand that free WiFi is offered because the retailer is hoping the consumer stays longer and buys more. As free WiFi becomes more interesting thanks to pay-per-use data plans, I think consumers will also realize that riding on that free WiFi is going to come with some strings attached–like the chance to offer promotions or have the initial welcome page look an awful lot like a walled garden.
So whether it attracts new customers, or keeps existing ones longer, I don’t think that matters. We’re going to see more of this no matter what.
If they can get the word out, it will bring the new customers in. Maybe, more importantly, it will help to strengthen the brand and keep the present customers coming back for more.
First my disclaimer, I’m addicted to Starbucks, I’m a “gold card” holder, I go to Starbucks to three times every day of my life, and I only choose hotels and offices that have Starbucks in the lobby! However, in as much as I understand the digital strategy to lure new customers and to encourage them to stick around in the coffee shop longer to buy more coffee, I strongly believe that whereas such an approach might work well on college campuses, I think that in the “real world” people don’t have time to “stick around.” People who do stick around are usually visiting with someone else with whom they came to the coffee shop and others like me are always in a hurry and what I want is not more books and music, but more drive-up windows!
And I do think I’m more typical than one would want to believe!
The cynic in me wonders if the reason they want people to stay around longer is because it now takes more time to order and receive your craft beverage. Providing a digital network will give people something to do while they wait. I realize that is not the real reason but….
I find it interesting positioning that Starbucks wants people to stay, to spend more time in their stores. Many of their locations I have been in are small with limited seating. Having people occupy those seats even longer mean less space for the customers now entering the door. Instead of creating an environment where people want to stay, they may end up creating one where people don’t want to go to because there is no place to sit.
Content will drive people to Starbucks or retain people at Starbucks. Consumers don’t need more content, for content’s sake.
Remember the Starbucks Magazine? It was sort of a middle brow literary and interview format glossy. It was nicely produced and available to pick up while you waited for your coffee. No, I don’t blame you if you don’t remember–it didn’t do well. And this is the same thing–but digital.
If a patron is online in the store, they are doing their own work, not Starbucks. To stay competitive with Dunkin’ Donuts, Starbucks needs to stay authentic and close to their customers’ real needs.
Since they told their customers (including me) this week that they’ll be waiting longer for their coffee, they need something to keep them occupied. I’ve already scoured the shelves while waiting, at all the things that I can’t afford or are ridiculously over priced. There’s little else to do while waiting for them to catch up after running out of the only thing they sell.
Okay, so why do I keep going?
David raises, I think, a really interesting point: There’s a bifurcation in Starbucks’ customer segments–one who’s convenience oriented and wants to get in and out as quickly as possible and one segment for whom the “3rd place” positioning is critical–it’s my away-from-home home office, place to work on my home projects, etc. I’ve personally been in both segments, sometimes during the same day. As they think through their business strategy they need to keep both these groups in mind and make sure they don’t make decisions that alienate one in favor of the other.
Starbucks has been in the content game for a while–starting with music and reaching beyond to now, online content. I think it’s a great loyalist play for those who love their local Starbucks and want to hang out–will it sell more coffee though? I don’t know–I see an awful lot of people lingering over a single cup and Starbucks food is not (in my opinion) good enough to convert a lot of people to lunch customers. Love it from a brand loyalty perspective–like it less from a clear “path to revenue” one.
I don’t see this as bringing in a lot of new customers, but it may help build loyalty of existing customers and also increase their spending if they are encouraged to stick around longer. Since it is generally more cost-effective to increase the profitability of existing customers than convert new ones, Starbucks will probably benefit from its new free WiFi services.
Maybe it’s time for Starbucks to re-visit shopper segmentation. What could we learn from this?
Let’s assume that for those shoppers who are really “about the coffee,” the behavior they exhibit is about less, not more, time in the store. I doubt online content will appease the “late for a meeting guy” now waiting longer for the barista to follow new process to make and deliver the “vente soy latte no foam.” What can Starbucks do to change this segment to advocates? As David B. noted, perhaps it’s more drive-through windows and faster, not slower, service. At the end of the day, if sales is the business goal, there should be a segment strategy. Online content in the store seems mis-matched here.
Now let’s assume another group is the “hang around” segment. I’ve read here that the food is not all that great and that prices for “sundries” are too high. So, is the goal of getting more people to hang around more often, potentially enticed by online content, about something different than product sales? Presumably, the groups that hang at Starbucks for hours are accomplishing something. Did they tell Starbucks that they wanted, needed, had to have this online content? Perhaps a high percentage of them are brand advocates who are worth their weight in Facebook and Twitter posts to attract more footsteps to the store?
What’s the shopper benefit? If they share it out, it will travel.
Point is, while Starbucks is doing a lot of marketing “stuff” right now, it doesn’t seem to hang together as an integrated or cohesive plan. They surely have shopper segmentation, right? How easy it would be for them to be more transparent and let the various shopper segments be a part of helping them succeed!
Just for the record, I’m a Dunkin’ Donuts coffee fan.
I don’t perceive this as being as much a customer acquisition strategy as a channel augmentation and loyalty strategy. They’re giving their customers yet another reason to be there.
On the other hand, I also wouldn’t minimize the public’s increasing desire for rich and robust WiFi networks.
What Starbucks is reinforcing once again is that it’s not all about the product. It’s about the experience.
Earlier this week we were told you (not me because I don’t drink coffee and would not pay those prices if I did) will wait longer to be served. Now we find out they will be offering more opportunities to buy things we probably don’t want or need. Sounds like the customer lost twice this week.
Do customers need a reason to hang out longer in Starbucks? I do not go there that often, but it is always the same people staying for extended periods of time for what seams to be no reason. They seem to be milking the drink? Not sure this makes sense.
Two observations re: Starbucks’ new content offering, which is another move following their strategy to be more customer-centric and -relevant:
1) Offering free premium content provides added value to customers, whether they all use it or not. It’s about providing real value as part of the SBUX customer experience and it’s pretty clear that digital news and free WiFi fit well with a coffee place.
2) There is a dearth of relevant local neighborhood news available digitally. In fact, it’s one of the bigger voids in the digital content world. Given the number of locations, it is conceivable that SBUX sees a play in local news, store-by-store/neighborhood-by-neighborhood. This is incredibly interesting as it makes a giant, global brand like SBUX seem like the local coffee shop it would love to be.
Maybe Howard Schultz is hanging out with his Seattle neighbor and member of customer-centric CEO royalty, Jeff Bezos? This is a smart move for SBUX!
As a Starbucks “best customer,” I look forward to learning more about the new Starbucks digital experience. It has some exciting potential to create additional support for the uniqueness of the Starbucks in-store experience, differentiating the store from its competitors and driving additional customer retention and incremental revenue at the same time.
The key will be in the execution. For this strategy to succeed, the digital experience must be simple to access, and present a strong range of easy to find and easy to use options online. To achieve this goal is more complicated than it looks. Just look at all the websites that are so difficult to navigate today.
However, as another blogger mentioned, it is exciting to see Starbucks’ renewed focus on a differentiated customer experience, and I believe that they will succeed in the long run no matter what.